DOUBLE TAXATION RELIEF (Hansard, 17 July 1946)

§ The Financial Secretary to the Treasury (Mr. Glenvil Hall)
I beg to move, That an humble Address be presented to His Majesty, praying that, on the ratification by the Government of the United States of America of the Convention set out in Part I and the Protocol set out in Part II of the Schedule to the Draft of an Order entitled the Double Taxation Relief (Taxes on Income) (U.S. A.) Order, 1946, a copy of which was presented on 4th July, an Order may be made in the form of that draft in lieu of an Order in the form of the draft laid before this House on 28th January As the House is aware, the Finance (No. 2) Act, 1945, provides that Double Taxation Agreements may be made with other countries. Statutory effect is given to any Agreements that are so made by Order in Council. It is an Address for such an Order in Council that we are now asking the House to approve. The draft Order to which this Motion relates was presented on the 14th July last. It contains a Double Taxation Convention with the United States relating to taxes on income, which was actually signed on the 16th April, 1945, and was also, as many Members will be aware, published some time ago as a White Paper. It also includes, something which is new and that 1290 is a Protocol, signed on the 6th June, 1946, which amends one of the Articles of the Convention to which / have just referred. An affirmative Resolution is needed before both the Convention and the Protocol can he ratified by this country. The United States is ready to ratify both these documents. The approval of the Senate has already been obtained, and we are asking the House to approve on behalf of the United Kingdom.
The present draft Order supersedes another draft Order, which was presented to the House on 28th January, 1946, and which actually received an affirmative Resolution by this House on 19th February. Although the present draft Convention is the same as was then presented, and agreed to, we are presenting it again to the House because, this time, it has attached to it, as I have indicated, the Protocol making a change in the Convention. The purpose of the Protocol is to delete Article 11 (3) from the Convention. This Article is designed to facilitate business visits between this country and the United States, and provides that where a United States resident is performing services for another United States resident in this country he should be exempt from United Kingdom tax on any earnings that might accrue to him if he is here for not more than 183 days in any one Income Tax year. The arrangement is, of course, reciprocal, and would apply equally in favour of a United Kingdom resident residing in America, and acting there for another citizen of this country. Paragraph 3 of this particular Article, however, denied the benefits of this exemption to "public entertainers, such as stage, motion picture or radio artistes, musician, and athletes." These would have been taxable, although any double tax relief to which they would have been entitled might have been claimed by them under Article 13 of the Convention. Their exclusion under Article 11 was however noted by the motion picture industry in Hollywood, which immediately made representations to the United States Government on the subject. Their spokesmen appeared before the Foreign Relations Committee of the United States Senate and, eventually, it was agreed that representations should be made to this country for the deletion of the offending limitation.
1291 As has already been reported to the House, my right hon. Friend the Chancellor of the Exchequer agreed to the deletion of this paragraph of the Article. No doubt the noble Lord the Member for Horsham (Earl Winterton) may later substantiate the statement that this is a change which the British film industry is pleased to see made, and is one it thoroughly approves. The effect of the change is that an English film "star"— to use the motion picture industry as an example—if working temporarily in the United States for a United Kingdom employer, will not now pay United States tax on his earnings there. The same rule will apply to a United States "star" working here for a United States employer. I should add that the change will have no application whatever to a United States resident if he is living here, and performing services here for a United Kingdom employer——

§ Earl Winterton (Horsham)
No doubt inadvertently, the hon. Gentleman did me an injustice. It is true that I have a certain personal interest in the film industry, but I am not speaking in this Debate, and I do not want it to be thought that I am a party to these negotiations.

§ Mr. Glenvil Hall
I am sorry it anything I said might have given to the House a contrary impression. I knew that the noble Lord was interested in the film industry, and thought he would have been aware that the British film industry did thoroughly approve of this change, and was anxious that the House should agree to it. I meant no more than that, and I hope the noble Lord will accept my assurance on that point. I have no more to say, Mr. Speaker, than to commend this Motion to the House for its acceptance.

§ Mr. Osbert Peake (Leeds, North)
I am sure the House will be grateful to the Financial Secretary for his clear exposition of this rather technical matter. I must confess that when I saw that the draft Order which was approved by the House as long ago as last January was to be laid again, with an amendment in it of a very minor character, I was somewhat suprised, and wondered why it was that this Amendment had been thought 1292 necessary, or desirable. The hon. Gentleman has now made the position clear. We on this side of the House welcome this double taxation agreement. It will do a very great deal to facilitate both commercial and cultural relations between the two great English speaking democracies It provides for the elimination or the reduction of double taxation over the whole commercial field, and a large part of the cultural field. The different Articles in the Convention deal with shipping profits, dividends, interests, royalties, copyrights, professional fees, and fees earned by teachers and people of that description.
The earnings which may be subject to double taxation are dealt with in a variety of ways. Some are met by means of apportionment, some by means of a set off, and some by way of total exemption. Article 11, which is being amended by the Protocol, refers to the earnings of professional and business agents on short-term visits of less than 183 days from either United States to this country or from this country to the United States. The earnings of such agents were totally exempt from taxation in the country visited by the agent. The Article contains a curious exception relating to public entertainers, such as stage, motion picture or radio artistes, musicians, and athletes. I cannot believe that that exemption, in the first instance, was of very much value, because my experience, such as it is, is that stage, motion picture and radio artistes, musicians and athletes, work not as agents for other people, but on their own account. They fall into the ranks of what we call here, "the self employed." I should think that the number of cases where they act as agents for other persons, and might be said to be performing services for or on behalf of other persons are very few and far between. I imagine that the reason why the United States came forward, after the agreement had once been signed, to ask that this paragraph should be deleted, was more a matter of amour properwith Hollywood film stars than anything else.
As far as I can see, the addition of the Protocol, which will delete this exception, will make very little difference to the agreement. It may, to a very slight extent, facilitate visits to this country by American "stars" and by British "stars" to the United States. In either case, they would have got free 1293 dom from double taxation, but if they obtain freedom from taxation under Article 13, they will obtain that freedom in a much more simple and speedy way than they would have done had their cases been dealt with under Article 13 of the Convention. For that reason, while we are extremely grateful to the hon. Gentleman for explaining this matter to us, we on this side will offer no objection to the Order.