§ (1) So long as the seat of the International Wheat Council established by the International Wheat Agreement signed at Washington on the twenty-third day of March, nineteen hundred and forty-nine, is in the United Kingdom, an employee of the said Council who is not a citizen of the United Kingdom and colonies shall enjoy exemption from income tax in respect of any emoluments received by him as an officer or servant of the said Council.2185
§ (2) This section shall be deemed to have applied to emoluments for any period since the thirty-first day of July, nineteen hundred and fifty-three (that is to say the date on which the Government of the United Kingdom ceased to be a member of the said Council).
§ (3) This section shall be without prejudice to the powers conferred by the International Organisations (Immunities and Privileges) Act, 1950 (which relates to organisations of which the Government of the United Kingdom is a member).—[Mr. Boyd-Carpenter.]
§ Brought up, and read the First time.
§ The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter)
I beg to move, "That the Clause be read a Second time."
This new Clause has as its purpose to enable us to continue the exemption for foreign employees of the International Wheat Council from taxation on their salaries which was given to them while this country was a member of the International Wheat Council.
The International Wheat Agreement of 23rd March, 1949, provided that the Government of the country where the seat of the Council is located should grant exemption from taxation on the salaries paid by the Council, except to its own nationals. The Council chose London as the seat of the Wheat Council and, consequently, while this country was a member of the International Wheat Council, it was under an obligation to grant this exemption. The exemption was effected by Order in Council under the International Organisations (Immunities and Privileges) Act, 1950, and was subject to affirmative Resolution in this House in the usual way.
The United Kingdom ceased to be a member of the International Wheat Council on 31st July, 1953, and, consequently, the power to grant exemption under the Act of 1950 lapsed, as it applies only to organisations of which this country is a member. It is now necessary either to provide for exemption, as is provided by this Clause, or to subject these salaries to tax.
As this country is no longer a member of the International Wheat Council, it is clear that the obligation under the Agreement of 1949 is no longer strictly binding. But I would suggest to the House that it would be at least a piece of international bad manners for this country to withdraw the exemption previously given on the grounds that the 2186 United Kingdom has ceased to be a member of the International Wheat Council. Admittedly, the case is somewhat unusual. I know of no other in which there is located in London an international body of which this country used to be a member and of which it is no longer a member. However, that is here the case, and we are faced with a rather awkward situation.
Unless we proceed as is suggested in the new Clause, we shall be forced to impose taxation on these salaries. That, I am bound to say, would be regarded by our former associates in the Organisation as—although within our legal rights—somewhat oppressive behaviour. I would further suggest to the House that it is a good thing to encourage international organisations to have their seat in London. Were this new Clause accepted, the financial consequences would be quite trivial. We are concerned, at the moment at any rate, with only four non-United Kingdom employees of the International Wheat Council, and their salaries average £450 a year. The amount of taxation involved is extremely small and the case for this Clause rests, not on any particular hardship, but on the basis that this is the sort of behaviour which this country ought to show to an international organisation of which it was once a member.
§ 5.0 p.m.
§ Mr. Deputy-Speaker (Sir Charles MacAndrew)
I think it might be convenient to discuss the Amendment in the name of the hon. Member for Islington, East (Mr. E. Fletcher) to leave out lines 7 to 10, on the Question "That the Clause be read a Second time," and divide on the Amendment, if necessary, after the Clause has been read a Second time.
§ Mr. E. Fletcher
I would have liked—and I gather that it is in accordance with your suggestion, Mr. DeputySpeaker—formally to move my Amendment, and then—
§ Mr. Deputy-Speaker
No, the idea was that we should discuss it now, and then after the Clause has been read a Second time, it can be moved and a Division can take place upon it if necessary.
§ Mr. Fletcher
If you please, Mr. Deputy-Speaker.
2187 I noticed that the Financial Secretary was studiously silent about subsection (2) of this new Clause, and I was surprised that he devoted almost the whole of his speech to attempting to justify what should be done in future. He has made no attempt whatever to explain why he thinks this new Clause should have retrospective effect. I can only conclude that his silence is due to considerable embarrassment on his part, bearing in mind that he used to regale us, when he was in Opposition, on the vices of retrospective legislation.
Now the right hon. Gentleman brings forward a new Clause which blatantly proposes that the law should go back to an earlier date nearly a year ago, and there is not one word of explanation from him about it. I can well understand that he felt that he should try to cover up this lamentable failure by a reference to international good manners—not that I think that we should accept him necessarily as being the last word on that subject.
In view of the right hon. Gentleman's silence, I must ask him some questions. Am I right in thinking that since the United Kingdom ceased to be a member of the International Wheat Council, the employees of that Council who are not United Kingdom citizens have been liable for tax? I assume that the answer to that question is in the affirmative. Then I should like to know whether they have, in fact, been paying tax. Presumably, tax under the P.A.Y.E. system has been deducted from their salaries since the date when they became liable for tax. Am I right in thinking that that is the case?
Thirdly, have we had any representations either from the International Wheat Council itself, or from any member of the Council, that legislation should be introduced in this House to give the members of that Council the immunity which the Financial Secretary seeks to give them, or is this something which is sponsored by the Government of their own volition?
