HC Deb 19 June 1950 vol 476 cc1003-21
The Minister of State for Economic Affairs (Mr. Gaitskell)

I beg to move, in page 36, line 32, at the end, to insert: Provided that Part I of that Schedule (which contains enactments dealing with licences and oil rebate for agricultural tractors, &c, in

(1) To the extent appearing from the subsequent provisions of this section and the Schedule (Double Taxation Relief) to this Act, relief from income tax and the profits tax shall be given in respect of tax payable under the law of any territory outside the United Kingdom by allowing the last-mentioned tax as a credit against income tax or the profits tax, notwithstanding that there are not for the time being in force any arrangements under Part V of the Finance (No. 2) Act, 1945, providing for such relief.
(2) The said relief (in the subsequent provisions of this section and in the said Schedule to this Act referred to as "unilateral relief ") shall be such relief as would fall to be given under Part I of the Ninth Schedule to the Finance Act, 1947, if arrangements with the Government of the territory in question, containing such provision as appears in so much of Part 1 of the said Schedule to this Act as applies to that territory, were in force by virtue of Part V of the Finance (No. 2) Act, 1945:1
Provided that the total amount of the credit to be allowed by way of unilatera-relief in the case of any income shall not exceed, if the territory is within the Common wealth territories, three-quarters, and, in any other case, one-half, of the sum of the limits specified in paragraph 4 and sub-paragraph (11 of paragraph 5 of Part I of the said Ninth Schedule.
(3) The provisions of Part I of the Ninth Schedule to the Finance Act, 1947, shall as respects unilateral relief, have effect subject to the provisions set out in Part II of the said Schedule to this Act, and any expression occurring in Part 1 of the said Ninth Schedule, or in subsection (5) of section fifty-one or subsection (5) of section fifty-two of the Finance (No. 2) Act, 1945, which imports a reference to relief under arrangements for the time being in force by virtue of Part V of the last-mentioned Act shall be deemed to import also a reference to unilateral relief.
(4) Unilateral relief shall not be given in respect of tax payable under the law of the Republic of Ireland, and section twenty-seven of the Finance Act, 1920, shall, as applied by the agreements set out in the Second Schedule to the Finance Act, 1926, the Fourth Schedule to the Finance Act, 1928, and the Ninth Schedule to the Finance Act, 1948, continue to have effect in relation to the Republic of Ireland.
(5) Subject to the provisions of subsection (4) of this section, section twenty-seven of the Finance Act, 1920, shall cease to have effect.
(6) Where, under the law in force in any territory outside the United Kingdom., provision is made for the allowance, in respect of the payment of United Kingdom income tax, of relief from tax payable under that law, the obligation as to secrecy imposed by the Income Tax Acts upon persons employed in relation to Inland Revenue shall not prevent the disclosure to the authorised officer of the Government of that territory of such facts as may be necessary to enable the proper relief to be given under the law thereof.
(7) References in this section, and in the said Schedule to this Act, to tax payable or tax paid under the law of a territory outside the United Kingdom include only references to taxes which are charged on income or profits and correspond to income tax or the profits tax in the United Kingdom, and, without prejudice to the generality of the preceding words, a tax which is payable under the law of a province, state or other part of a country not being a country within the Commonwealth territories or which is levied by or on behalf of a municipality or other local body, shall not be deemed for the purposes of this subsection to correspond to income tax or the profits tax.
(8) In this section and the said Schedule to this Act, the expression "income," in relation to the profits tax, means profits.
(9) In this section and the said Schedule to this Act, the expression "the Commonwealth territories" means His Majesty's dominions, India, the British protectorates and protected states and any trust territory administered by the Government of any part of His Majesty's dominions.

Great Britain or with oil rebate for agricultural tractors, &c, in Northern Ireland) shall have effect only from the beginning of the year nineteen hundred and fifty-one.

