CLAUSE 13.—(Special provisions as to mines, oil wells, etc.) (Hansard, 15 August 1940)

§ Sir George Broadbridge (City of London)

I beg to move, in page 10, line 17, at the end, to insert: (6) Upon an application made with respect to any class of trades or businesses consisting of the getting of minerals or oil from any mine, oil well, or similar natural source of a wasting nature and of which the estimated life at the current rate of production is less than twenty-five years, the Board of Referees may, by Order, direct that special provisions shall apply with regard to the assessment of standard profits for the purposes of excess profits tax and shall permit the deduction 1027 from such profits of such amount as the Board of Referees may, with the consent of the Treasury, agree as being the amount by which the value of the mineral, oil or other natural resources belonging to the trade or business concerned has been diminished during the year. I will deal with this Amendment in tabloid form. The reason for moving this Amendment is that the 100 per cent. Excess Profits Tax is having a most disastrous effect upon alluvial tin mines which can be said to have short lives of from 10 to 20 years. To-day the Government require these mines to force their output and produce the largest amount of tin possible, but in consequence of the 100 per cent. Excess Profits Tax these properties are suffering very badly indeed. Every ton of tin taken out of these properties is depleting their capital ore resources. Let me give an illustration. An English company operating in the Colonies produces, say, 700 tons per annum according to the quota in the standard year. That would give a profit of about £60,000. Under the quota today that mine could produce 1,000 tons, with a profit of about £100,000, but the company would have to pay the whole of the profit from the extra 300 tons, namely, about £40,000, in Excess Profits Tax. In other words, no benefit would accrue to the company for those extra 300 tons. That tin cannot be replaced and is a part of the company's valuable capital ore reserve. If these companies continue to produce on these lines not only will they do so without profit upon the additional output but they will at the same time be shortening the lives of the mines. The Excess Profits Tax is, therefore, a most serious matter for these short-lived alluvial mines.

If this state of things continued, the result might be this: The present price of tin enables companies to produce less, should they so desire, and yet, while earning sufficient, to avoid incurring Excess Profits Tax at all. This policy of prudence would also have another good feature, that they would not be drawing so unremuneratively upon their ore reserves. But as the Government want the commodity for war purposes the mineowners naturally do not want to adopt this policy if it can be avoided, and this Amendment will give to the Board of Referees the authority, where a mineral 1028 or oil property at the present rate of output has an estimated life of 25 years, to direct that special provisions shall apply with regard to the assessment of standard profits for the purpose of Excess Profits Tax, and, further, permit the deduction from such profits of such amount as the Board of Referees may agree as being the amount by which the value of the mineral, oil or other natural resources belonging to the trade or business concerned has been diminished during the year. I hope the Chancellor will see his way to accept this Amendment, because if the present state of affairs continues the Empire's alluvial mining industry will be in a disastrous state.

§ The Solicitor-General (Sir William Jowitt)

I think that I can satisfy the hon. Member that the Amendment which he is moving would have exactly the opposite effect to that which he desires. It is absolutely impossible, in fact, for us to consider this Amendment. I can well understand the objection which may be entertained to 100 per cent. Excess Profits Tax and to its being said that the concessions in Clause 13 are not adequate, in that we have imposed a ceiling of 4 per cent., but I cannot understand how anyone accepting these principles can think that the present Amendment provides a satisfactory method of dealing with this problem. I would remind the hon. Member that Clause 13 applies only to what I might call the substituted standard, where you have to have resort to a percentage on capital because the person concerned has had an unfortunate time, or because it is a new business or because, although an old business, it has had brought into it new capital. In that case we allow an increase on the normal percentage, up to 4 per cent. That applies to these very companies which exist by getting minerals or oil from oil wells or other similar sources of a wasting nature.

In the Amendment, the hon. Member proposes to introduce a new class. Be it observed that the Amendment refers to a wasting asset of which the estimated life … is less than twenty-five years. Estimated by whom, and from when? It is notoriously difficult, and I might even 1029 say it is impossible, to estimate how much there is left in the ground, the hypothesis being that you have not worked it. In the examples of which I am aware of estimates being made, they have always resulted in second estimates which have completely falsified the first. These estimates are to be made upon an assumption that the current rate of production is continued. Why assume that? I have heard it suggested that this war will last for 25 years; why should you assume that the current rate of production will last for 25 years? When you have got over that difficulty, somebody who is going to make an estimate—nobody knows how—will put the company into one category or the other. If it is a 24-year estimate, these consequences follow, but if it is a 26-year estimate a completely different code applies, which applies only in the case of the substituted standard.

Suppose it is a 24-year estimate; what happens then? The Board of Referees are to direct that special conditions apply. Instead of the House of Commons deciding what the tax principles shall be, the Board of Referees, uncontrolled, and the Treasury, who also are not the taxing authority, are to fix it. How does the hon. Member propose to do this? I ask him to follow the words of his own Amendment: The Board of Referees may, by Order, direct that special provisions shall apply with regard to the assessment of standard profits for the purposes of excess profits tax and shall permit the deduction from such profits"— that is to say, the standard profits, "of such amounts," et cetera. The more you deduct from the standard profit, the worse the Excess Profits Tax gets. The Excess Profits Tax is the difference between the standard profit and the profits in the current year. Therefore, the higher you make this standard profit, the higher the Excess Profits Tax will be that you have to pay. The hon. Member proposes that the Board of Referees, acting on some absolutely undefined principle, with no limit or check at ail, shall deduct something from this standard profit which shall make the persons concerned pay even more Excess Profits Tax. I think the hon. Member will see that to make the Amendment work in the sense in which he wants it, we must substitute for his words, "deduction from," the words "addition to," because 1030 you must make your standard profit higher in order to make the amount of the Excess Profits Tax higher. I think I have said enough on this Amendment. The Chancellor of the Exchequer is sympathetic to the case which the hon. Member has put up, but it is impossible for us to accept the Amendment, which would realty have the effect of making things much harder for the people whom the hon. Member represents.