HC Deb 28 June 1939 vol 349 cc480-95

5.53 p.m.

Mr. Benson

I beg to move, in page 13, line 30, to leave out "investment company," and to insert: company to which the provisions of Section twenty-one of the Finance Act, 1922, apply. This being an entirely different Clause from the last one, I have every hope that I shall get the word "investment" deleted. The purpose of the Clause is to deal with a very obnoxious form of tax evasion. In order to avoid tax a member of a company arranges that his shares shall appear to belong to somebody else, though he may in some curious and ill-defined way be able to obtain those assets at some time or another. By this Clause the Government suggest that the Commissioners can look beyond the apparent facts and can say, "Member A is not the real owner, irrespective of what appears on the book, and irrespective of what the legal position appears to be, and we are going to attach that income to the real owner, and it shall attract Surtax." For some reason or other the Government propose to limit this very valuable power to their dealings with investment companies, and I see no particular reason why it should be limited to them. If the same tricky work is going on in a trading company I see no reason why the Commissioners should not have the same powers as in the case of an investment company. If the tax avoidance is not going on in a trading company this Clause would not operate even if the Amendment were adopted. It may be that the Attorney-General will reply that this tax avoidance does not happen in trading companies. Perhaps it does not at the moment, but the strong complaint we have against the Treasury is that they are always behind the times. They never stop a hole until it is being widely used, and here is a potential hole which we can stop up, not with complicated legislation but by simply leaving one word out of a Clause. It will impose no hardship upon any company.

5.57 p.m.

The Attorney-General

The hon. Member asked why, if the same tricky work is going on among trading companies, this very drastic Clause should not be applied to them. The answer is that it is not going on. As may be shown when we discuss a later Amendment, this Clause confers very exceptional powers upon the Special Commissioners, powers which the Committee would require should be justified by very special circumstances before they would agree to them. Evidences of the device with which we are dealing here have been found solely among investment companies. As the hon. Member knows, there are various other provisions in the Finance Acts of the last two or three years which apply only to investment companies, for the reason that trading companies have not sought to evade the intentions of Parliament in such a way as to make these special provisions necessary in their case; and that distinction having been already drawn, I think it would be wrong to extend this very drastic Clause to cover classes of companies which are easily distinguishable, and have already been distinguished in previous legislation, when it has been shown that there is no necessity for the exceptional powers to apply to them. The hon. Member and the Committee can rest assured that if these devices do emerge in other quarters we shall ask Parliament to allow this Clause, which we shall have ready to hand, to be extended; but I do not think that is likely, for various reasons which I will not go into now. All hon. Members who are interested in this subject know that the sort of device we have in mind is much more difficult to apply in the case of a company which is carrying on active trade and distributing a certain amount of its income in dividends than it is in an investment company, and we think it right to restrict these very special powers in the way I have indicated. I therefore hope that the hon. Gentleman will not press the Amendment.

Mr. Benson

I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

6.0 p.m.

Mr. Spens

I beg to move, in page 13, line 34, to leave out "or is likely to be, able," and to insert "in law or equity entitled."

I tell my right hon. and learned Friend frankly that the Amendment which I am moving would torpedo his Clause if it were carried. The hon. Member for Chesterfield (Mr. Benson) referred to a situation which arises in connection with these companies, and he used the expression that the revenue should be able to get behind what appeared to be the legal situation. The whole object of the Clause is, for the first time in our legislation, to allow the Government to empower a body of men, the Special Commissioners, whom we all trust up to the hilt, to go, on the application of the Government, right beyond not only what appears to be the legal position but what is in fact the legal position. If the Committee will study the words of Sub-section (1) they will notice that the person who may be got at is: any person who is … or is likely to be, able to secure that income or assets, whether present or future, of the company will be applied either directly or indirectly for his benefit. When you read Sub-section (3) you find these words: For the purposes of this Section, a person shall be deemed to be able to secure that income or assets will be applied for his benefit if he is in fact able so to do by any means whatsoever, whether he has any rights at law or in equity in that behalf or not. Then it goes on to the particular instance.