This is an Amendment concerned with the new Clause on Excise licences for tractors, which we shall be coming to shortly. It is clearly necessary that if any change is to be made in the Excise arrangements, it should be made at the end of the calendar year and not in the middle.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

(10) This section and the said Schedule shall have effect in relation to the Anglo-Egyptian Sudan as they have effect in relation to a part of His Majesty's dominions.
(11) This section applies to income tax for the year 1950–51 and all subsequent years of assessment, and to the profits tax for any chargeable accounting period ending after the end of March, nineteen hundred and fifty, but the transitional provisions contained in Part III of the said Schedule to this Act shall have effect in the cases therein referred to.—[The Solicitor-General.]

Brought up, and read the First time.

10.16 p.m.

The Solicitor-General

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

The Clause provides for a system whereby the British Exchequer gives credit in respect of taxes payable in foreign countries and in Commonwealth Territories on income arising in those territories to United Kingdom residents. As hon. Members know, in the 1945 (No. 2) Finance Act we introduced a system whereby, if reciprocal double taxation agreements were entered into between this country and other countries, they could be made, so far as necessary, part of the law of this country in order to give relief in respect of taxation payable on the income arising in those other countries under their taxation systems.

It was hoped that it would be possible to negotiate agreements with a wide variety of countries providing for such reciprocal relief. Indeed, the position at present is that there are in force a number of such agreements. It has, however, not been possible to progress quite as fast as was hoped, and in order to assist British traders in trading in foreign markets—that is to say, the markets both of foreign countries and of Commonwealth Territories—it has now been decided to introduce a system of unilateral relief in respect of foreign taxation.

I should call the Committee's attention to one or two features of the system which is embodied in the new Clause. The relief extends, in relief of tax payable in foreign countries, up to one-halt of the United Kingdom rate of tax, and in respect of tax payable in Commonwealth countries, to three-quarters of the United Kingdom tax. The rate of United Kingdom tax is ascertained in accordance with a formula which was included in Schedule 9 to the 1947 Finance Act, which provides how the double taxation agreements when they are entered into are to be implemented so far as the actual working out of the rates of tax are concerned.

The unilateral double taxation relief which we now provide is on these lines. It is given only to United Kingdom residents, with exceptions in the case of the Channel Isles and the Isle of Man. It is given in respect of tax payable in the foreign or Commonwealth territory on income arising in those territories. It is given, as I have said, up to the limits which I have indicated: one-half in the case of foreign countries, and three-quarters in the case of Commonwealth countries. The balance of the foreign or Commonwealth tax which is not allowed under this limit of unilateral relief is, in the ordinary way, allowed as a deduction in the computation of the trader's expenses.

In other words, if the trader resident in the United Kingdom and trading in a foreign country has to pay foreign tax on the income which arises to him in that foreign country, he is entitled to claim relief against United Kingdom tax up to half of the United Kingdom rate in respect of that foreign tax. He finds out what is the foreign tax and is relieved up to half the United Kingdom rate, and if that does not give him complete indemnity in respect of the tax payable in the foreign country, he is entitled under ordinary tax law to draw the balance of the foreign tax he has to pay as a deduction in computing his profits for foreign tax purposes and Income Tax purposes.

The unilateral relief which we give under this Clause relates only to foreign tax analogous to British Profits Tax and British Income Tax. This is a system which, we hope, will be in operation so long as we have not succeeded in negotiating a true double taxation agreement with another country. We hope this will be a system which will afford a very considerable measure of assistance in enabling British traders to gain entry into and expand their exports in foreign markets, and it is with that end in view that we have introduced this system of relief. I think the Committee would like to know what the cost will be to the British Exchequer of this unilateral relief, and I am able to say to the Committee that it will cost £9,500,000 in a full year.

I hope that with that explanation the Committee will feel able to agree to the Clause. The Clause is worked out in rather great detail in a new Schedule which goes with it and which I will move in due course, but the general outline of the relief is contained in the Clause itself and is as I have indicated to the Committee.

