HC Deb 24 January 1940 vol 356 cc630-46

Motion made, and Question proposed, "That the Clause stand part of the Bill."

4.44 P.m.

Sir William Jowitt

On the Second Reading I pointed out some of the difficulties which I felt with regard to this Clause, and I am bound to say that on consideration the difficulties which I then felt are still present to my mind, and before the Committee proceeds to pass this Clause I think we ought to have some further explanation of the topics which were then raised. It is a significant and striking thing that at this time, when we are all earnestly hoping that the difficulties at present prevailing in India may be surmounted, we should radically alter a provision in the Government of India Act. The first question I should like the right hon. Baronet to answer is, Has there or has there not been any consultation with Indian opinion on this topic? However desirable it may be to make the alterations, there should have been such consultation.

There is a second question which I would put to the right hon. Baronet. We were given to understand on the last occasion that this Amendment was rather in the nature of a formal or corrective Amendment and that the words in the Act failed to carry out the Government's intention. In so far as that intention derives from the words of the Government of India Act I can understand it. There you have, in the one Schedule dealing with Central Government, matters reserved to the Central Government in regard to any tax on income. In the Provincial Schedule, reserved for the Provincial Legislatures, is the tax on professions or employment. In so far as there may be said to be a conflict between those two, that seems to be typically a matter which might have been the subject of discussion before the Federal Court. As I said on the last occasion and as the Solicitor-General would agree —I think he did agree on the last occasion—it is obviously a matter upon which a good deal might be said on one side and on the other.

I would like to ask the Minister whether he is able to point to any precise words which were used, to make good his claim that an Amendment on these lines is merely carrying out an understanding which was always there. That is rather important. I know from my postbag that this Clause is arousing considerable feeling and apprehension in India. If we were able to say to our Indian correspondents: "This Amendment is merely carrying out what was obviously intended, because the Minister in charge of the Bill said this in so many words," or: "The Commission reported in plain terms" or something of that sort, I think we should say a good deal. If, on the other hand, there is nothing of that sort and the matter is all left vague and mushy, and we are told: "It was always understood," although the point was never considered at all, a very different situation exists. My second question to the right hon. Baronet is, Has he found —I hope he has—any authoritative state- ment which justifies him in saying that this Amendment is really carrying out what was always the intention of the Legislature in passing the Government of India Act? If he derives that intention merely from the words of the Act itself, that seems a matter which might well be argued before the Federal Court, as to whether the intention is, or is not, adequately expressed.

The next thing I would like to ask him about is that it does seem, even assuming his point that you have to make plain that the tax on employment is not to impinge on the province or the ambit of the tax on income, that you have been rather unnecessarily drastic. For instance; in the tax on professions, trades, callings and employments, why should we have an absolutely flat rate for all professions? Take firms carrying on a profession such as that of architect. One firm may have just started, be living in very small offices and employ only one office boy, while another firm may occupy very large offices and employ many people. I can understand the objection to a tax based on income, but you can base the rate on the offices which they occupy; or they may pay some graduated tax on the number of staff they employ. That is not what the Bill proposes to do at all. It proposes a flat, or rather a maximum, rate of no more than 50 rupees, no matter how large the business or how many are employed. The rate is not to exceed 50 rupees per annum, and that is unnecessarily drastic. By all means say, if you like, that you have put the tax on employment so as not to make it a veiled Income Tax; that I can understand, but why go so much further? Why say that it is not to exceed 50 rupees per annum?

