NEW CLAUSE.—(Deduction for wasting assets of extractive industry.) (Hansard, 15 June 1944)

§ Commander Agnew (Camborne)

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

This new Clause is designed to remove a noticeable and, in many cases, overwhelming burden of taxation which rests upon the mining industry and those other branches of the general extractive industries which have as their object the winning of wasting assets. If I address my remarks chiefly to the case of metalliferous mining and do not deal so much with coal, it is because in the case of coal mining the deposits are usually extensive, compact, and easily accessible, and therefore the overhead charges are not high, whereas in the case of metalliferous mining the ore-bearing lodes are almost always narrow, very often slanting, and sometimes intermittent, and you have to tunnel your way through large quantities of granite or other hard rock before you get established, and therefore you have very high overhead charges. Furthermore, in order to maintain contact with the ore you have from time to time to undertake very vast development schemes which are entirely out of the ordinary and therefore very costly.

In the present situation, in the absence of any form of relief to this branch of the industry, the board of management of a metalliferous mining concern are forced, by circumstances, to neglect the development they ought to make for the future, and therefore tend rather to distribute the profits more easily acquired on the deposits most easily recovered because they are so near to hand. That action is quite contrary to the tenets of good mining, and I submit that it is also contrary to the national interest, because it is wrong that a mine should have to shut down solely on the ground that it cannot finance the development which it ought to undertake during such a period as its production is temporarily suspended.

There is one more aspect I want to stress. When the investors of a mining enterprise receive a dividend or distribution of profits over a period, they are really drawing partial interest but they are 2219 also having returned to them some part of the capital that was originally invested. Sooner or later the time comes—and it comes sooner in the case of base metal mining—when the mine is worked out. Then it is that there will be no more dividends, and investors' income from that source will cease. Neither is there any more capital to be returned to them, except their share, a meagre result in a particular shareholder's case, of the sale of the mining equipment for scrap value. The company has no reserves to fall back upon in order to prospect elsewhere in the district and it closes, and we get the dreadful social evil of mass unemployment. It would not be contended that the profits of a mining enterprise should not be taxed on the same principle as other enterprises are taxed, but it should be taken into account that part of the profits which under the present law fall within the Income Tax are returns of capital, and our tax law ought to reflect that position now.

Our law lags far behind that of other countries in the matter. In Australia, Canada, South Africa, as well as in the United States of America, there are depreciation allowances in some form or another, which are of a substantial degree, to deal with the special position of mining wasting assets. Only recently, in the midst of their preoccupation with the war effort, the Commonwealth of Australia introduced special concessions to base metal mining producers in their country, and I submit that it is not too soon for us here to consider, in planning our post-war world, what allowances we are to give to our mining enterprises in order to develop the wealth that lies below the ground.

In the Clause before the Committee the principle has been adopted of a percentage depletion allowance, and that has to be worked out according to the formula which is provided for in the Clause. The percentage, when it has been worked out, will be applied to the value of the products of the particular mine or quarry which have been extracted during the year concerned. It is proposed that the rate of percentage will be worked out by the Commissioners of Inland Revenue, and it will naturally vary according to the particular class of industry, whether it is a quarry, an oil well, a mine or a sand pit. The Commissioners, in arrive- 2220 ing at the appropriate percentage to be applied, are charged with the duty of having regard to a number of factors, one of which is the unexpired portion of the capital outlay. Obviously, if a mine has been run for a very long time a large amount of wealth drawn out of it the same conditions would not fall to be applied to it as in the case of a mine with all its wealth before it unextracted. That will have to be worked out by the Commissioners of Inland Revenue, so that some relief is granted, but not more relief than is justifiable. There are several safeguards in the Clause which are intricate in detail, and although I have inserted them on the advice of those well qualified and closely connected with the mining industry I do not propose to explain them in detail now.

I have put down this Clause because it is felt that the ordinary flat rate of a company Income Tax system should no longer in our country, any more than in the other countries I have cited, be applicable in the case of the mining industry. I go so far as to say that unless some change is made in our laws it will not be possible to set on their feet again, in post-war conditions, some of the mines and quarries which have been a great standby to us during this war, and which in our post-war economy we urgently need in order to make it possible to derive full wealth from our country.

This proposal would, of course, benefit the shareholders who put their money into a particular enterprise, but it would also benefit the people who lived where the mines are, and in particular those who worked in them. I am happy to be able to say that so far as my own constituency is concerned the trade representatives of the workers in the mines there have looked very favourably on the proposal to deal specially with these mining enterprises, and I am authorised to say that I have their support, as well as that of the management side for bringing it forward to-day. I trust the Chancellor will give the proposal his favourable consideration and if, as is sometimes the case, the Treasury draftsmen are not able to accept the exact phraseology used by other draftsmen outside, he will bend his energy, as I am sure it is his will, towards bringing forward at a later stage some other proposal which will bring the measure of taxation relief which the mining industry and its associated industries demand.

§ Sir J. Anderson

May I remind the Committee that in my Budget speech I made known my intention to introduce at a later stage certain proposals, which I particularised to some extent, for easing the burden of our existing Income Tax system upon industry? I said in regard to these matters that there were still many details to be worked out, that my advisers were busily engaged on the task, and that my intention would be to propose legislation in good time so that any new arrangements that might be accepted by Parliament could come into operation speedily on the termination of hostilities. In regard to this question of wasting assets in extractive industries I said: I propose also to introduce a depreciation allowance in the extractive industries, that is, in mines, oilwells, quarries and the like, where capital expenditure is incurred on various types of assets which are limited in life by the life of the mineral or oil deposits."—[OFFICIAL REPORT, 25th April, 1944; Vol. 399, c. 676.] I am still in the position in which I found myself when I made my Budget speech. Work is being done on these problems, and I hope to be in a position to make proposals before the next ordinary Finance Bill becomes due. I can certainly assure my hon. and gallant Friend and the Committee that, in framing such proposals, I will pay due consideration to what I find set out in this rather formidable Clause and to what my hon. and gallant Friend has said in com-mending this matter to the consideration of the Committee. I hope, in the circumstances, the Clause will not be pressed.