Mr. Waiter Fletcher (Bury and Radcliffe)

This Clause certainly appears to be an attempt to remedy the great delay there has been to bringing to a successful conclusion negotiations for double taxation agreements with certain countries. I have persistently attempted to get the Chancellor to see that the impression which is gained if one visits France and Belgium that it is this country which is hanging back and that those countries are only too willing to conclude this agreement, is a false one, but one cannot quite escape from that feeling.

The first question I want to ask is whether there is to be a persistent endeavour to bring to a successful conclusion the long-drawn-out negotiations which are taking place with those countries, because it is perfectly true and obvious that those forms of agreement which have been carried to a successful conclusion in a great many countries, particularly within the Commonwealth, in the last year or so are a much greater relief than the present Clause can give, not only to the trader but to the holder of wholly-owned subsidiary companies in many of these territories.

The first thing we would like to be reassured about is that the appearance of this Clause does not mean that the Chancellor is going to stop the negotiations. He recently had a very great opportunity in the soft air of Briançon of bringing these negotiations to a conclusion. The whole of the French Press was filled with a charming picture of the very democratic activities of the Chancellor of the Exchequer doing the washing up after his frugal meal. Surely there was an opportunity to discuss with M. Petsch, in the peculiarly intimate atmosphere that must have been created by that activity, some arrangement which would have been very much better than this Clause. We have some grounds for our doubts whether the Government are really pursuing with the utmost vigour bilateral tax relief. Not so long ago many traders and owners of companies in France were to have imposed upon them a tax against which British subjects were really protected by a law nearly 100 years old, but it was not possible to obtain from the Government any move to protect their own subjects.

Many of us have a feeling that the figures having shown that to bring dual taxation relief negotiations to a successful conclusion would cost a good deal more than the present Clause, the Government have chosen to bring in this Clause as their attempt to meet the position. We need a very categorical assurance that real attempts are being made by the Government here—and I am sure there is great willingness on the other side—to bring to a conclusion the negotiations which we have so often heard were on the point of completion.

On the question which the Solicitor-General raised about half the expenses being capable under the ordinary tax laws of being set against expenses, I would ask how that can be done in the case of traders whose form of trading is that they are the sole owners of French subsidiary companies? They have no expenses which they can possibly use for that purpose. The position is quite different if a British firm has a branch under its own name. If it is not a French or Belgian or foreign entity, it is perfectly possible to set the expenses of that organisation up to 50 per cent. against their trading, as the Solicitor-General has said. I do not see how that can be done in the case of wholly-owned or even partially-owned subsidiaries.

The right hon. and learned Gentleman should remember that by force of circumstances of the taxation laws of many of these foreign countries, companies have over a period if years been driven willy-nilly to having wholly-owned or partially-owned subsidiary concerns. That arose in order to avoid the danger that otherwise the foreign Government would assess the profits of the company in that country on the total of the whole group of companies. It is important that we should receive a satisfactory answer to this query. Otherwise the result would be that those who trade in the form of another branch would get a certain advantage and those who trade in the form of holding shares in a locally established subsidiary—and that is the great majority of them—would not get it.

It must be borne in mind that very often British firms carrying out the function which they should carry out, and which European payment negotiations and bilateral agreements have as their objectives, of increasing inter-European trade extend also to the Colonial Empires of those countries. There again is a great complication in that the taxation laws in the Colonies and overseas possessions of a good many of those countries are not the same as in the metropolitan country. We should have some sort of assurance that that will be taken into account in calculating what relief is needed.

I believe that this Clause is a short step, and quite a reasonable one, towards loosening European trade, towards making it possible for real joint enterprise in various European countries which has been stopped for some time to be carried out. But it does not go nearly far enough, and at a later stage I hope to have the opportunity of moving an Amendment in order to bring that about in toto instead of partially, as this Clause does.

