§ 7.29 p.m.
§ The ATTORNEY-GENERAL
I beg to move, in page 65, line 36, at the end, to insert:(f)subjects persons not resident in British India to greater taxation than persons resident in British India or subjects companies not wholly controlled and managed in British India to greater taxation than companies wholly controlled and managed therein.856 This deals with a question which is the subject of Clause 112. Clause 112 provides for any discriminatory taxation of British subjects domiciled in the United Kingdom, but there is a possible gap in the provision for this reason It might be possible to allow a person to earn money and to save money by carrying on a profession or conducting a trade while he was resident in India, and then, after he has ceased to be a resident in India, to impose upon him or people of his class discriminatory taxation almost of a penal nature by reason of its severity. It is proposed by this addition to the powers contained in Clause 108 to require the previous sanction of the Governor-General, in his discretion, in the case of legislation which subjects persons not resident in British India to greater, taxation than persons resident in British India. It applies to companies—which are dealt with under Clause 112—as well as to individuals.
A great deal of thought has been given to the best way of dealing with this subject. It might possibly have been dealt with by some enactment to the effect that non-resident persons were to be treated, for purposes of taxation, as if they were resident persons and then preventing that provision from being altered. But that course seemed likely to result in tying the hands of the Indian legislature too tightly and preventing them doing certain things which were perfectly legitimate and proper. The House probably knows that the taxation of nonresidents is adopted by a great many countries, in varying degrees of severity, and the idea in this case is not to hamper the Indian Government as regards the imposition of any necessary taxation which may be described as reasonable. The object is to prevent discriminatory taxation in the case of non-resident persons of such a character that it exceeds the bounds of reasonableness—whatever may be the practice in the case of some countries with which we are familiar at the present time.
Another suggestion was that we might lead to the desired result by some provision as to reciprocity. But it is very difficult to devise measures of reciprocity. The differences between Indian taxation and our taxation are so great that it is practically impossible for a draftsman to devise a form of words which will lay 857 down a basis of reciprocity, in such a way as to ensure the desired result. It has therefore been found necessary to fall back upon the somewhat elastic provisions of Clause 108 and to give the Governor-General the power to withhold the necessary previous sanction from any legislation imposing penal taxation upon nonresidents. If the taxation is of a comparatively mild character, the Governor-General, no doubt, would not feel that it was a matter upon which he needed to intervene, And he would, presumably, in that case give his previous sanction. It is difficult, in fact impossible, for me to lay down a line and to say, "Thus far may they go but no further," but when the actual case arises, I think the House will agree that the Governor-General will probably be able to form an opinion as to whether proposed taxation is proper and reasonable or whether it ought to be prevented on the ground that it will be penal in its discrimination against non-residents. The provision which I now propose is necessary to prevent Clause 112, to which we shall come later, from being made ineffective.
§ 7.35 p.m.
§ Mr. ATTLEE
This seems to be An attempt to restrain the Indian Legislature from following out the Conservative policy of making the foreigner pay.
§ Mr. ATTLEE
The non-resident may be a foreigner. I understand that he may be someone who is resident either in another part of the British Empire or in another country Altogether. Here we have the repercussions of the doctrines taught by the Conservative party which have been so thoroughly learned in India, and now hon. Members opposite object to the Indians applying those doctrines. I think that is very unreasonable. I cannot see why we should put this provision in the Bill. I think the taxation of foreigners is a foolish thing, but it is done in many parts of the world, and, after all, the idea is that we are giving India, a certain degree of freedom in these matters. I suggest that here again is a whittling Away of the Fiscal Autonomy Convention. There seems to be no reason why the Governor-General should have this right. I think at times we ought to allow the Indians to make their own mistakes. If they make a mistake of this kind it may 858 result in retaliations by other countries. But it is now proposed to impose this restriction on the Indian Legislature, while, in other parts of the British, Empire as well as in foreign countries, all kinds of discrimination might be practised against Indians. I think this is a thoroughly undesirable addition to the Clause 'and we shall oppose it.
§ 7.37 p.m.
§ Mr. MOLSON
The hon. Member for Limehouse (Mr. Attlee) suggested that this Amendment was in some way an infringement of the Fiscal Convention. In view of the fact that the Convention only referred to the imposition of customs or protective duties in cases where the Government of India and the Indian Legislature were in agreement, I do not see by what stretch of the imagination this proposal can be regarded as an infringement of the Convention. He also suggested that it was desirable that India should be allowed to make her own mistakes but there does not seem to be sufficient reason for allowing her to make her own mistakes at the expense of other people. There are provisions in this Bill for the purpose of maintaining the financial credit of India. The purpose of the Bill in that respect is to see that, under the new Constitution, India will be able to borrow money cheaply in the markets of the world in order to carry on those great measures of social amelioration which we hope will be undertaken by the future Government.