After all, you have plainly given the Provincial Legislatures power to impose a tax on professions, trades, callings and employments. The only point at issue between us is whether they are entitled to put on that tax if the tax so imposed is in the nature of an Income Tax. Let it be granted that the tax which they propose is not in the nature of an Income Tax; why should you say that the maximum tax to be imposed should be 50 rupees per annum? In the United Provinces they found themselves, when they passed their Measure, in very great financial difficulties. We had some discussion on the last occasion about prohibition; I say frankly that what little I have seen of prohibition in this world does not in the least commend it to me. There may be circumstances in which this would be a good tax. I do not know; but it is undoubtedly the fact that, because they were raising less from their excise on drink, they were hard pushed for money. Looking about to try to find money, they came on the opportunity of this employment tax. By all means, if it is necessary, make it plain that you are not, under the guise of an employment tax, putting a tax on income, but why should you cut down without asking—if it be without asking—this undoubted power to 50 rupees per year? That is another point on which I think the Committee would like to hear from the right hon. Gentleman.

Let the right hon. Gentleman make no mistake about this matter. I expect he realises far better than I do that altering the provisions of the Government of India Act in this way naturally arouses the susceptibilities of those who are particularly interested in the Provincial Governments and who have often observed that the powers conferred upon them by this House are not to be lightly interfered with or diminished. I would ask the right hon. Gentleman why he considers it necessary to cut down this power to a mere 50 rupees a year, which is almost a negligible sum.

4.53 P.m.

Earl Winterton

The right hon. and learned Gentleman and myself had some controversy on this point on the occasion of the Second Reading, when I said that, speaking as the only Member in the House at the time who had been both a member of the Third Round Table Conference and of the Joint Committee, this Clause merely carried out the intention of the Government of India Act. Since then, I have had the opportunity of consulting a very distinguished ex-civil servant, who is outside this House and no longer has any official connection with the Government of India. He was concerned to a great extent with the circumstances which led up to the drafting of that Act. I asked him whether his recollection was the same as mine, and he said that it was.

I should not have risen to take part in this discussion in Committee if the right hon. and learned Gentleman had not sug- gested that very important principles were here at stake affecting our relationship with what may be called the political elements in India. If I may so put it, I think that the right hon. and learned Gentleman has smelt a rat where no such rodent exists. I would like to put a point to him, in the hope that I may convince him. This is not a question of some action taken, some post hoc action, by the Government, or by the India Office at the request of the Government of India, to do down Congress—if I may use the vulgar phrase. We had a very full discussion on this point both at the Round Table Conference and in the Joint Committee, although I cannot point to the ipsissima verba of the Secretary of State on the point; but it was made clear that it was absolutely essential, if the Government of India Act were to operate smoothly, that the rights of the Central Legislature in the matter of taxation should be most carefully guarded.

Therefore, in what may be called the interim stage before the full development of responsible government as visualised by the Act eventually takes place, it is in the interests of the future constitution of India that the India Office, the Secretary of State and the Government of India should protect the interests of the Central Legislature. There is a very neatly balanced arrangement—as I have no doubt the right hon. and learned Gentleman is aware, as he was on one of the Round Table Conferences—with regard to the sources of taxation between the Central Legislature and the Provincial Legislatures. What happened, in the case of the particular Act which has been made by one of the Provincial Legislatures, was that that Act did constitute a serious inroad upon what I may call the taxable capacity of the income-earning classes in India. It is necessary, if the Central Legislature is to have the taxable resources that it requires to carry on its business, which will be naturally great in the future as it has been great in the past, that its interests should be protected. That is all that this Clause purports to do.

The Clause purports to carry out, as has been said by the Solicitor-General and by others, the original intention of the Government of India Act. It is not an action against Congress or against the Indian political elements as such; on the contrary, there are many people in India —naturally, people in public life in India are students of the Government of India Act—who would like the sources of taxation open to the Central Government to be wider than they are and who would restrain the Provincial Governments from having so many sources of taxation. I rose only because the right hon. and learned Gentleman has suggested what is entirely wrong, that this is some question between the Government of India and the people of India. This is a highly important matter connected with the question of the sources of taxation in India.