10.30 p.m.

Sir I. Fraser

I think the right hon. and learned Gentleman said that arrangements for reconciling double taxation were being aimed at as regards foreign countries, the Dominions and the Commonwealth Territories. I want to reinforce the plea made by my hon. Friend the Member for Bury and Radcliffe (Mr. W. Fletcher) that these negotiations go on in order to get fully satisfactory 100 per cent. double taxation agreements with all these overseas countries. There may be difficulties with foreign countries; the difficulties should be less acute in the Dominions; and I submit they should not exist at all in the territories, because if I understand the word "territories" correctly, they are managed from Whitehall and it is only a matter of making an agreement with ourselves, in consultation with Governments which are in the main Whitehall-controlled.

I want to make an observation about the concession, because I do not understand it. One might apparently charge one's taxation by another country as an expense against taxation in this country. If I understand that aright, suppose one has no office or machinery in the other country upon which to charge expenses, can one simply charge them on the taxation figure or up to the taxation figure as regards the 50 per cent.?

I will declare an interest, to illustrate the point. Suppose one is a person, as I am, who earns money in South Africa as an individual, not in this instance through a company or a firm, but as a private person who earns fees, and one has no expenses in earning these fees except an odd postage stamp. Can one charge half the taxation which one is compelled to pay in South Africa on those fees as a set-off against tax and surtax here in Britain? Is that what is meant? It seems to me that if it is expected to clear this matter unilaterally, there is every conceivable reason, especially within our own Dominions and territories, for clearing it wholly and not by reference to a half or three-quarters. If I have got this wrong, I hope the Solicitor-General will correct me; but if I have got it right, I hope he will explain how one can charge an expense where there is no expense.

Mr. Maclay (Renfrew, West)

I hope the Chancellor of the Exchequer will be able to give the assurance asked for by my hon. Friend the Member for Bury and Radcliffe (Mr. W. Fletcher)—namely, that the appearance of this new Clause will not mean any lessening of the efforts of the Government to push these bilaterial negotiations in all possible directions. There has been some evidence that with certain countries the running has been made by the British Government, and I think that is encouraging; but in France undoubtedly there is a strong feeling that the United Kingdom has been dragging its feet in this matter. I hope this Debate may give the right hon. and learned Gentleman an opportunity of making clear what is holding up the French negotiations.

However, I think it would be wrong not to express some satisfaction that this new Clause has appeared. It goes a certain distance, and one hopes it may be that the reason it does not go the whole way is that the Chancellor is frightened that it would take away some of the impetus from the negotiations for full bilaterial treaties. I doubt whether that is a sustainable argument. Doubtless we shall hear more about that when we come to a later stage, and shall hear the real reason why the Chancellor has not been able to go the whole way in unilateral relief. Speaking for some of those who have done a lot of work in respect of this double taxation—and I am not an expert in it—I feel that we should thank the Chancellor for this start, and hope that it will be carried on to its logical and proper conclusion in this Bill.

Mr. David Eccles (Chippenham)

I think the Chancellor of the Exchequer ought to thank us on this side of the House. We have pressed this on him for several years running. Last year the Solicitor-General replied, when I moved a Clause with exactly the same intention—that is to say, to lessen double taxation: The case made by the hon. Member for Chippenham (Mr. Eccles) is that, in present-day circumstances, it is urgently necessary to lift from the shoulders of British undertakers operating in foreign markets, so far as we can, the burdens which impinge upon them. It is not as if we had not already made very substantial progress in regard to the conclusion of these bilateral agreements. If it could be said that this had been an extraordinarily slow business, and that we were making very little advance in concluding agreements which included other countries, then there would be more in the argument that we should proceed in this unilateral fashion."—[OFFICIAL REPORT, 28th June, 1949; Vol. 466, c. 1045–6.] He went on to cite 14 agreements that were in negotiation, and as the Government were in process of fixing them up, the obvious advantage of proceeding by unilateral relief was turned down.

