SECOND SCHEDULE.—(Supplementary pro visions as to prevention of avoidance of income Tax by transactions re sulting in the transfer of income to persons abroad.) (Hansard, 17 June 1936)

§ Mr. FOOT
I beg to move, in page 30, line 10, at the end, to insert: and where any income deemed to be the income of an individual by virtue of the principal section has already been charged to income tax or borne income tax by deduction in the hands of a person resident or domiciled out of the United Kingdom it shall not be liable to be charged to income tax again as income of the individual by virtue of the principal section. The purpose of paragraph 3 of the Schedule will no doubt commend itself to the Committee. It is to prevent a taxpayer who is affected by Clause 16 from being taxed twice over. The paragraph states that if the income which is deemed to be his has borne tax before he received it, he is not required to pay tax on it after he has received it. The Amendment seeks to carry the matter a stage further and to deal with a slightly different point. Suppose that the income has borne tax in the hands of a foreigner. In spite of that, it will be deemed, under Clause 16, to be the income of the British subject concerned. Might it not well be the case that that income would have to bear tax twice over—once when it was in the hands of the foreigner and once when it was deemed to be in the hands of the British subject. To give an example, suppose that a foreigner derived income from shares in the Imperial Tobacco Company. That income will have borne British Income Tax by deduction at source, before it reaches the hands of the foreigner. If the actual dividend which the foreigner received was deemed to be the income of the British subject under Clause 16, might it not then be that the British subject would still be required to pay Income Tax on that amount? I am not quite certain that this point is covered by paragraph 1 of this Schedule, and I should be grateful if the Minister would deal with the point.

§ The ATTORNEY - GENERAL (Sir Donald Somervell)
The point is covered 1132 by the opening words of paragraph 1, which state: Tax at the standard rate shall not be charged by virtue of the principal section in respect of income which has borne tax at the standard rate by deduction or otherwise. Those words seem to me exactly to meet the point which the hon. Member put. The words which he has put on the Paper would, in fact, prevent any assessment being made in respect of Surtax, the object of Clause 16 being, of course, to see that Surtax assessment should be made on individuals who would not be otherwise liable.

§ Mr. FOOT
It seemed to me that perhaps it was not entirely covered by paragraph 1, because surely it all depends on the point of time at which the income becomes deemed to be that of the British subject; but if the Attorney-General is certain that this point is covered, I, of course, accept that assurance and ask leave to withdraw the Amendment.

§ Mr. SPENS
I beg to move, in page 30, line 24, to leave out paragraph 6.
This matter was discussed at some length on Clause 16 as to the desirability of there being a reference from the Special Commissioners, after they had dealt with the matter, to the Board of Referees. The Committee will remember that in order to get out of the Section the Committee decided that each person should have to establish to the satisfaction of the Special Commissioners that he had made one of these transfers for a, purpose other than that of avoiding tax. The Special Commissioners are to go into that question and to come to a decision of fact, one way or the other, and this paragraph in the Schedule then provides that either party may have the same thing done over again by the Board of Referees. From the point of view of the subject, it appears to me that there is not a body which enjoys such enormous public confidence as the Special Commissioners, and if in connection with tax cases we make it possible for the subject to go through the same procedure over again with the Board of Referees, that is really to involve the subject in a great deal of expense, and I do not 1133 think it gives the subject any protection which he needs, having regard to the extraordinary public confidence in the Special Commissioners.

§ The ATTORNEY-GENERAL
My right hon. Friend inserted this provision, giving the right of appeal on a question of fact, as a protection to the taxpayer. It was felt that in the circumstances it might be right to give a possibility of review on this question of fact by a tribunal other than the Special Commissioners. My right hon. Friend is, of course, aware of the arguments which are advanced on the basis that every fresh hearing involves fresh cost. He is also aware of the great confidence which is felt in the Special Commissioners and the decisions they give on questions of fact. My right hon. Friend does not think it right to accept the Amendment at this stage because he thinks there should be an opportunity for people to make representations to him, should they have relied on what he said and, in fact, regarded the question of right of appeal as one of value. He will undertake to reconsider the matter before the Report stage if the representations made to him support the view of my hon. and learned Friend that on the whole people would rather that this matter should be left, together with other questions of fact, to be decided by the Special Commissioners and, if necessary, he will take appropriate action at a later stage.

§ Mr. FOOT
The concluding words of this paragraph are when any question is so referred the board shall proceed to hear and determine the question and their determination thereon shall be final. In paragraph 8 there is a provision for appeal by way of case stated to the High Court from the referees. Is it intended that when the Board of Referees have given a decision under paragraph 6, there will still be an appeal to the High Court under paragraph 8?

§ The ATTORNEY-GENERAL
Paragraph 8 states: notwithstanding anything in the foregoing provisions, and the intention is, I think, quite clear that, on the Schedule as it stands, there is an appeal on questions of fact to the Board of Referees. Their decision will 1134 be final. If, having got to that stage, the taxpayer has a point of law that he desires to take, he can take it from the Board of Referees by means of case stated, just as he could have taken it in the first instance from the Special Commissioners by way of case stated.