I am glad that this controversy, or whatever you like to call it, has arisen, because it is very important to make abundantly clear for all time that you can get round the intention of the Act if you put a tax of a certain height upon professions, thereby reducing the taxable capacity of the income-obtaining classes, whose capacity is assigned under the Act to the Central Legislature. This is the answer to the question of the right hon. and learned Gentleman, why it is necessary to put a limitation to what can be raised by the tax upon professions.

4.59 P.m.

Mr. Wilfrid Roberts

I do not want to over-estimate the importance of this Clause but, in the present state of public opinion in India, and at a time when there is, to say the least, a certain political tension between the Government of Great Britain and India, it is particularly unfortunate that the Government should have decided to do something which I believe, with all due deference to the Noble Lord, will be regarded as a somewhat arbitrary decision to amend the Government of India Act in such a way as, possibly to carry out the original intention, but nevertheless, to do so in an arbitrary way without any consultation with those provincial governments or Indian politicians who can speak or organise political affairs in India. It is unfortunate at this particular moment when negotiations are going on between Mr. Gandhi, the Viceroy, and others, that the Government should have decided to go ahead with this particular Amendment.

I would like to reinforce the question which I have already put, whether there has been any consultation, and if not why there has not been any consultation with those who do speak for Indian organised political parties? This Amendment to the India Act arises in a way which has been fully explained in the House and into it I need not go again, but it does represent a dispute between provincial governments and the Governor-General, and this sort of dispute might frequently arise between the Federal Government and the provincial constituents of it. It is unfortunate at this moment, when we are talking in terms of Dominion status in India, that the particular procedure which the Government have adopted should not in fact have been followed. I understand that the Governor-General gave no decision about this Act of the United Provinces until after it became known that the British Government intended to deal with the question by an amendment here in England; that he abstained from giving a decision until the intention of the British Government was known. So that in fact the British Government are as one party in this question deciding that the British Government shall be the interpreters of the India Act and of the intentions of those who framed it. There were considerable consultations before the India Act was passed and organised Indian opinion was fully consulted on this very difficult question of demarcation between the sources of revenue which are open to a provincial or to a federal government; the matter was very fully discussed.

It seems incredible that in the early stages of Dominion status of another Dominion this particular action, which must seem arbitrary to Indians, should have been taken in another Dominion, and it seems unfortunate that there has been no consultation or that the other procedure of referring the matter to the courts was not followed. It may be that technically the action of the United Provinces does fall within the constitution. It might be possible for somebody, perhaps even the Privy Council, to say that if that was so nevertheless the original intentions of those who framed the Act had not been carried out, and to recommend an alteration such as is being made at the present time. That would seem to me to have been a better and more conciliatory procedure than the one which is being followed now. I do not know whether the Government would consider waiving this particular Clause at the present moment. After all, there is no urgency about the matter because in spite of everything, and in spite of the years that have gone by since the India Act was passed, the constitution envisaged in that Act is not in fact working at the present time, neither has the Federal Government been set up as has been intended, nor are the Provincial Governments working in a democratic way.

Earl Winterton

A system of taxation is in operation.

Mr. Roberts

A system of taxation is certainly in operation, but a very great part of the constitution set up under the India Act is, I greatly regret, not in fact working at the present time. The system of taxation would have gone on and I suggest it could have gone on under the other procedure of referring the matter to the courts for a decision. It seems to me that that would have been a more conciliatory way of proceeding, and, after all, on questions of taxation we in this House are very careful of our rights. You have in India at the present time a democratic system in the Provinces; you have a system which is not democratic so far as the Central Government is concerned. It is particularly unfortunate that we in England should interfere with that democratic right of taxation which the United Provinces have perhaps stretched further than was intended under the Constitution.