This Amendment carries out an undertaking given by the Government during the Committee stage, and in view of the very cautious comments of the right hon. and learned Gentleman on that occasion I think the Government have carried out their promise in a generous spirit. At the same time, it does not go as far as the European community in India would wish, nor even as far as they think they are entitled to claim. I am sorry that the Government were not able to deal with the matter on the basis of reciprocity and in view of what the Attorney-General has said I ought to make it plain that the European community in India believe that this protection to prevent discriminatory taxation of non-residents is only what they are entitled to so long as recipients of incomes from this country, who reside 859 abroad, are subject to no greater taxation than that paid by people resident in the United Kingdom. I was a little concerned at that part of the Attorney-General's speech which seemed to indicate that under this Clause it might be permissible to impose higher taxation upon non-residents than upon residents. He did not seem to regard it as a matter of principle or to consider that any departure from the present system would be unjustifiable and inequitable, so long as this country does not practise any discrimination against Indians who draw revenues from securities held in this country. However, under this Amendment it will be open to the European community and other people affected to make representations and I think it will be possible for them to show that anything in the nature of higher taxation upon non-residents than upon residents would not be wise from the point of view of India's credit or justifiable on grounds of equity. I thank the Government for the way in which they have carried out their undertaking.
§ 7.41 p.m.
§ Sir B. PETO
I wish to ask how this Amendment will operate in two specific cases. I take first the case of a mining company owning property in India but not registered in India. Would this Amendment ensure that such a company —subject of course to the sanction of the Governor-General in his discretion—would not be subject to higher mining taxation or any other taxation of that kind, than mining companies registered in India? Secondly, is it intended to protect those whom I may describe as absentee landlords? Will the Amendment prevent special penal taxation being imposed in respect of the ownership of land in India upon a person who resides in this country? If so, in both cases it ought to be enacted here and not left to the hope that no future Governor-General will sanction discriminatory taxation of that kind which clearly would involve hardship to British subjects. The hon. Member for Limehouse (Mr. Attlee) suggested that the Amendment was contrary to what he termed the Conservative principle of taxing the foreigner. I did not understand from the Attorney-General's speech that the Amendment was intended to deal with foreigners at all. I understood that it applied to 860 British subjects, but as it is worded it appears to cover everybody no matter what his nationality may be. Is it the intention to cover, equally, British subjects and subjects of every other country in this respect? It appears to me that the Amendment is worded so widely that it will go beyond the protection that we want to give. It is conceivable that the Governor-General in his discretion might think that some taxation which was to apply to subjects of foreign countries was reasonable, whereas he might regard it as discriminatory if applied against British subjects.
§ 7.45 p.m.
§ The ATTORNEY-GENERAL
My hon. Friend in his first question raised a point about taxation upon mining companies. He will find that Clause 112 deals with that matter and that a mining company would be amply protected by the general provisions of that Clause. So far as the second question is concerned, the answer undoubtedly is that which my hon. Friend would desire. He asked whether it would apply to persons who are not resident in India, but who own land there. Certainly. The only condition contained in this new paragraph is that they should be "not resident in British India." It does not matter whether they own land or do not own land. If a law is introduced subjecting them to discriminatory taxation, the Governor-General, if these words are inserted, will have the power to withhold his sanction to the proposal.
§ The ATTORNEY-GENERAL
It must depend on the particular case. The Governor-General is not likely to use a discretion given to him under this paragraph in favour of people with whom he is not concerned. It must depend on the facts of the particular case.
§ Mr. ATTLEE
Will the right hon. and learned Gentleman answer the actual question put? As the Amendment is drafted, it does not apply only to British subjects, but to all the world. Is that not so?
§ 7.47 p.m.