For the first time we are authorising the Executive to go before a tribunal in this country and to say: "It is true that in law A is the owner of this income and that in equity B is its beneficial owner, but there is somebody else, man or woman D, who by some means can get part of that income out of A or B. He or she has no legal or equitable right to it but that person can get the whole or part of that income. Therefore, we, the Revenue, ask you to say that the third person is the owner of that income although he has no sort of legal or equitable right to it." My right hon. and learned Friend is quite right in saying that one has to go to enormous lengths to protect the Revenue and to get these practices stopped, but to give such power to a tribunal as that for which my right hon. and learned Friend is asking is to go far beyond anything that we have ever done in this House before in order to protect the Revenue. My right hon. and learned Friend said that the Clause could be very easily applied to prevent these devices; of course you can apply it to every sort and kind of company. You could say in certain circumstances that any person within the highest category of Surtax was likely to be able to get somebody else's income. If the Committee are to go beyond the legal and equitable rights of persons they must do so with a full knowledge of the extreme step which they are taking and of the enormous discretion which they are giving to a body of men.

It is right to point out that these powers may be used by the Special Commissioners only if they think right. Discretion is left with them. From that body of five or six human beings there is an appeal to a court of referees and no further, as to questions of fact. In the last three years we have authorised the most enormous steps to be taken by the Executive to protect the Revenue. Much as we trust the Special Commissioners and those who act for the Crown in these matters, this seems a most tremendous power to give to any tribunal in this country. It may be necessary to do what is provided here, but the Committee must make up their mind whether to allow to go into the Finance Bill a Clause for the protection of the Revenue which goes to the length to which this Clause goes, or whether to raise the main issue.

My Amendment would confine the rights of the Commissioners to assets where the legal owner of the income was so-and-so but somebody else had a right in equity to get that income and therefore this other person could be assessed for it. To go beyond legal and equitable relationships in this country seems to be taking a step forward about which the Committee should sincerely think before they let it become the law of the land.

6.9 p.m.

The Attorney-General

I do not think that the discretion conferred on the Commission, wide though it is, is quite as wide as my hon. Friend suggested. I would like to make some observations on the more general points which he raised. It is true that this is the first time that Parliament has been asked to confer powers of this kind on Special Commissioners, subject to a right of appeal. Let me tell hon. Members why Parliament is being asked to do this. We have been faced by what I might describe as a rake's progress by these financial shirkers of their share of taxation. They are not a large body. Anybody has been entitled to arrange his affairs as he wished in the days before Parliament showed a determination in certain directions, as has been laid down in the Statutes, that it was going to make people pay what Parliament had ordered was their fair share of taxation. A very large number of companies accepted the intention of Parliament and accepted what we call the taxation Clauses, but there have been some wealthy, or at any rate comfortable, people who have conducted a series of rearguard actions against the Revenue in this matter. The tax avoider was normally a shareholder. Parliament having said that he should pay his share of taxation he then said: I will put in as shareholders people who are not taxpayers and will apportion the income to them. I will maintain my rights by becoming a loan creditor instead of a shareholder.

Mr. Bracken

What does my right hon. and learned Friend mean by the intention of Parliament? So far as I know no committee can tell what the intention of any Parliament is, not even the Members of it.

The Attorney-General

Anybody who could not see what the intention of Parliament was in Section 21 of the Act of 1922 must be a very stupid person. This important Section attempts to prevent the avoidance of Surtax by withholding of income from distribution by companies.

Mr. Bracken

Mr. Pitt in this House over 130 years ago introduced an Act against Income Tax evasion and complained about a monstrous misrepresentation regarding the intentions of Parliament. How could anybody outside Parliament decide the intentions of Parliament unless those intentions were clearly-set down in the law?

The Attorney-General

This is a case in which Parliament has set down its intentions unusually clearly. There is not the slightest doubt that companies and others, when dealing with these matters, should know the kind of device which Parliament has intended to stop. Parliament has clearly intended that certain devices shall not prevent the payment of Surtax. We have no right to talk about the intention of Parliament; all you can talk about is what Parliament has enacted. In this case I think Parliament's intention is perfectly clear in the Act, and the tax avoiders have tried to defeat that intention. For instance, instead of having shareholding rights, a man who is a loan creditor has rights only in liquidation. He may say, "I am not interested in the income, and therefore you cannot apportion it to me. My only right is when the company is wound up;" and he is, of course, at liberty to wind it up when he likes. I have in mind a series of schemes each designed to get round the Acts passed in previous years. I have had a case, for instance, in which the suggestion was put forward that a man had no interest in the company because he had only an option, which he could exercise at any time, on the shares, but not the shares themselves. That shows the kind of artificial devices which are resorted to.