What has happened in the year? Of all the cases which the Solicitor-General said were under negotiation, only that with Sweden has been ratified by both parties and is now in operation. We say that the progress expected has been exceedingly slow and justified our argument. With the exception of France, to which some reference has been made, it is true to say that the countries with whom we have not got double taxation agreements are those with whom it is very difficult indeed to make one. It is no advantage to a country like Venezuela, with whom it would be desirable to have an agreement, to have one, for there is little income being earned here by Venezuelans, and there is little property owned by Venezuelans in this country on which a bargain could be made with British interests there.

I should not like to say what difference it has made to our exports, or to British trade, because the Government were so obstinate last year and have changed their minds this year. One case comes to mind. It is that of a £4 million contract for the Colombo Harbour project. Two British firms tendered, but withdrew because double taxation killed the business for them, and it went to the French. That is the kind of business we lost because the Government did not understand the export trade.

The relief to be given, as the Solicitor-General has said, is 50 per cent. in regard to foreign countries and 75 per cent. in regard to Commonwealth countries. That, I think, means that if the income tax is less than 5s. Od. in the £, the British taxpayer has to pay nothing: if the tax is less than 7s. Od. or 7s. 3d. in the Dominions, there is no double taxation. Therefore, under this Clause, in these countries there will not now be any double taxation. In Argentina there will be no double taxation any longer, because the Argentinian income tax is less than 50 per cent. of the United Kingdom Income Tax. In Brazil, I understand, there will only be a small proportion.

What I want to ask the Government is at what point they are not going the whole way as is done in Section 131 of the International Code of the United States? I understand that the argument they will use is that there is some bargaining power left in the hands of our negotiators with which it will be possible to press forward with some more double taxation agreements. I fail to see what that bargaining power is and with which countries it would be appropriate. I hope that the Chancellor or the Solicitor-General will explain what is the advantage, now that we have made up our minds to go some way towards equalising the tax burdens on British firms in foreign markets, as compared, let us say, with Canadian or United States firms. Why have we not gone the whole way?

There is one final question I should like to ask in relation to the Gold Coast. I think my hon. Friend the Member for Morecambe and Lonsdale (Sir I. Fraser) was perhaps a little late. I believe there is no Crown Colony in which there is not now some double taxation agreement. But what I do want to know is this. Is not it a fact that the gold mines in the Gold Coast are still, even with this Clause, penalised, as compared with the mines in other quarters? I do not expect an answer this evening, because it is obviously a difficult problem, and I apologise for not having given the Government a warning that I would raise it; but will they look into the position of the tax on gold mines in the Gold Coast? I think they are the last group of British gold mines which have not transferred their head office outside this country.

It is a serious thing when head offices are transferred outside this country because of double taxation. I do not think for one moment that these mines are contemplating transferring their head office to the Gold Coast at this particular moment; but at the same time I think we should get taxation arrangements which do not induce them to do so as soon as they think that possibly the political situation there would justify their doing it. I should be very grateful if at some future time the Government could give an answer to that point.

Sir S. Cripps

We will certainly look into the question of the gold mines and give an answer to the hon. Member for Chippenham (Mr. Eccles), whom we are glad to see back again in these Debates.

A number of hon. Members have asked me whether I can give an assurance that we are going ahead with the double taxation agreements with all the different countries. The hon. Member for Chippenham seemed to think it was not much good going on because they would not be of much value if we got them. We do not take that view. We take the view that they are of great value and that it is very essential that we should get them wherever we can. We have pressed forward with them with the maximum speed possible, and where there have been delays I think we can say that, broadly, we are not responsible for the delay. I do not want to start difficulties as regards agreements by accusing other people of delay. Delays are inevitable in the course of the negotiation of this class of agreement. There are changes of government and all sorts of things happening, and they do not always go as quickly as we would like; but we shall certainly continue to press forward with them with all the speed we can.

