HC Deb 01 July 1941 vol 372 cc1247-8

In respect to undistributed profits, the standard rate of Income Tax for the year 1941–42 shall be nine shillings in the pound. —[Mr. Hammersley.]

Brought up, and read the First time.

Mr. Hammersley (Willesden, East)

I beg to move, "That the Clause be read a Second time"

The object of the Clause is self-evident. It desires to give some kind of incentive to companies to retain as much of the profits as they possibly can in the company. When my right hon. Friend made his financial proposals his first objective, of course, was revenue, but he also had the objective of raising it in such a way as not to undermine the stability of enterprise or the ability of businesses to deal with post-war problems. If the maximum of reserves can be kept in companies, they will be able to deal with the difficult times which lie ahead in the post-war period. The Clause will have a second desirable objective. It will reduce the distribution of profits, thereby decreasing purchasing power and reducing consumption, which was one of my right hon. Friend's objectives in introducing his Budget. It is clear that no company can or does distribute the whole of its profits which are assessed to taxation. Although one appreciates the necessity of raising these large sums of money, it is being done in a way, as regards the stability of many companies, which is rather ruthless, and I hope, if he cannot accept the Clause, he will bear in mind these criticisms and that in point of fact it is important to retain the maximum amount of undistributed profits inside companies.

Sir Reginald Clarry (Newport)

I beg to second the Motion.

Sir K. Wood

My hon. Friend will not think I am detracting from what he has said when I say that a good many people have also put the case on many occasions under much more favourable circumstances, as far as finance is concerned, than those of to-day. In fact proposals of this kind have always been rejected by the House, either because the relief is unsound in principle or because the concessions are too costly. I will not enter into a controversy with my hon. Friend on the merits of his proposal, I will simply say that a concession of this kind would cost something in the neighbourhood of £12,000,000, which I am by no means in a position to sacrifice. Therefore, in the interests of the country as a whole, and of the Exchequer and the Treasury, I must ask him not to press it further. Perhaps in happier times, when the Income Tax is down, he will be able to put it before the Chancellor of the Exchequer of the day with more hope of success, but to-day it is impossible to make the concession.

Motion and Clause, by leave, withdrawn.