The next step, and the stage against which this Clause is directed, is this: The man who is really interested will not have any shares or any rights in the liquidation, but he will so arrange the articles as to have his friends or clerks as shareholders, and, as the director, someone who will do as he says; and there will be a power in that director to issue shares, carrying all the liquidation rights, at his discretion to anybody he likes. People have already begun to walk through that door, and, unless it is closed by a Clause of this kind, they will all walk through that door and will take a very substantial amount of Surtax with them. As I have said, the width of the Clause does not arise from any desire on the part of the Government to get excessive powers, but simply from the fact that the devices which are resorted to can only be dealt with if a wide discretion of this kind is conferred on the Special Commissioners. You have the case in which the man who is clearly interested does not appear from the beginning to the end of the articles. He has no rights in law or in equity, but he takes good care that there is someone who is in a position to give him those rights later on when he wants to exercise them. My hon. and learned Friend wants to leave out the words or is likely to be, able. I am not quite sure whether he appreciates that these words are not unconditional. In order to find that the individual is likely to be able to secure the assets or income, the conditions set out in Sub-section (3) have all to be fulfilled before the right to exercise the discretion arises. I think that that ought to relieve a good deal of the anxiety which my hon. and learned Friend and others quite rightly feel in considering whether or not a person is likely to be able to secure the assets or income.

Mr. Spens

It is just because of the words of Sub-section (3) that our anxiety arises. The Sub-section says: For the purposes of this Section, a person shall be deemed to be able to secure that income or assets will be applied for his benefit if he is in fact able so to do by any means whatsoever, whether he has any rights at law or in equity in that behalf or not, and in particular (but without prejudice to the generality of the foregoing words), in considering whether or not a person is or is likely to be able to secure that income or assets will be applied for his benefit regard shall be had"— and so on. The words in brackets only give an indication as to the line on which the Commissioners may work.

The Attorney-General

I am not sure that my hon. and learned Friend is right, but, if he is, I am quite prepared to consider the drafting. We do not intend this discretion to be absolutely unfettered. Where there is no right in law and in equity, the Commissioners have to consider, first of all: Whether or not the persons who, whether as directors or shareholders or in any other capacity have, or will at any material time have, powers or rights affecting the disposal or application of the income or assets, are likely to act in accordance with his wishes. That is to say, first of all you have a relationship of that kind, and then the Commissioners have to be satisfied: That he has, directly or indirectly, transferred assets to the company the value of which is not represented, or is not adequately represented, in the value for apportionment purposes of any relevant interests which he has in the company. It is only then that they may draw the inference that he is likely to be able to secure that the assets or income of the company will be applied for his benefit.

Mr. Fleming

It is clear that two persons are referred to, the one entitled in law and the other entitled in equity; and, looking at the definitions in Subsection (6), one finds in paragraph (c) three categories, according to whether the person is entitled in law, or in equity, or in neither. Would the Attorney-General give the Committee an example of the person who will be entitled neither in law nor in equity?

The Attorney-General

Yes, I will endeavour to do so. A man transfers his assets to a company, wishing to avoid the apportionment which Parliament desires. He therefore, in the year in question, has no rights at all, at law or in equity, in the company. When he signs his name to the articles, he is not a shareholder or a director. But the articles enable the director to issue to him one £I ordinary share which will carry the whole of the rights. That is the point. That is a case in which the man is not entitled at law or in equity, and that is the sort of case against which the Clause is directed.

Mr. Loftus

Surely, if he abandons all rights in law and in equity, and hands over the property to the directors, they can seize the property?

The Attorney-General

He takes very good care to see that the director is not a person who can seize the property. I think that as a matter of fact he would be outside the existing law if he were himself a director. He could be a director having no shares and no liquidation rights, but he could give himself the power to issue shares to himself which would give the rights he wanted, and I think he would still have no rights in law or in equity. In any case, he could put in a director who depended for keeping his job on his good will, and in fact that is done.

The Special Commissioners have to find, in addition to other things, that the person has transferred assets directly or indirectly to the company and that the value of those assets is not adequately represented by any rights that he has. I appreciate as much as anybody the drastic character of the Clause, but I have had experience, as some others have had, of the necessity for such a provision if a limited number of people are not to be allowed deliberately, by the most artificial structures it is possible to erect, to avoid making the contribution which Parliament clearly thinks it is fair that they should make to the national need at the present moment. For that reason I ask the Committee to pass the Clause, and hope that my hon. and learned Friend may see his way to withdraw the Amendment.