In the absence of answers to those questions, it is a little difficult to comment on the merits of the proposal as it stands. The amount of tax involved is so small that I would have thought that it was not worth making a great deal of fuss about. But there is a question of principle involved, and there are some 2188 people who feel that there must be some limit to the immunities from United Kingdom Income Tax that are enjoyed by international organisations of one kind or another. I would have thought that, taking the matter by and large, this country has been rather generous on that subject and that we have gone as far as most taxpayers would have thought we were justified in going in granting immunity from tax to members of international organisations.
The number of international organisations with non-United Kingdom employees is growing. Some of these organisations are Government-sponsored and some are not, but there must be a limit to this, and I think it is probably very salutory that the Government should have been compelled to seek to justify this proposal to the House. I do not know what my hon. Friends think about it, with regard to the future, but I take the strongest objection to making a provision of this kind retrospective, without having the information which we require. If an attempt is to be made to justify retrospective legislation, we must be told why it is necessary.
If the Government think that this is such a good thing, why did not they propose it before? Why leave it until this Finance Bill? They may say that they did not think of it before. If so, when did they think of it? The Chancellor may say that we did not leave the International Wheat Council until July last year. But the Government knew before July that they were going to do so, and, if necessary, they could have made some provision in last year's Bill. Why did they not introduce legislation as soon as it became necessary, rather than leave it until now? Why did not this provision appear in the Finance Bill when it was first printed? Why leave it until the Report stage?
We have a good many new Clauses and our time is limited. It seems to me to be rather unsatisfactory that the matter should be dealt with in this way. Whatever the House does about this new Clause, I hope that we shall not agree to subsection (2).
§ Mr. Gaitskell
I hope very much that we shall have a reply to the pertinent questions put by my hon. Friend. I agree that some explanation must be given about what has been happening 2189 since the end of July last year in the case of the taxation of the persons concerned. Equally, I think we must be told why the Government have discovered this difficulty only after all this time has elapsed—I presume that must be the explanation—and have come forward with this new Clause at this late stage.
I think that probably my hon. Friends will agree that on the merits of the proposal, we should not wish to oppose it. I agree with the Financial Secretary that it is, no doubt, a matter of international courtesy that we should continue to grant the same tax concessions to the employees of the International Wheat Council although we have ceased to be members. But it is a very strange situation to have an international body obtaining concessions under our tax laws although we are not members of that body.
We are very glad to see in the Chamber the Joint Under-Secretary of State for Foreign Affairs, and it would be helpful if he could tell the House what is the prospect. Is the Wheat Council likely to remain in England, or is the headquarters moving, or is it hoped that if it stays here, Her Majesty's Government may change their minds and rejoin the Wheat Council?
This proposal which we are now considering creates a very curious situation. Suppose that 10 years hence we are still outside the Wheat Council and it still has its headquarters here. Shall we still continue to grant these tax concessions? I think that a good deal depends on how long the present situation is likely to continue. If we could have a few words from the Joint Under-Secretary, I think it would help the House to come to a decision.
§ Captain J. A. L. Duncan (South Angus)
This is a very unusual proposal, and I think that some of us on this side of the House ought to ask for an assurance that it is not regarded as a precedent. On the Order Paper, awaiting approval, there are eight Motions concerning diplomatic immunities to be accorded to members of various organisations. We have not reached them yet, but we shall have to discuss them some time before the end of this Session. We might leave any one of those organisations, in which case a similar situation would arise. I do ask my right hon. Friend to give the House an assurance 2190 that this case will not be treated as a precedent, in case a similar situation arises in connection with any other of these organisations. I suppose it would be out of order to congratulate my right hon. and gallant Friend the Minister of Food for his decision to leave the International Wheat Council, but I should like to do so. I think he was perfectly right.
I hope that my right hon. Friend will answer the question put by the right hon. Member for Leeds, South (Mr. Gaitskell). It may be that we shall want to rejoin the International Wheat Council in the future it may pay us to do so. What are the terms upon which we can rejoin? They may provide one good reason for the action that is proposed in this case. I should like my right hon. Friend to explain the meaning of subsection (3). Unless there is a hidden meaning behind it it seems to be an unnecessary piece of verbiage.
Lastly, I would point out that there were two ways of dealing with this matter—this way, or by amending the International Organisations (Immunities and Privileges) Act, 1950. I consider that my right hon. Friend has chosen the right way. It is very much better to deal with it in this way than to try to amend the Act. I do not oppose the Motion because I realise that it deals with an exceptional situation, but I hope that my right hon. Friend will give the assurances for which I have asked.
§ Mr. Boyd-Carpenter
With the leave of the House, I should first like to reply to the points raised in connection with the proposed new Clause and then come to the question of retrospection which was raised by the hon. Member for Islington, East (Mr. E. Fletcher). The right hon. Member for Leeds, South (Mr. Gaitskell) said that the situation with regard to the International Wheat Council was an unusual one, and I agree. I know of no other organisation, with a seat in this country, of which we were once a member and no longer are.