This Amendment that we are introducing is retrospective. It makes illegal the Act which the United Provinces passed and it makes it illegal retrospectively. It has been held up constitutionally but for consideration first by the Government, then by the Governor-General, and now here in England that Act is made retrospectively inoperative. I say again that I believe this will have an unfortunate result in India at the present time. I believe it is tactless, to say the least. I do not wish to over-estimate the importance of the question, but it seems to me at this particular moment, when some of us are very concerned about the way in which the Indian people have been dealt with by the British Government, when we are most anxious that that widespread good will which exists in India towards this country in the fight in which we are engaged should take a constructive and active part—we are all anxious for that —that we see our Government lacking in consideration and not willing to consult, whether on relatively small or on big questions.

Some of us fear that this is another example where such lack of consideration may lead to embittered feelings, where a more conciliatory attitude might make perhaps a disproportionately great difference to the question actually involved. After all, it has been laid down as the British Government's policy that Dominion status should be introduced into India as soon as possible after the war. The Viceroy has made it clear that he is ready at any time to consider proposals and to receive suggestions. Surely it would be possible in these small things as well as in the more important things to proceed in the spirit of that declaration now and not wait for the constitutional reforms which are necessary to carry it out.

5.10 p.m.

Mr. Sorensen

Up to now the discussion which we have had on this particular Clause might have been concerned with the County of Rutland. I am afraid, however, that if at the present time we were discussing the limitation of assumed existing powers of the smallest county in this country, we would have had more attention paid by the Government and by this House than that now being paid to this matter which concerns directly or indirectly 350,000,000 people. Consciously or unconsciously, we are classifying India in a lower category than one of the smallest areas of this country. As far as Rutland is concerned, they have a representative in the House, representations would be made by the local authorities and the Government itself would be exceedingly careful to go to every length before a proposal of this kind were brought into the House. Because it is India and because India has not direct representation in this House and also cannot govern itself centrally we are prepared to introduce this Measure, to make up our minds that it shall go through and to make no suggestion that it should be considered in co-operation between ourselves and those 350,000,000 human beings.

As far as I can see, the Government have made up their minds, no matter what appeals may be made from this side of the House, above or below the Gangway; the Under Secretary and the rest of the Government have decided on it going through. The concerns of the people, the appeals they make and the representations we make on their behalf are just brushed aside. In other words, we have an exhibition of autocratic power. Let us be perfectly clear that we are deciding in this House, thousands of miles away from India, exactly what shall happen to India, how India shall be governed, and how it shall dispose of its finances. I agree that so far as the hon. and Noble Lord is concerned he really believes the Government of India Act did not intend that these financial resources should be put into the hands of certain of the provincial legislatures of India. At the same time we must ask ourselves this: If the intention is not, to use his own colloquial phrase, to "do down" certain legislatures in India, how then did this particular Clause in this amending Bill arise? It arose, obviously, out of a recognition that there were powers interpreted by one of the provinces in India that might divert part of the financial resources of India away from the Central Government to the Provincial Governments. I was interested, therefore, in what the Noble Lord said. He went on to suggest that it was a technical question, that the Government of India Act needed adjustment and that we are trying now simply to clear up that simple technical defect. In other words, the Government of India Act did not intend this taxable capacity to be so advantageous to the provincial legislature.

Earl Winterton

If the hon. Gentleman intends to give a resume of my speech, I would remind him of what was one of my most important points; that this House, the Government of India and the Secretary of State should be to some extent the guardians of the future responsible Government of India, that is to say the Central Government; they should not give away the taxable right which they have given under the general Act.

Mr. Sorensen

While I appreciate that, surely if there is to be this careful guardianship of the future taxable capacity of the Government of India we should consult the people of India about it and not only ourselves. It is a one-sided arrangement. We are deciding ourselves what is good for India and yet at the same time we talk about the democracy of India. If there is any point in establishing these provincial legislatures it is that they do represent in some measure a democratic principle in India. I repeat what a previous speaker said. Have we consulted any representative political or legislative opinion in India on this matter?