§ Sir S. CRIPPS
I am not very interested in the Amendment, but I am rather alarmed at what the Attorney-General has said. As I understood him, he said that the Chancellor of the Exchequer was not prepared to make up his mind on this Amendment until he had had representations from someone. Surely the place where this should be discussed is the Committee of the House of Commons. The idea that the Finance Bill should be framed in discussions between the Chancellor and some undefined persons outside seems to me to hit at the very root of House of Commons control. The Chancellor should listen to the opinions that are put forward here by informed persons who, after all, represent the public, and to say that, having heard the case put forward by representatives of the public in this Committee, he is not prepared to make up his mind, but is going to consult someone else or get representations from some other body outside, seems to be a most monstrous suggestion as regards the control of this House on matters of finance.
I hope that the Chancellor will tell us from whom he is expecting to get representations. Who is going to be able to cause him to change his mind when speeches in this Committee cannot cause him to change his mind? That is the point. The hon. and learned Member for Ashford (Mr. Spens) has—whether I agree with him or disagree with him—put forward a point of view, and it is now open for discussion in this Committee, but we are told that the Chancellor is not prepared to decide the matter on discussion in this Committee but is going outside this Committee to get representations from some other body, who I do not know—

§ The ATTORNEY-GENERAL
I never said the Chancellor of the Exchequer was going to others outside the Members of the Committee.

§ Sir S. CRIPPS
Certainly.

§ The ATTORNEY-GENERAL
No. I said representations made to him by Members of the House. It is getting on towards the end of the evening, but Members who heard my right hon. Friend's earlier statement will agree with me, I think, that it is an extraordinary doctrine to say that a Minister cannot indicate a provisional intention subject to what Members of the House or others may put before him.

§ Sir S. CRIPPS
This seems almost worse. What is this Committee for, except to discuss this problem? If Members do not care to attend, what right have they, after the discussion, to go to the Chancellor in his roam and put forward their views in private? The whole object of this Committee is to have a public discussion of these matters, to know that the Chancellor is being Influenced by speeches made in public and not by some hole-and-corner conversations which take place outside this Chamber altogether. I hope very much that the Chancellor will tell us that he is not going to be swayed by some discussion taking place outside the Chamber in a matter which is essentially and primarily one for decision by this Committee. If the Chancellor says that he wishes to think over what has been said in this Committee, that he is not prepared to announce a decision at the moment, that is quite a different matter. But if he is going to say that what he has heard in this Committee is not sufficient to persuade him, but that he will take an opportunity of chatting with his friends outside, other Members of the House who are not interested enough to attend the proceedings, I venture to suggest that an extremely dangerous precedent is being set up, which is going to undermine the authority of this Committee. Members will say: "It is not worth attending the Committee and discussing the matter there. We will go to see the Chancellor to-morrow." We shall then get an even more depleted Committee than we have to discuss these important matters.

Major HILLS
Any charge more unjust against the Chancellor than that of refusing to listen to this Committee I have never heard. Anyone who sat through the long discussion on Clause 19 must know that nobody could have been 1136 more courteous and ready to listen to suggestions publicly made in this Committee than the Chancellor of the Exchequer and the Attorney-General. Every suggestion was considered, there was a very full discussion, and the Chancellor promised to weigh all the Amendments, which had been moved publicly. It was no hole-and-corner matter, as the hon. and learned Gentleman said.

§ Sir S. CRIPPS
The right hon. and gallant Gentleman will excuse me. I have never suggested that the Chancellor has not listened attentively, but what I am objecting to is the Attorney-General saying that the Chancellor will not make up his mind until he has consulted with people outside the House.

Major HILLS
I did not hear the Attorney-General say that.

§ Sir S. CRIPPS
Well, you will see it in the OFFICIAL REPORT.

Major HILLS
To my imperfect brain he appeared to say that the Chancellor would listen to what was said in this House. [HON. MEMBERS: "NO."] I think that is so. I speak in the recollection of the Committee. Throughout the whole of the proceedings of the Committee the Chancellor has shown conspicuous courtesy to the Committee, with every wish to hear all the suggestions which have been made. I want to ask one question of the Attorney-General. No tribunal stands higher in repute than the Special Commissioners, but for some reason, I do not know why, the Board of Referees are not liked; they are not popular. I have come across them only once, and then I was not putting my own case but somebody else's. I did not get the decision I liked, so perhaps I am prejudiced. Is it not best to make the taxpayer go to the Special Commissioners, with an appeal to the High Court? I think that would be better.

§ Mr. CROOM-JOHNSON
I confess that I did not understand the Attorney-General in the same way as did the hon. and learned Member for East Bristol (Sir S. Cripps). I understand the situation to be that as the right hon. Gentleman the Chancellor of the Exchequer had not been convinced by the arguments put before him he was prepared to give an opportunity to people to make repre- 1137 sentations to him. I cannot see what is wrong in that procedure. The matter is, after all, not new. I raised it two or three years ago upon the discussion of the Finance Bill at that time, and, so far as I can gather, in the intervening period the general feeling about the retention of the Board of Referees has not grown any less, and there is, in fact, a strong feeling that they are an unnecessary tribunal. We have been engaged, through legislation in this House in the last two years or so, in getting rid of unnecessary tribunals, with the object of saving expensive litigation and cutting down unnecessary appeals by one side or the other. How much more should we attempt to cut down unnecessary appeals when on the one side you have the taxpayer and on the other side the whole force, energy and resources of the State? I hope that these matters will be given, and I am sure they will be, due consideration, and I thank the Chancellor of the Exchequer for the statement that has been made on his behalf.