I was asked by the hon. Member for Chippenham why we did not go the whole way in this Clause. We had to consider, of course, when we decided to introduce the Clause—it was obviously since the Budget that we came to the decision or it would have been in the original Bill—whether, in the light of the position as regards the negotiations with the different countries, if we were to take action unilaterally that would be liable to defeat our object in getting these agreements or not. We came to the conclusion that if we had to introduce a Clause which gave 100 per cent. relief as regards this dual taxation on a unilateral basis, that it would in fact have affected our chances of getting the agreements we all desire. We thought, therefore, that the best thing to do was to make a large beginning towards this form of a solution in the hope that that would give a very welcome relief; and in fact, with the arrangement as regards the charging against profits of the other part of the foreign tax, it gives—

Mr. Lyttelton

In so far as they are traders.

10.45 p.m.

Sir S. Cripps

There are special provisions in paragraphs 3 and 4 of the Schedule which allow it to be set off even against a dividend received from a subsidiary in a foreign country; that has been specially taken care of. The point raised in that regard has been particularly taken care of, and if hon. Members will study those two paragraphs in the Schedule I think they will see they do in fact cover the point raised.

The hon. Member for Morecambe and Lonsdale (Sir I. Fraser) raised the question whether we could not expedite the agreements with our Colonial Territories. As a matter of fact, as the hon. Member for Chippenham said, we have, I think, concluded agreements with practically every Colonial Territory now, although I do not think we could take the view that he expressed, that they should be entered into on the basis that we were merely making agreements with ourselves and that therefore we could do anything. For the purpose of making these agreements we regard such territories as quite independent people who must be advised by their own legislatures and by their own advisers, and these are agreements freely entered into with us. We do not think it would be right under these circumstances to use the power of Whitehall over these territories to force them into terms which might not be to their best advantage; so these agreements have been freely negotiated with them, and in practically every case now a satisfactory agreement has been arrived at.

The hon. Gentleman also asked, in the case where there were individual earnings in one of these other territories or in one of the Dominions, whether, where there were no expenses, the tax could be written off against the expenses. I think the answer is that, if it were a question of taxation under Schedule D here it could be written off, but if it were under Schedule E it could not be. I think that is the right answer, though I would not pledge myself too thoroughly upon that because it is a matter which I had not before considered.

I hope, with these explanations, that the general principles of this Clause will be acceptable to the Committee and that they will allow us to have the Clause.

Mr. Lyttelton

Of course, the Clause, which goes a long way towards what we want, is up to a point very agreeable to us, as all concessions on this and other occasions always are. There does not seem to be very much reason why it should not go the whole way, and I find it extremely difficult to follow the Chancellor's argument that the fact that 25 per cent. in one case and 50 per cent. in another is withheld very much strengthens his hand with regard to the neogtiations with those territories with which agreements have not been concluded. I have been searching my mind very much to see what force should be given to that argument and I find it very difficult to understand.

Perhaps the Chancellor would allow me to say one more word on that point. It really does seem to me that by this Clause considerable handicaps to the British export trade have been removed, and to that extent it is to be much welcomed. It is very tardy, but in future these particular disabilities will be to some extent removed. Having set his hand upon this riotous course, the Chancellor really ought to have gone the whole hog and saved his bacon in doing so, instead of which he has the feeling that to be entirely forthcoming is slightly immoral and that he had better have a pinch of austerity in a generous action rather than be accused of being spendthrift and prodigal. Perhaps he could enlighten me on this point, because I really cannot follow it.

Sir S. Cripps

I think that the reason a number of those countries are anxious to get the double taxation agreements is because they are anxious that British companies should operate in their territories. They are either accustomed to such operations by British companies, or they desire their help in exploiting the natural resources of their countries. In those circumstances if they felt that the position had been dealt with unilaterally by our legislation, they would put it on one side and say that they were not going to do any more. That would be the end of our chance to try to negotiate bilateral agreements with them; whereas at present the matter is not wholly solved either for them or for us, and so long as it is not wholly solved there is the better chance of agreement.

