NEW CLAUSE.—(Relief in respect of Indian Land Tax.) (Hansard, 1 July 1935)

§ Mr. OSWALD LEWIS

I beg to move, "That the Clause be read a Second time."

The object of this Clause is to ensure that where a man is domiciled in this country and owns a source of income in India and is subject to Indian Land Revenue Tax, he shall be entitled to a similar relief from United Kingdom Income Tax to which he would have been entitled had that source of income been subject to Indian Income Tax instead of Indian Land Revenue Tax. The need for such a Clause may be stated briefly. Indian Land Revenue Tax arises out of the ancient history of land tenure in India, with the details of which I need not trouble the House. It is a tax which is levied on the gross proceeds of agricultural land, and for that purpose the land is periodically assessed. Indian Income Tax, which is a much later tax, was introduced in due course. When it was introduced, it was decided, I think quite properly, that it could not in fairness be levied on a source of income which was already the subject of Indian Land Revenue Tax, and such sources of income were accordingly expressly exempted from the operation of Indian Income Tax.

Therefore, so far as the landowner who is domiciled in India is concerned, the position is simple. He holds a sort of income which is subject to Indian Land Revenue Tax. He does not pay Indian Income Tax upon it, no matter how wealthy he may be. I want to draw attention to the position of such a landowner if he be domiciled in this country. Section 27 of the Finance Act of 1920 provides a certain relief from United Kingdom Income Tax in the case of 1612 sources of income which are subject to Dominion Income Tax. In that Act the term "Dominion Income Tax" is defined as follows: Any Income Tax or Super-tax charged under any law in force in any Dominion, if that tax appears to the Special Commissioners to correspond with United Kingdom Income Tax. The Board of Inland Revenue have taken the view that, whereas Indian Income Tax does correspond with United Kingdom Income Tax, in other words is a form of Dominion Income Tax for the purpose of that Act, the Indian Land Revenue Tax does not so correspond, and therefore is not Indian Income Tax for the purpose of that Act. I do not know whether the Board of Inland Revenue in coming to that decision have consulted the Special Commissioners or not. For the purpose of my argument it does not matter whether they have done so or not, because I am willing to assume that the Board of Inland Revenue have correctly interpreted the law. I do not quarrel with them on that ground. But I suggest that while they have interpreted the letter of the Act they have not followed the spirit of the Act, and in order that that may be followed I am moving this new Clause.

I hope that the Chancellor will not rely, in the event of his opposing this Clause, on any suggestion that any one aggrieved could appeal to the Special Commissioners, because, with great respect, it seems to me that that would hardly be a seemly point to take. It would be tantamount to saying to the House that the Board of Inland Revenue have acted illegally or may quite conceivably have acted illegally. I am prepared to assume that they have acted legally, and that is an assumption which, in the circumstances and having regard to his relations to the Board of Inland Revenue, the Chancellor is bound to take. Therefore, it would be a mistake to suggest that anybody who was aggrieved by the action of the Board of Inland Revenue should appeal to the Special Commissioners.

I want to point out how unfairly this distinction operates. It operates unfairly in two ways. If a landlord is domiciled in India and owns land which is subject to Indian Land Revenue Tax he escapes Income Tax. If he is domiciled in this country, he still has to pay Indian Land 1613 Revenue Tax and he gets the full weight of United Kingdom tax. On the other hand, take the case of two men, one of whom shall we say has rice fields in India which are subject to Indian Land Revenue Tax while the other is interested in tea plantations in India which are not subject to Indian Land Revenue Tax but are subject to Indian Income Tax. These two men are treated quite differently as regards United Kingdom Income Tax. The owner of the rice fields who pays Indian Land Revenue Tax, is mulcted in the full amount of United Kingdom tax. The owner of the tea estate, because he pays Indian Income Tax, gets a rebate in respect of his United Kingdom Income Tax, the only reason being that the latter form of industry has been brought within the Indian Income Tax Act. I submit that neither of those two cases could be fairly argued to be just, as between the two persons concerned.

It may be said that there are very few persons in this country in the position of holding land in India which is subject to Indian Land Revenue Tax. It should hardly be necessary in this House of Commons to stress the point that whether the persons affected be few or many, does not affect the justice of a case. Indeed, should the number affected be few it rather strengthens my hopes because it takes away from the Chancellor that argument which we so often hear that he cannot afford the remission. I am not asking for special treatment for British owners of Indian land. I am only asking that they shall be placed, in respect of double taxation, in the same position as Indian owners of Land, that is to say that if they pay Indian Land Revenue Tax that shall be treated, for Income Tax purposes, as a form of Income Tax. I hope the Chancellor of the Exchequer will see his way to regard sympathetically this effort of mine which may be described as an effort to remedy an accidental injustice arising out of the interpretation of Section 27 of the Finance Act of 1920.

Mr. CHAMBERLAIN

The first point which arises under the proposed new Clause is whether in this case the charge to which my hon. Friend refers as the Indian land revenue tax—though in fact 1614 it is not called by that name—can strictly be regarded as corresponding to United Kingdom Income Tax. When I tell the House that this charge for Indian land revenue was in some cases fixed in perpetuity over 150 years ago and in other cases is revised from time to time at intervals of 30 or 40 years and that when it is revised the method of assessment varies, not only from Province to Province but even occasionally from holding to holding, I think they will see that there is very little correspondence between a charge of that character and United Kingdom Income Tax. But my hon. Friend says that that does not matter to his argument. In fact, by his own Clause he admits that this Indian land revenue charge is not a charge which can be compared with our United Kingdom tax, and he bases his argument upon another consideration, namely, that those who are subject to Indian land revenue in India are not also subject to Indian Income Tax.

I must admit that that does put the position of my hon. Friend on rather firmer ground than would any suggestion that we have here a charge which can properly be compared with our own Income Tax. But I had to ask myself whether my hon. Friend's argument would stop at Indian land revenue. Is that the only case of a tax in the Dominions which is in lieu of a tax on profits although it may not correspond to United Kingdom Income Tax? I do not know whether he is aware that it does not stand alone. I should find a difficulty in conceding the Clause which he has put down, without at once having to go further and give similar concessions in other cases in the Dominions where charges on capital instead of on property are taken in lieu of a tax on profits but are not admitted for relief from double Income Tax for the same reason that this particular charge is not admitted. There are other cases again where royalties are paid in lieu of Income Tax which are not now considered as coming within the purview of Section 27 of the Finance Act of 1920. Therefore, I could not accept my hon. Friend's proposals without going a good deal further—further no doubt than he intends, because his mind has been fixed on this particular case alone.

I must say to him that the provisions for relief from double Income Tax in the British Empire have placed upon the taxpayer 1615 of this country a burden which in my opinion is altogether unfair. It has not worked out as has been anticipated. It is a matter, as I have repeatedly informed the Dominions, which I considered we ought to discuss afresh with them. We have not yet found an opportunity when it was possible to do that, but I hope that before the next Imperial Conference takes place we may get some preliminary discussion with a view to finding something which will be more equitable in its workings than the present arrangement has been. When that time comes then will be the opportunity to consider all questions of this kind and what further adjustment ought to be made. Until that opportunity comes I do not think I can do anything further than I have done or make any further change which would add to the burden on the British taxpayer.