6.25 p.m.

Mr. Spens

May I take it that the Attorney-General will consider making alterations in Sub-section (3) so as to make the conditions a mandatory direction to the Special Commissioners as to what they are to be satisfied about before they can assess a third party? I agree that that would make a very substantial difference in the scope of the Clause, and would limit its effect, but if the Attorney-General would go that length it would make a very great deal of difference to my attitude and that of my hon. Friends.

I should like to ask the Attorney-General whether this is not really the wrong way to deal with the trouble? Would not the right way be to provide that, when a man does in fact take steps to secure for himself the income, the actual transaction which deprives the Crown of its Surtax could be declared void against the Crown? Surely that would be a much better way of attacking this horible social sore than by giving to any tribunal, however much we may trust them, the right to say, "Never mind what the law or equity is; the general circumstances are such that here is a third party who may be able to secure income for himself, and, therefore, we are going to assess him." One feels certain that, once laws of this description get into an Act of Parliament, within the next 10 years they will develop.

I believe that the principle of this Clause is wrong. I am just as keen as the Attorney-General is to get at these people, but I wish to get at them in a way that is more in accordance with the historical traditions of this country. We have never given tribunals powers like this. I suppose that the Star Chamber might have been able to do this sort of thing, but we have never in civilised times given such powers to a tribunal of this description, whereas we have constantly given power to the courts to decide that a transaction shall be void as being against public policy, and I should have thought that a Clause based on that principle and administered by the courts would have protected the Revenue and would have prevented what I venture to think are the very far-reaching possible effects if a Clause of this sort is made a precedent. If the Attorney-General is going to press for the inclusion of the Clause in the Finance Bill, I would ask him to narrow it down so that the Special Commissioners have to find certain conditions fulfilled before they can assess a man.

6.29 p.m.

Mr. Keeling

While I am disappointed by the Attorney-General's reply, I do not propose to press him to accept the Amendment of my hon. and learned Friend, partly because I can see that he is adamant, and partly because I have a shrewd idea that my hon. and learned Friend is not going to press the Amendment. But I would like to make this suggestion to the Attorney-General, and to ask him to consider it before Report. Should not words be added to the Clause to the effect that no apportionment of income shall be made against a person who was not in law entitled to that income unless—and this is the important point—he has in fact received a benefit equal to the amount assessed? As the Clause stands, a man may be compelled to pay tax on income which he has no right to receive, which he has not received or even indirectly enjoyed, which he never will receive or enjoy, and which is in law and in fact the income of some other person and is enjoyed by another person, and on which that other person has paid tax. I would ask my right hon. Friend to consider adding words on the Report stage to make it clear that a person shall not be assessed unless he has in fact received the benefit.

6.31 p.m.

Mr. Bellenger

In spite of the eloquent appeal addressed to the Attorney-General by his hon. and learned Friend the Member for Ashford (Mr. Spens), I hope he will not weaken on this point. I am just as keen as any hon. Member to protect the rights of an individual if he be an honest individual and is attempting honestly to carry out the intentions of Parliament—[Interruption]—which, in spite of the hon. Gentleman behind me, Parliament very well understands, even though it may not define them explicitly in legal language. We know very well what we are doing, and so do the people who are trying to evade carrying out our intentions.

Mr. Bracken

I was not saying whether we did or did not know our intentions, but why is it that judge after judge in the High Courts is puzzling his brain and making sarcastic comments as to the difficulty of knowing what Parliament really means by its legislation?

Mr. Bellenger

I quite understand that, but I suggest that the Clause, as now drawn, will be perfectly explicit as to what Parliament means, and that the judges will have less difficulty in interpreting Parliament's intentions in connection with this Clause than they have in connection with many of those ambiguous Clauses which have appeared in Acts of Parliament. Is not the principle here that Parliament is determined that every individual who receives an income, by whatever method, should pay the appropriate taxes on it? The object of this is to prevent dishonest men evading the carrying out of Parliament's intentions. The honest taxpayer has nothing to fear from this Clause; only the dishonest one has anything to fear. Therefore, I support the Attorney-General on the very clear case that he has made to the Committee, and I hope that he will not be weakened in his stand by the arguments which have been put forward.

6.34 p.m.