Mr. Lyttelton

I find these Florentine subtleties a little difficult to follow in Westminster. But it is difficult to look a gift horse in the mouth any further because, judging by previous analogies, the gift horse may be put back into the stable. Therefore, I think I had better say no more for fear of doing irreparable damage in this matter of double taxation.

Clause read a Second time.

Mr. W. Fletcher

I beg to move, as an Amendment to the proposed new Clause, to leave out lines 14 to 18.

I find myself in the same difficulty as the right hon. Member for Aldershot (Mr. Lyttelton). The argument adduced by the Chancellor of the Exchequer really does not appear to me to stand up for a moment. If, as the right hon. and learned Gentleman says—and he did clearly say so just now—it is the desire of the people of France or of Belgium or Germany that British capital and enterprise should carry out its traditional rôle of development in those countries and in the colonial empires of those countries, a big impulse must be given by granting 100 per cent. relief here. That would be an inducement to the enterprising capitalists of this country.

I am talking with some knowledge, because, through a French subsidiary company, I have to decide not only whether we should go to Saigon but whether, in West Africa, a certain enterprise should be undertaken. Even now the odds, owing to the Chancellor's lack of generosity in not going the whole hog, are still going to be against us, and that is going to clog exactly the form of enterprise which the Chancellor states that he and the countries concerned desire.

I believe, too, that he is at fault in his argument for, looking at it from the point of view of any foreign Government concerned in the matter, they must surely argue along the same lines. Does the right hon. and learned Gentleman really think that if he gave 100 per cent. relief here they would merely lean back and not bother to argue the interests of their nationals—that they would do nothing in the matter? That argument does not stand up to examination for a moment. They will not do anything of the sort. Very much greater pressure will be brought to bear upon them by their own nationals seeking relief than is exerted by those nationals in the present circumstances.

I really think that the Chancellor of the Exchequer should concede the Amendment in the names of my hon. Friends and myself. Every argument in favour of that course has already been deployed and therefore I do not propose to weary the Committee with their repetition; but no one single argument of any substance has been deduced against them. I am not completely reassured when the Chancellor of the Exchequer says that he is continuing, and hopes to have a successful conclusion to, his various negotiations with the countries concerned. We have heard so often that that was going to be the case.

Even so, I am naturally relieved at what is being offered now. But full relief can come only from one of two courses, either the successful conclusion which the Chancellor of the Exchequer says he hopes for, or else the 100 per cent. relief which we are asking in this Amendment. The right hon. and learned Gentleman must know perfectly well that at this very juncture in European development, when a great number of payments agreements are being negotiated, great difficulty is experienced, and when breaking away from certain blemishes of bilateral trading the fact of not having these double taxation agreements is the one thing standing in the way of a great many forms of agreement which constitute the essential fibre of any international trade arrangement. I beg the Chancellor, when everybody is thinking in terms of international trade, to make it easier for that trade to take place. I ask him not to deal in petty and meagre limitations, but to prevent the one thing which stops the onrush of so many enterprises all over the world.

Sir S. Cripps

I have listened with great attention both to the appeal of the hon. Member and to that made in the earlier discussions; and I can assure the hon. Gentleman and his colleagues that we think we have gone quite a long way to meet this difficulty. After all, this means £10 million to people who have been trading in difficulties; and that must very considerably ease the difficulties under which they have been trading.

I assure the hon. Member that, from his own arguments, my thesis is correct; that, as he says, these other countries must be equally keen to get these double taxation agreements, but if we make a 100 per cent. unilateral solution of the problem in this country, they will not be so keen. They are keen to get our companies operating in their territories, but there is not a large question of their companies operating in our territories. When one comes to India and Pakistan, for instance, one has two very large examples where this double taxation, especially in the course of the last year. has played a very considerable part.