I cannot answer his question as to the length of time the International Wheat Council will remain in London, but I can say that we welcome its presence here. We think it is a good thing that international organisations should have their seats in London, and we hope that this 2191 one will remain. As we are not now a member, however, it is difficult to forecast what are its intentions.
§ Mr. Gaitskell
If this situation continues for a long time, shall we not arrive at a curious position? As I understand, if we do not belong, and never have belonged, to an international organisation with a seat in London, we do not make tax concessions, yet we shall apparently continue to do so in this case, even if this organisation remains here for another 10 years. Surely the Financial Secretary ought to endeavour to discover the intentions of the International Wheat Council.
§ Mr. Boyd-Carpenter
I do not think that we should put ideas of leaving into its head, but I appreciate the right hon. Gentleman's point. He is quite right in saying that in the case of organisations to which we do not belong we have no power under the 1950 Act to grant tax immunity; hence the necessity for this new Clause, which deals separately with this body. To some extent that is the reply to the question asked by my hon. and gallant Friend the Member for South Angus (Captain Duncan). He will have noted that the proposal relates solely to the International Wheat Council and does not give power to confer tax immunity upon any other body.
My hon. and gallant Friend asked what was the meaning of subsection (3). That subsection ensures that the power given to us by the 1950 Act—to grant tax exemption to organisations to which we do belong—shall not be treated as being in any way affected by this specific provision which enables us to give tax exemption to a body to which we do not belong.
I now come to the point raised by the hon. Member for Islington, East. I am sorry he thought that I should have dealt with the question of retrospection when I moved the Motion. I did not do so because I had seen his Amendment, and had no doubt that he would deploy his argument upon it either when he moved it or on the main Question, and I thought it would be more convenient to him, and possibly less tedious to the House, if I postponed what I had to say until I had heard what he had to say. I did not 2192 intend to let that aspect of the matter go by without any reference to it.
The hon. Member referred to the fact that I have occasionally said one or two things upon the subject of retrospection, but I think he will agree that my criticisms of retrospection have been made in cases where tax has been imposed and not where relief has been granted. From the ordinary, commonsense point of view of the human interests concerned it is obviously quite a different matter to exempt someone retrospectively from tax than it is to impose a tax retrospectively. Therefore, the general arguments about retrospection do not apply to this case, where we are relieving a body from liability to tax.
The hon. Member then asked what had been the position since the tax exemption lapsed on 31st July, 1953. The normal procedure of P.A.Y.E. is not open to us in this case. As the International Wheat Council is a collection or assembly of foreign Governments its employees are not subject to the P.A.Y.E. regulations. Whatever may be the position with regard to the tax liability of its employees, we have no power to impose upon the Council the duties we normally impose upon employers. Consequently, P.A.Y.E. cannot be applied to the salaries paid by it. In any event, whatever the House may decide about tax liability, we are not in a position to apply P.A.Y.E.
If the House should decide not to grant this proposed exemption it would be necessary—in relation to the period from 31st July of last year to the end of the last financial year—to assess these people for Income Tax, and, in the normal way, such assessments would be made towards the end of the summer. The position with regard to that tax has not been prejudiced in any degree by the fact that the exemption lapsed on 31st July and that no tax has been levied, physically, upon them since then. The position is entirely open, and if the House decided that this Clause should not operate retrospectively, assessments could be served upon the people concerned in the ordinary way in a few weeks' time.
I should like to explain why I think it is right to make this provision retrospective. I proceed on the assumption that the House is in favour of giving this exemption, at any rate, "as of now." 2193 as our American friends say. The question arises whether it is either right or sensible to levy it for the period between 31st July of last year and the date when this Bill comes into force. I think that the International Wheat Council and its employees would consider that we were being a little pernickety and, perhaps, even a little oppressive, if, having decided in principle to put through the House of Commons a provision giving a special exemption to these employees alone, we were none the less to levy a tax upon them in respect of the short intervening period.
I think it would spoil the effect of what we are trying to do, and, in view of the fact that the amount of money involved is absolutely trivial, I think that we should be wrong to throw away a good deal of the impression which I hope that what we are doing will create. In view of those considerations, I hope that the House will be prepared to do the job properly and allow exemption to take effect as from 31st July last year.
§ Mr. Mitchison
Is not this a case of coming clean? There is one significant question that the Financial Secretary has not answered, and that is, why this Clause did not appear in the Bill in the first place. Is it not a fact that, since Homer sometimes nods, and, I suppose even Macaulay did sometimes, the Board of Inland Revenue on this occasion overlooked the existence of these taxpayers as taxpayers and that, consequently, no steps were taken to collect tax from them?
§ Mr. Boyd-Carpenter
In this case Homer has not nodded. The reason is that it is only in the last two weeks that representations have been made on behalf of the International Wheat Council.
§ Clause read a Second time.
§ Mr. Deputy-Speaker
Does the hon. Member for Islington, East (Mr. E. Fletcher) wish to move his Amendment to the proposed new Clause, to leave out lines 7 to 10?
§ Mr. E. Fletcher
In view of the very full explanation that the right hon. Gentleman has given the House, and as this is a small matter, I do not propose to move the Amendment.
§ Clause added to the Bill.