Mr. Bracken

Were it not for the fact that everybody in the Committee knows that the Attorney-General is one of our most agreeable Ministers, one might be forgiven for saying that some of the language he used was worthy of Dr. Goebbels. What do the Attorney-General's observations mean? He said, "We are introducing the most drastic legislation at the present moment, but we cannot help it. In recent times some very wicked tax dodgers have arisen and it is impossible for the Board of Inland Revenue to pit their ingenuity against these people." That is a perfectly absurd argument. I will read a sentence or two from a gentleman who was himself not such a good lawyer as the Attorney-General, but was, nevertheless, a very eminent statesman. I am referring to Mr. Pitt. [An HON. MEMBER: "He is dead."] I am glad to see that the standard of education in the Socialist party is rising rapidly. Mr. Pitt referred, 135 years ago, to: the evasion, the fraud, and the meanness which have struggled to defeat the operation of the assessed taxes, … shame that in a moment like the present, in a contest so awfully interesting to every individual and to the nation, there have been men base enough to avail themselves of the general modifications which were intended to relieve those who might have been called upon to contribute beyond their means, to avoid that fair assessment which corresponded with their circumstances. Since then, 135 years have passed. [An HON. MEMBER: "And they are still with us."] I quite agree; and in 135 years' time there will still be legal and illegal avoidance of taxation. And I would say to hon. Members above the Gangway that if they will consider some of the methods, quite legitimate methods, which are used by the trade unions and cooperative societies, they will find that those organisations are not exactly panting with anxiety to pay maximum taxes. It is a mistake to penalise the many because of the few individuals who are able to avoid taxation. The Attorney-General quoted Lord Sumner, but rather brushed him aside. He said that Lord Sumner belonged to different times. But Lord Sumner died only a few years ago, and his observations are still quoted as having high authority in the courts. He said: It is trite law that His Majesty's subjects are free if they can to make their own arrangements so that their cases may fall outside the taxing Acts. As there are a few Members of the Liberal party present, I am going to quote what is to them a sacred authority, Mr. Gladstone. He said that the citizen was entitled to do everything within his legal rights to avoid taxation. I am surprised that what remains of the Liberal party, the relics of the Hampdens, have not got up in this Committee and protested strongly against this development of arbitrary power.

I have no sympathy whatever with anyone who illegally avoids taxation, but anyone who does that can be put in gaol. The few people who avoid taxation by legal methods can always be attended to by Somerset House. Can anyone doubt that the most ingenious minds of the land are to be found at Somerset House —though one would imagine, from some of the speeches that are made here, that Somerset House was peopled with village idiots recruited from the most backward areas.

I discerned a certain amount of diffidence in the speech of the Attorney-General when he answered my hon. and learned Friend the Member for Ashford. It was evident that his heart was not in his brief. He showed reluctance to have to answer my hon. and learned Friend in the way he did. Surely it is wrong, in the present Parliament, to adopt totalitarian methods to stop up these admittedly few methods of evasion. I said that the Attorney-General's language reminded me of Dr. Goebbels. May I say to him that if Ministers now adopt these totalitarian methods the day will come when hon. Gentlemen above the Gangway will be installed in office, and they will say, quite rightly, "The Ton-party thought fit to introduce this totalitarian legislation, and we shall use it to the full now that we enjoy the fruits of office."

6.40 p.m.

Mr. Fleming

I think, from the attitude of my hon. and learned Friend the Member for Ashford (Mr. Spens), that he does not intend to press this Amendment to a Division; and I do not blame him. It is obviously a matter of drafting, because the whole point turns on the construction that the courts are going to put on Sub-section (3). It is all very well for an Attorney-General to get up and assure the Committee that this means such and such a thing. We have already had experience in this Parliament of the trouble which has arisen over the interpretation of words in an Act. In the case of the Official Secrets Act the Attorney-General of the time gave the House of Commons an assurance as to what would happen as a result of that Act, and he was the most surprised man in this country because the exact opposite happened when a case came before himself on appeal. I recall a case where a learned gentleman who was acting as chairman of a tribunal put to me a case of his own and gave me his interpretation of the Act relating to that case. I was so much surprised at that interpretation that I sent it to the present Chancellor of the Exchequer, who himself was surprised that that interpretation could be put on the particular words.

