Motion made, and Question proposed,
That no relief shall be given under section thirty-two of the Income Tax Act, 1918, or any other provision of the Income Tax Acts providing for relief for income tax purposes, in respect of contributions towards the cost of pensions to or for the benefit of the widow, children or dependants of the contributor, being contributions made under any Act of the present Session to amend the law relating to the superannuation and other benefits payable to and in respect of persons who serve or have served in the Civil Service of the State or in service to which the Superannuation (Various Services) Act, 1938, applies and for certain other purposes.—[Mr. Glenvil Hall.]
§ 7.18 p.m.
§ Mr. Osbert Peake (Leeds, North)
Perhaps the Financial Secretary will say a word in explanation of this Motion. Looking at it without any knowledge of the background of the matter, it seems a little curious that these pensions to widows and orphans to be paid as the result of the Bill will, in the hands of the recipients, be liable to Income Tax. It is therefore a little surprising that the contributions which are paid by the persons whose dependants will eventually receive them should not be permitted to subtract the amount of the contribution from their Income Tax liabilities. Perhaps the Financial Secretary will explain why this is not to be permitted.
§ 7.19 p.m.
§ The Financial Secretary to the Treasury (Mr. Glenvil Hall)
The right hon. Gentleman the Member for North Leeds (Mr. Peake) is quite correct. Normally, an Income Tax allowance rebate is permitted for contributions of this kind to life assurance or to a pensions scheme. We are here proposing that, so far as civil servants who come under the scheme are concerned, no such allowance should be given. The reason is two-fold. First, some of these payments will be made out of the lump sum, others as a l¼ per cent. deduction per year from salary; yet others will be partly by one and partly by the other method. The actuaries tell us, and it is a fact, that if an Income Tax allowance were permitted under Section 32 of the 1918 Act, the incidence on the contributors would not be equal; in other words, one person would have a slight benefit over another according to whether he or she chose one method rather than another.
There is another and more important consideration, that any relief from Income Tax on these payments must diminish the amount received by the Exchequer from Income Tax. In other words, it would place an additional burden on the general body of taxpayers. The actuaries have worked out this scheme so that the employer and the employee pay equal contributions. If we allowed civil servants as a body to have, in addition, an Income Tax rebate, it would mean that the Exchequer proportion would have to be higher or that the percentage levied on the contributor would have to be more than l¼ per cent. Therefore, by agreement with the Staff Side, it was decided that Clause 48 should be inserted in the Bill; this Ways and Means Motion naturally follows from that.
§ Resolution to be reported Tomorrow.
§ Committee to sit again Tomorrow.