Income Tax Law

HC Deb 08 May 1950 vol 475 cc22-4

52. Mr. Julian Amery

asked the Secretary of State for Foreign Affairs in what circumstances the British High Commissioner in Germany first vetoed the income tax law proposed by the Federal Government and then withdrew his veto.

Mr. Ernest Davies

The German Income Tax law provides for a reduction in tax rates, particularly for higher incomes. Since the Allied High Commission considered that its introduction would cause German budgetary deficits and increase German balance of payments difficulties they decided on 21st April to disapprove it provisionally until proposals for-compensatory action had been put forward. Discussions took place with the Federal Finance Minister, who provided fresh information on measures to avoid budgetary deficits, and gave assurances that additional taxation would be introduced. In the light of these assurances the Allied High Commission withdrew their provisional disapproval of the law.

Mr. Amery

Could not all these subsequent negotiations with the German Finance Minister have been carried out before the veto was originally made? Will the hon. Gentleman bear in mind, and impress upon his right hon. Friend, that a policy which is a combination of pinpricks and appeasement is hardly calculated to integrate Germany into the European system?

Mr. Davies

I would point out that the veto was a provisional veto. It was in order to obtain further information, and with a possibility that that might lead to not proceeding with the veto, that it was made provisional, and it was after further information was obtained that the veto was not applied.

Viscount Hinchingbrooke

Since the Germans have a very large number of unemployed is not a budget deficit a good thing, and ought not His Majesty's Government to apply to Germany the same theory as that applied to this country?

Mr. Davies

That is largely a question for the German Government. I would point out to the noble Lord that in this case the taxation was of a nature which does not commend itself to hon. Members on this side of the House, inasmuch as it was favourable to the higher levels of income.

Mr. Peter Thorneycroft

Do we understand that the High Commissioner in Germany imposed a veto on certain fiscal measures suggested by the German Government because those measures did not happen to appeal to hon. Members opposite?

Mr. Davies

No, Sir. There are three High Commissioners, representing three separate countries. The decisions which are taken there are taken by the Allied High Commission and all factors put forward by the separate High Commissioners are taken into account.

Mr. Quintin Hogg

If, in fact, disapproval of policy by hon. Members opposite did not enter into it why did the hon. Gentleman refer to it in his previous answer?

Mr. Davies

I did not say did not enter into it. I said it was not a determining factor inasmuch as there are three High Commissioners.

Several Hon. Members rose

——

Mr. Speaker

We had better push on to the next Question.