The answer, obviously, is, no. What we have done is to assume for ourselves that we are to determine what is best for India, to decide exactly what the future arrangements shall be; and, although I am quite certain the Noble Lord is sincere in his desire to see that the future financial resources of India are safeguarded, he, sitting in the British House of Commons, is helping to decide what is good for India without consulting the people of India themselves. If he were an Indian in one of the Provincial Legislatures or occupying a public position in India, he would be the first to resent someone in this country deciding what is best for him. Our complaint is that there has been no sort of co-operative move to gain the confidence of the people of India in order that this defect might be remedied. The explanation is that the Central Government of India is not democratic; therefore, the bias must be put towards the autocratic form of government and taken away from the democratic form of government. I ask the House to consider what effect that will have on 350,000,000 people of India. They will perceive that the first amending Bill that we put forward is designed to limit in some measure their own rights, and to increase in some measure the autocratic powers of the Central Government over the people of India. Is not that going to play into the hands of those who say that we speak with two voices, one directed to the people of Europe and a totally different one directed to the people of Asia, and that while use speak of democracy so glibly, when it comes to a question relating to an area in which we are so much concerned we modify our professions?

I would earnestly appeal to the Under-Secretary to see whether he can, at least, suspend the operation of this Clause. I should have thought that at this time, especially in view of a recent statement by Mr. Gandhi and in view of a conference which is shortly to take place at Delhi, the Government would have gone out of their way to try to encourage confidence, understanding, and friendship. Instead of which, they are blind to the psychological effect of a Bill like this and of this Clause in particular and they push this proposal through, hoping to gain a certain amount of finance for the Central Government, which is under their control. I repeat that I should have thought that, if there had been any political sagacity at all on this matter, the Government would have said that although there might be a certain financial advantage to them in passing this Clause, yet that that was infinitesimal compared with the advantages that would result from the greater confidence, assistance and understanding secured from the people of India if this Clause were waived for the time being.

I am glad that my right hon. and learned Friend who spoke just now has drawn attention to the fact that, although Prohibition is the occasion for this matter, it is not the real issue. He and I may disagree as to whether Prohibition in India is a benefit or not; that is not for us to decide. The people of the United Provinces have decided, in their wisdom, that Prohibition should be introduced. We might think it unwise but that is not our concern but that of the United Provinces. The introduction of Prohibition is simply the occasion for the emergence of a financial difficulty. The United Provinces desired to secure revenue, and they find themselves checked. That produced in that Province a dire effect. Now the situation is made worse. Therefore, I ask, though almost without hope, whether the Under-Secretary could not, at least, suspend this Clause for the time being, as a gesture to the people of India.

Let us understand that the people of India can be won by friendship and co-operation. If we go on in the way proposed in this Clause we shall unnecessarily foment antagonism and hostility. It is not too much to ask that the Government, if they are sincere, shall suspend this Clause, so as to encourage beneficial relationship between this country and the country of India—for they are two countries, not one. Although we may treat India as a Colony, it is morally and physically as distinct a country as our own. If we suspend this Clause, our act of generosity, if you like—I would say, of far-sightedness—will have far greater advantages than will he obtained if this Clause goes through. I hope that my party will vote against this Clause—whether they will or not I do not know—but I would rather that it did not become necessary. I hope the Under-Secretary will rise to his feet and say that he has listened to our appeals; and that, because he is as concerned about India as we are, he is going to withdraw the Clause, or, at least, suspend it.

5.22 p.m.