There is no doubt that this Sub-section is going to cause a lot of trouble. We are dealing with only a small number of people who want to avoid their obligations. It is true that they are doing nothing illegal. If it is admitted that the party concerned is very small, should not the greatest care be taken, is legislating against them, to see that the net is not thrown so widely as to drag in innocent people, as was done in one case recently? I am sure the Attorney-General will go into this matter before the Report stage, and take great care of the drafting of Sub-section (3), so that it cannot be extended by the Commissioners to include innocent people.

Amendment negatived.

The Chairman (Sir Dennis Herbert)

I did not propose to select the next Amendment, in the name of the hon. Member for Chesterfield (Mr. Benson), but I understand that he attaches some importance to it. If that is so, I will give him the opportunity of explaining what it means.

6.43 p.m.

Mr. Benson

The purpose of the Amendment is to allocate reserves which may have been accumulating and might not be paid out to the real beneficial owners as denned in this Clause. Under Sub-section (4), there is a complicated paragraph which aims at the prevention of double taxation. It seems to me that, as that is drafted, it allows the distribution of reserves in such a way that they will entirely avoid attracting Surtax. It was with the object of preventing that that I drafted this proviso.

The Chairman

If I understand the hon. Member correctly, his idea is that some profits may have been set aside, without paying tax, in one year, and in a subsequent year they may be distributed in addition to the profits made that year. In the circumstances, I am quite prepared to call on the hon. Member to move the Amendment.

Mr. Benson

I beg to move, in page 15, line 31, after "that," to insert: (a) for the purposes of this Section if the total income distributed by the company in or during the said year or period is greater than the total income apportioned among the members of the company in accordance with Sub-section (2) of this Section for the said year or period the amount by which the total income distributed exceeds the total income apportioned shall be apportioned to the members of the company for the purposes of Surtax in accordance with Sub-section (2) of this Section. Sub-section (4) states that if an allocation has been made of the income for the year, and that allocation is different from the actual distribution according to the boks of the company, then wherever the income distributed by the company is greater than the allocation made by the Commissioners, the surplus shall not be regarded as the income of the owner for Surtax purposes. That income has actually been allocated to another member or possibly non-member of the company. Sub-section (4) visualises that the amount of income distributed for the year is either less than, or equal to, the amount apportioned by the Commissioners. It may happen that the company have accumulated reserves in the past which have not been distributed and therefore have not necessarily attracted Surtax, but if they are distributed after this Clause has been passed and after a specific allocation under it has been made, not a single pound will attract Surtax. The amount allocated or apportioned by the Commissioners is the income for the year. If you distribute the income of the year, plus the reserves, no tax can be charged under Sub-section (4) where the income distributed is greater than the amount apportioned. Therefore, if a company that comes under this Sub-section distributes not only its total income, but: its reserves, those reserves will not attract tax. When reserves are distributed, they should be apportioned on the correct basis and so attract tax.

6.48 p.m.

The Attorney-General

This Amendment would, in fact, make the provisions of this Bill retrospective in respect of profits earned in past years, and I suppose that my hon. Friend who criticised me earlier on the question of the retrospection will now rally to my support in resisting the hon. Gentleman's suggestion. The Clause, as drafted, applies only to the income which would follow under the direction made in respect of 1938-39, and the hon. Member wants to extend it to the income of previous years. In these earlier years there either will have been or will not have been a reasonable distribution. If there has been a reasonable distribution, it would be quite wrong to penalise such amount as was not distributed, because in those years the company would have done everything that was right and proper. If a reasonable amount was not distributed, there will have been a notional distribution. The Amendment introduces a retrospective element which is not justified, as we dealt with the earlier years in earlier legislation, and I ask the Committee not to accept the Amendment.

Mr. Benson

I cannot follow the right hon. and learned Gentleman when he says that the Amendment has a retrospective action. The effect of the Amendment is that income shall attract Surtax when it is distributed.

The Attorney-General

Or apportioned under the earlier legislation.

Mr Benson

The income apportioned by the Commissioners is approximately the income which the companies receive every year. On top of that a company may distribute the whole of its reserves which may not have attracted tax.

The Attorney-General

They may have.

Mr. Benson

They may have attracted tax or may not. There are certain reserves which have not attracted tax under previous legislation. If the Clause goes through as it is drafted, reserves which have not attracted tax can be distributed and may not be regarded as the income of the Surtax payer under Sub-section (4). It is for the purpose of remedying that that I have put down my Amendment. There is no retrospective action at all.

Amendment negatived.

Clause ordered to stand part of the Bill.