NEW CLAUSE.—(Relief from double taxation). (Hansard, 15 June 1944)

§ Mr. Henry Brooke (Lewisham, West)
I beg to move, "That the Clause be read a Second time."
Let me make it clear at the outset that my hon. Friends and I do not wish to ask the Government for a detailed reply covering the whole field of double taxation now. Rather we wish to urge, through this Clause, the need for the Chancellor to make full inquiry with a view to a comprehensive reform of the existing law. I do not know whether the Committee appreciates the present situation. With respect to overseas earnings, if the local rate of taxation in the country concerned is 40 per cent., that immediately reduces earnings of £1 to 12S. The British rate of tax is 10s. in the £, and when this is applied to the remaining 12s. it reduces it to 6s. So the recipient has from his £1 not 10s. left, as he would have if it were domestic earnings, but only 6s. That is a very severe handicap against anybody who is assisting the nation by carrying on overseas business. The Chancellor himself has been foremost in showing that he appreciates the paramount necessity for all citizens in the country and for the Government itself to work together in the stimulation of British overseas trade. The present aggregate of taxation, when domestic taxation is added to foreign taxation, is so crushing that a business man, or it may equally be an author who is having books published abroad, wonders if it is any use going on. If he has a business he may be compelled 2281 to sell it to some native of the overseas country, who will not be subject to this severe burden.
I am sure that the Chancellor of the Exchequer, from what he has said, agrees that the existing law, which dates from the 1920 Finance Act, needs overhaul. It has become inconsistent with Government policy for the furtherance of overseas trade. Three salient changes have taken place since 1920. First of all, there has been a sharp rise in the rate of taxation, not only in this country but in practically every country overseas. Secondly, the theory of the present law is that the British Government should work towards reciprocal agreements with other countries overseas; but unhappily our experience of these 24 years is that reciprocal agreements are very hard to come by. Thirdly, the 1920 Act is based on the old theory, I sincerely hope now an obsolete theory, that the Government would be ill advised to encourage British citizens to engage in overseas business unless the yield on the capital employed is likely to be so high that it can well afford to bear double taxation.
The 1920 Act indicates too limited an approach to the problem. My fear, from something that the Chancellor has said, is that he is still thinking only along the restricted lines of reciprocal agreements. If we are to wait until we have reached reciprocal agreements with the Dominions and all the foreign countries concerned, we shall have to wait till the cows come home. The situation of Britain does not allow for that. That is why I have put down this simple Clause—far too simple, if one was really undertaking the reform of double taxation. It provides, first, that the measure of relief from double taxation, which at present only applies within the British Empire, shall apply to earnings received from foreign countries as well as from Empire countries; and, secondly, that the relief, which is now limited to one-half of the Dominion rate of taxation, shall be freed from that limitation. In other words, the earnings will pay tax either at the British rate or at the overseas rate, whichever is the higher, but not both. I hope I have proved the case for a thorough investigation and a radical overhaul of the existing law.

§ Mr. Assheton
My hon. Friend told the Committee that he was really moving the 2282 Clause in order to ventilate his views on the matter, and I think it is very appropriate that the subject should be discussed in this Committee. It will be within the recollection of the Committee that my right hon. Friend the Chancellor said how he fully realised the great importance of this matter when dealing with it in his Budget speech. The only thing I can say now is that everything that has been said by my hon. Friend or may be said by others will be carefully noted, and that at the present time, in view of the negotiations that are going on I should not care to make any further statement on behalf of the Government. If an arrangement comes to be made with the United States which is on different lines from the existing arrangements with the Dominions, it will clearly become necessary to consider what the repercussions on the latter arrangements may be. But it would be a mistake to prejudice the issue by making any alterations in the law at the present time. In view of that, I have no doubt that my hon. Friend will be good enough to withdraw the Clause.

§ Mr. E. P. Smith (Ashford)
With regard to the negotiations that are taking place between the United States and the British Treasury, can we be assured that they are proceeding satisfactorily?

§ Mr. Assheton
I have no reason to think anything to the contrary.

§ Mr. Brooke
On my right hon. Friend's assurance that the Chancellor will give this matter his attention and will look at it in a broad and not a narrow way, I am happy to ask leave to withdraw the Motion.