Sir H. O'Neill

I am sorry in many ways that the tone of this Debate should have become rather political. After all, the matter which we are discussing in Clause 2 of this Bill is essentially a comparatively confined point, though it deals with what is in a sense a larger problem. The Income Tax of India, of course, is a matter of considerable importance, but we are really dealing with the comparatively minor point of the construction of the words in the Act of 1935. May I first remind the Committee of the two different definitions with which we are concerned? First, in List 1, which is the Federal List, with regard to which the Federation can deal, you have, under item 54: "Taxes on income other than agricultural income." I should have thought that that clearly meant.what it said, namely, that the main subject of taxes on income was to be for the Federal Government, and not for the Provincial Governments. Then, if you look at List 2, which deals with Provincial matters, you find in line 46: "Taxes on professions, trades, callings and employments." I think it was made clear in the Debate last week that that item in the Provincial list was not intended to be, in any shape or form, an Income Tax. Those taxes have been described by the various committees and commissions which have considered India's constitution as being taxes on professions, trades and circumstances. They have sometimes been called "status taxes." They were mostly taxes imposed by municipal bodies and corporations in India, and they were clearly imposed on a person in respect of his profession, status or employment. The Bill that was passed by the Legislature of the United Provinces not long ago—and the right hon. and learned Gentleman the Member for Ashton-under-Lyme (Sir W. Jowitt), who I know has studied the Bill, can confirm this—is simply a graduated Income Tax, graduated according to the amount of the incomes concerned. I do not think that under any interpretation of "taxes on professions, trades, callings and employments" you could possibly have included anything in the nature of the kind of tax imposed by the Legislature of the United Provinces.

Sir W. Jowitt

That is a very important observation. Am I to understand that the right hon. Gentleman has been advised —it is obvious that this matter has been very carefully considered by his Department—that such a tax as the United Provinces tax is plainly ultra vires; and, if so, why on earth was it not referred to the Federal Court?

Sir H. O'Neill

I shall come to that point in a moment. The right hon. and learned Gentleman asked whether there was any record in the proceedings of Parliament at the time when the Act of 1935 was being discussed, to show what was the intention of Parliament with regard to these taxes on income. I must say quite frankly that the Debates have been looked up and that there was not any definite statement in Parliament with regard to them. But I think the reason why there was not—if you look at all the other relevant documents which concern the matter—was largely that the whole point was so clearly understood and so clearly settled that it really was taken for granted; and that, therefore, it was not specifically referred to in Parliament. The scheme with regard to Income Tax under the Act owes its origin to the report of the Federal Finance Sub-Committee of the Second Round Table Conference. The conclusion of that committee was unanimously that taxes on income must be centrally administered. This was confirmed by the committee which sat under the chairmanship of Lord Eustace Percy. They said: One fact which has come out clearly in our investigations is the widespread recognition of the need for uniformity of taxation throughout India… Then you come to the Federal Finance Sub-Committee of the Third Round Table Conference. They accepted the views of the Percy Committee as to the classification of taxes on income, and they were at pains to emphasise that all legislation for the imposition of taxes on income should be uniform, and should be effected by the Federal Legislature. Thus, apart from any specific mention in Parliament, if we look at the origin of such taxation it seems impossible to doubt that taxation on income, other than agricultural income, which was reserved to the Provinces, was intended to be an exclusively Federal matter. Every reference to the matter in the White Paper and in the Joint Select Committee's report is consistent with this view. Therefore, I would reply to the right hon. and learned Gentleman's point with regard to intention by saying that although there may not have been any specific references to the subject in Parliament, there is undoubtedly ample authority for concluding that the intention was that taxes on income should be a matter for the Federal Government.

The right hon. and learned Gentleman and also the hon. Member for North Cumberland (Mr. W. Roberts) and indeed, I think also the hon. Member for West Leyton (Mr. Sorensen) all asked whether there had been any consultation with India on this matter. There has not with regard to this particular Clause, and I think the reason is obvious. If there had been consultation the lines along which it probably would have proceeded would have been as to whether or not this matter was to be referred to the court, and I am going to deal with that in a moment. Quite apart from that, it would not have been of very much use entering upon any kind of consultation with those who had been responsible for passing a Bill with regard to which there was such a fundamental difference of opinion.

Mr. Sorensen

Does that not mean that we are not treating the Indian Provinces as equal in any sense of the word at all?