§ Mr. H. WILLIAMS
I should like to congratulate the Secretary of State upon introducing this Amendment. It is true that as drawn it is world-wide in its application, but it is not a complete prohibition against the Federal Legislature imposing, if the circumstances require it, measures of discrimination against anybody. Obviously you cannot completely deprive a country of that right, but in this case what are the limitations t The Governor-General in his discretion must give permission; that is to say, it is a matter on which his Ministers have no right to give him advice, and when the Governor-General acts in his discretion he has to consult with the Secretary of State at home and act under his direction. That seems to me to be a good safeguard. It provides that where something ought to be done, it can be done, and in general it prevents the Legislature from doing things that are likely to lead to trouble or to treat this country unfairly. It is also right that discrimination against foreigners should be prevented in certain circumstances, because, as the foreign policy of India is a function reserved to the Governor-General, it would be undesirable that the Legislature should be permitted to pass legislation which might give rise to a serious foreign situation.
Although these are powers, at first sight, to prevent an Indian Legislature doing what they wish, in the long run I am certain that this will be good for India, because, as the hon. Member for Doncaster (Mr. Molson) pointed out, by having this check and safeguard you are going to create far greater confidence than would otherwise be the case. People will be attracted to develop enterprises of all kinds in India with the full knowledge and security that when they have undertaken developments they will not be frivolously robbed of that which is rightly theirs. I think the Amendment is well drafted and that the Secretary of State should be cordially congratulated on having found this happy solution of what was obviously a rather difficult problem. I was one of those who in Committee tried to draft one or two Amendments dealing with the situation, but they were not called, whether because of bad draftsmanship or because the hon. Member for Doncaster and his friends got 862 there first, I do not know. I admit, however, that this seems an excellent solution of a difficult problem.
§ 7.50 p.m.
§ Mr. ISAAC FOOT
I saw a criticism a day or two ago in the "Times" newspaper as to the strengthening of safeguards during the discussion of this Bill, and I am sorry to see this additional safeguard introduced. I do not know that there is any real danger to be apprehended against which this Amendment would be an adequate protection. I am afraid the fact of having an additional safeguard will only be to enlarge that alienation of Indian opinion of which the correspondent in the "Times" wrote last week. If we could be sure that there was some real danger apprehended by the Government, and that this was the only way of dealing with it, it would be a different matter, but when the Attorney-General introduced the Amendment just now he did not give us any information along those lines. I am sorry, but I am bound to express my regret that during the Report stage of this Bill there should be further safeguards introduced which can only tend to irritate Indian opinion, and I am satisfied that if there were a desire to take a line penalising foreigners, including ourselves, a Clause like this would not be likely to have the desired effect. Therefore, because I think such a Clause will strike at that spirit of good will on which the whole future of the Bill depends, if there is to be a Division, I am afraid I must be associated with those who vote against the Amendment.
§ 7.52 p.m.
§ Sir S. HOARE
I very much hope the anxieties of the hon. Member for Bodmin (Mr. Isaac Foot) will prove to be groundless. I do not regard this Amendment as a new safeguard. It has always been intended to provide safeguards against penal discrimination. It was borne in upon me that there was a great deal of anxiety in the minds of many of the representatives of the business community that they might be subjected to the kind of discrimination to which they have been subjected by more than one foreign country in recent years, and it appeared to me that it was necessary to be somewhat more explicit, even though we were adding no new safeguard at all in the Bill. That is all that this proposal does. 863 It is founded upon the basis, on which we have always worked, that there is this partnership between India and Great Britain and that, as there is this partnership, penal discrimination ought not to be permissible.
§ Mr. ATTLEE
The right hon. Gentleman is talking about a partnership, but this Amendment deals, not with questions as between Great Britain and India, but with India's relations to citizens of all the rest of the world.
§ Sir S. HOARE
So it may appear from the words, but in practice it is intended to deal with the different partners, and if the Governor-General's power under this Clause is ever brought into operation—I hope the circumstances will never necessitate it—he will bring it into operation, I feel sure, in protection of the British partnership. That is our sole object.
§ Mr. ISAAC FOOT
Does the right hon. Gentleman think this is in line with what was already recommended by the Joint Select Committee? Does he think it does not add an additional safeguard, and has he had any opportunity of ascertaining Indian opinion upon the subject?
§ Sir S. HOARE
I can assure my hon. Friend that it does not add any factor of importance to the problem at all. The position put to me, I may tell the hon. Member, was this: It was said, "Your proposals against penal discrimination prevent unfair obstacles being put in the way of business carrying on its work and earning its profits, but you have done nothing to prevent those profits being subsequently confiscated by penal taxation after they have been earned." Now we always intended—the Joint Select Committee always intended, I think—to cover the whole field, and all that this proposal does is to make explicit the fact that we intend to cover the whole field. Again let me say that it is not a new proposal and that it does not add any new safeguard.
§ Amendment agreed to.