§ Mr. A. SOMERVILLE
The Attorney-General spoke of the board and the taxpayer. As a matter of fact, the decision of the Board of Referees has been almost invariably against the taxpayer. May I be allowed to express surprise at the hon. and learned Member for East Bristol (Sir S. Cripps) coming forward as a defender of the rights of the House of Commons, when he is in favour of a House of Commons in which there will be a Government of which he will be a Member, and which will be invested by that House with dictatorial powers, which Government will send Members of the House of Commons back to their constituencies—

The DEPUTY-CHAIRMAN
Order!

§ Mr. SPENS
The Attorney-General has said that the Chancellor of the Exchequer will consider the matter, and therefore I shall ask leave to withdraw the Amendment; but before I actually do so, may I make this suggestion? If it be established with the Board of Referees under this Section, which has been introduced on behalf of the taxpayer, that the onus is on the taxpayer to prove that he is not avoiding the tax, then the right of appeal for re-hearing to the Board of Referees should be confined 1138 to the taxpayer. It does not seem quite fair to put the burden on the taxpayer to prove his case to the Special Commissioners, and that the Inland Revenue Commissioners should then have the right to make him do it the second time to the Board of Referees. That right ought ordinarily to be reserved for the taxpayer. Subject to those remarks in regard to procedure, I beg to ask leave to withdraw the Amendment.

HON. MEMBERS
No!

§ Mr. FOOT
I beg to move, in page 30, line 28, after "does," to insert" or does."
This is a mere point of wording. I only put it forward because I was puzzled lay the way in which the paragraph is worded. I understand that the Government are prepared to accept the Amendment.

§ The ATTORNEY-GENERAL
My right hon. Friend desires to advise the Committee to accept this Amendment, as it will clarify the sense.

§ Mr. FOOT
I beg to move, in page 31, line 12, to leave out from "Schedule," to "they," in line 14.
The words which I am moving to leave out are these: or if the Special Commissioners are not satisfied with any particulars furnished under this Schedule. In order to appreciate the point of this Amendment, it is necessary to look at the provisions both of paragraph 9 and of paragraph 10. By paragraph 9 the Special Commissioners may require the taxpayer to furnish such particulars as they think necessary for the purpose of the principal Section. If those particulars—and, of course, they may require such particulars as they wish—are not furnished, the taxpayer is liable to a penalty. By paragraph 10, if the particulars are not furnished, the Commissioners have further power to make an estimate, and then, of course, the amount which the taxpayer will have to pay will be based on that estimate. I should have thought that these by themselves were sufficiently wide powers to be given to any public body, 1139 but paragraph 10 goes rather further, because it says that, if the Commissioners are not satisfied with the particulars furnished under the Schedule, again they may make an estimate, which, of course, may bear no sort of relation to the facts, that is to say, to the actual income of the taxpayer. As I read the paragraph, they are made the sole judges, first, of what particulars are necessary; and, secondly, of whether the particulars furnished are satisfactory; and there is no appeal from their decision.
If they get their particulars in the first place, they can, of course, use them as the basis of the assessment. If they do not, they have two alternatives—they can impose a penalty, or they can make an estimate without having the particulars before them. I submit that these powers by themselves are perfectly sufficient for the purposes of the Special Commissioners. But the provisions go further, and in my submission it is going much too far to say in effect that, having got those particulars—that is to say, any particulars they may require—they may then disregard them because they are not satisfactory, and may fix the amount to be paid at an entirely arbitrary figure.

§ The ATTORNEY - GENERAL
The power which the hon. and learned Member has criticised is similar to the power already contained in Section 44 (3) of the Finance Act, 1927, which deals with failure to make a return for Surtax purposes and gives the Special Commissioners this power if they are not satisfied with the return made. There are a few other cases where this power is given. It is a proper power, and if the Amendment was carried, however obviously inaccurate or inadequate the answer was that the taxpayer was required to furnish this power could not be exercised. My hon. and learned Friend said there was no appeal. He is labouring under a misconception. An estimated claim under this paragraph becomes an assessment and the taxpayer has all the rights of appeal that he has in the case of an assessment in the ordinary course.

§ Mr. FOOT
Surely there is no appeal on the specific question whether the particulars demanded are reasonable or not.

§ The ATTORNEY-GENERAL
No, but the position of the taxpayer is fully safe- 1140 guarded if he has the same right of appeal to the Special Commissioners to review the facts. There should be this power to cover cases where the particulars furnished have been obviously inadequate or inaccurate. These powers have been in existence in other cases for a number of years, there have been no complaints as to their use and I would ask the hon. and learned Gentleman to consider whether he cannot see his way to withdraw the Amendment.