Sir H. O'Neill

That is a matter of opinion, but I was stating that there are very obvious reasons why consultations did not take place and could not properly have taken place. As a matter of fact there were consultations with the Provincial Governments with regard to other Clauses in this Bill and most of them have been agreed.

Now I come to the point as to why this matter was not referred to the Courts in India for a decision. Under Section 213 of the Government of India Act there is a provision by which a matter of this sort can be referred to the Federal Court. The question as to whether or not Section 213 could be made use of was obviously considered, and this course was not adopted for one or two reasons which I think are cogent reasons. If it had been done it would have taken some considerable time. Meanwhile the taxes would have been imposed, many people would have had to pay them, considerable hardship might have been caused, and supposing the Act had eventually not been ultra vires there would have been considerable difficulties about the matter. But the main reason—and I will put it quite plainly and it is probably obvious to every hon. Member in this House—why the matter was not referred to the Court was because, supposing the decision of the Federal Court had been adverse and they had decided that the Indian Provincial Legislature was within its rights and that this was a legal tax, clearly it would have been essential to come to this House to get the matter reversed. We look upon this question of Income Tax as being one solely for the Central Government, and as being one of such vital importance to the whole structure of Indian finance that it could not possibly have been allowed to stand otherwise. That, I think, is the real reason why, if I may put it so, it was not worth while going to the Court to get an opinion when it if had been in a certain direction it would have been just as necessary as it is now to come to this House and to amend this Clause.

In conclusion, I will just put before the Committee one rather wider consideration with regard to this matter, and it has been referred to by my Noble Friend the Member for Horsham (Earl Winterton), who has a great knowledge of India and of Indian conditions. In trying to maintain the financial structure of India and to make sure that the Central Federal Government shall have stability of finance and will he financially sound, surely, we are building for the India of the future. The fact that constitutional conferences are to take place very shortly in India has been referred to more than once in the course of this Debate, and we all hope that out of these conferences, either now or at some later time, there may eventually come a solution of the constitutional difficulties in India and that India may take its place as one of the self-governing Dominions in the British Commonwealth of Nations. That envisages, I hope, a future Federal Government at the centre in India, and if that Federal Government is to function smoothly and properly, no matter by whom it may be controlled, it is essential that we in this House should make certain that we so frame its financial structure that it will be able to function successfully and without the difficulty of financial stringency which might upset the whole constitutional settlement. Therefore, I feel that even on those wider grounds there is justification for the course which I am asking this Committee to take and I hope therefore that we shall be able to pass Clause 2 without the necessity of going into the Lobby to record our votes.

Sir W. Jowitt

May I ask the right hon. Gentleman to reply to a question I put to him which he has not dealt with at all? He has made a very eloquent speech which would have defended his proposals had his proposals been something to this effect—provided always that no tax upon employment may be levied if in fact it amounts to an income tax. That I quite understand. Instead of doing that he said that no tax on employment may exceed 5o rupees, which is a different value altogether. He did not deal with that, and we should like to know the explanation of that.

Sir H. O'Neill

I am sorry that I forgot that particular point. The limit has been put down at 50 rupees largely owing to practical difficulties in confining it in any other way, and I would ask the right hon. and learned Gentleman to notice that in the proviso to Sub-section (2) of the Clause it is clear that any Province which at present has an employment or professions tax which is larger than 50 rupees may keep it. I believe that there is one Province where the tax is now' over 50 rupees, and this Clause will not affect it. There are only, I understand, two Provinces that have this tax in force as a provincial tax, and in each case it is considerably under 50 rupees. I think it varies from 28 to 30. This professions or employment tax has always been a tax of quite inconsiderable extent and I am informed that it was impracticable and quite impossible to find any way of suitably limiting the amount which could be imposed other than by putting in a specific sum.

Question, "That the Clause stand part of the Bill," put, and agreed to.

Clauses 3 and 4 ordered to stand part of the Bill.