I would remind the Committee, too, that it is very important that we should not abandon the possibility of getting these double taxation agreements. If we find that we cannot get any further in the course of time, we may have to take other steps; but we have made a very good beginning with the solution of this problem, and I ask hon. Members to let the Clause stand as it is and then to let us next year see what the situation may be, and see whether we have the agreements or not. Upon that information we shall be able to consider whether we ought to go further or not.

Mr. W. Fletcher

Before the right hon. and learned Gentleman sits down, will he deal with the provincial and other taxes which are mentioned in line 44 on the Paper, because that is a considerable question?

11.0 p.m.

The Solicitor-General

In so far as the Commonwealth countries are concerned, we have done this when drafting the Clause; we have followed the precedent of the Dominion income tax relief granted under Section 27 of the Finance Act, 1920. We are doing in that case as we have done previously—treating the South African State taxes, the Canadian provincial taxes, and the agricultural taxes which are levied in certain States of India, as coming within the scope of the relief.

But, when one comes to foreign countries, the situation is rather different. All sorts of different constitutional arrangements have to be considered in the very many countries which will be involved in this system of unilateral relief. It would immensely complicate the administration of unilateral relief, which already will be extremely difficult, if we sought to include the taxes imposed by States and parts of foreign countries in the scope of this relief. It would make the system extremely difficult to work, if not cause it altogether to break down. The relief extends only to the foreign taxes which are analogous to British Profits Tax and British Income Tax. To try to ascertain, with regard to the areas' component territories, in all the foreign countries which will be involved within the scheme, whether the taxes there imposed come fairly within the description of taxes analogous to British Profits Tax and British Income Tax, might often be well-nigh impossible.

Therefore, the justification for our Clause is that, so far as the Commonwealth is concerned, we are following the accepted practice under Section 27 of the 1920 Act. From the nature of things it is much easier to obtain any necessary information as to the structure of Commonwealth taxes. In foreign countries, it would be extremely difficult, if possible at all, to try to ascertain in regard to the vast number of taxes which would have to be considered whether they come within the purview of unilateral relief. For that reason, we have excluded constituent provinces of foreign countries.

Mr. Fletcher

In the case of Switzerland, traditionally and for many years cantonal taxes have been probably more important than those of the central Government. It also is likely to arise in the case of Germany, where the Lander taxes may play the same rôle. I suggest that, as Switzerland is certainly a hard currency country and our exports to her are of such importance, the Chancellor of the Exchequer might well go into this point and see whether these taxes which are very old established ones, are not just a matter of solely provincial taxes but are an essential fibre of the whole taxation system.

The Solicitor-General

With regard to Germany, the income tax is administered and collected by the Lander but the tax itself is imposed as a national tax and will come within the scope of the relief provided for in the new Clause. But Switzerland is rather different. Taxes are imposed in the cantons—they are fairly heavy taxes and will be excluded. Income tax imposed by the Swiss Confederation will rank for relief. In the case of Switzerland, too, it is hoped the negotiations for a bilateral agreement will be opened in the very near future, and it is perfectly competent in the course of these negotiations to explore the possibility of including cantonal taxes. The bilateral arrangements which can be brought within the scope of the 1945 Act. because the Act is so framed, embrace taxes other than the taxes strictly within the purview of the present Clause. It is hoped, when the negotiations fructify, that it may be possible to introduce that tax into the scope of bilateral relief.

Mr. Fletcher

In view of the considerable relief which this Clause is bringing and also because of the fairly open-minded way our points on this side of the Committee have been dealt with, and the hope that during the current year further agreements may be reached, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause added to the Bill.

Mr. Lyttelton

I beg to move, "That the Chairman do report Progress and ask leave to sit again."

We have made unexpectedly good progress today, and I think this would be a convenient time to adjourn.

Committee report Progress; to sit again Tomorrow.