§ The Financial Secretary to the Treasury (Mr. Henry Brooke)I beg to move, in page 9, line 3, after "assessment", to insert:
(and the emoluments are not excepted as foreign emoluments).Perhaps it would be for the convenience of the Committee to discuss at the same time the next two Amendments on the Notice Paper, in lines 6 and 18. There is also a consequential Amendment to the Second Schedule, in page 54, line 49, to insert a new paragraph (3).These Amendments give effect to a statement which my right hon. Friend the Chancellor of the Exchequer made during the earlier Committee stage about the taxation of people working in this coun- 220 try for overseas concerns. He said that he would bring forward on Report Amendments which would have the general effect of restoring the existing position for persons domiciled overseas who work in the United Kingdom for overseas employers. Such persons who have hitherto been liable on what has been called the remittance basis will continue to be liable on that basis and not on their full pay.
These Amendments are designed to give effect to that statement by excluding from Cases I and II emoluments which are foreign emoluments, as defined in the third of the Amendments as—
emoluments of a person not domiciled in the United Kingdom from an office or employment under or with any person, body of persons or partnership resident outside, and not resident in, the United Kingdom.The effect will be that foreign emoluments will be chargeable only under Case III on the amount received in the United Kingdom. In order to qualify for this relief, the holder of the office or employment will have to show that he is not domiciled in the United Kingdom, and also that he holds his office or employment under this wording:under or with any person, body of persons or partnership, resident outside, and not resident in, the United Kingdom.The Committee may hesitate at these curious words:resident outside, and not resident in, the United Kingdom.They are designed to cover the possible case of an international body which, it might be contended, was not resident anywhere. At any rate, that is the purpose of the words—to put that matter beyond doubt.The method by which the Chancellor is proposing to the Committee that this change in the Bill should be carried out is simple, and probably requires no further explanation. His announcement when the Clause was originally discussed—it was then Clause 9—was generally welcomed on both sides of the Committee. There were questions asked as to the extent to which other countries gave similar treatment in their tax laws. That is an interesting question, but it is not really the vital question here. The vital question is what would be likely to happen if the Clause were left unamended. In order to draw a conclusion about that, one has to look primarily at the rates of 221 tax and the liability to tax that a person would suffer in this country if the Clause remained unamended, as compared with what he would suffer if he stayed elsewhere or went elsewhere.
For example, we have to consider whether Americans would find the rates of British taxation so penal that they would be unwilling to come to work here, even though we might greatly need their technical services. We have to examine separate but similar types of case where people from overseas, who are now working in this country, might if we left the Clause unamended think very carefully whether they could not carry on the work they were doing on this side of the Atlantic just as well in Paris or Brussels as in London. If hon. Members will examine the relative tax liabilities which they would incur in France or Belgium, they will see at once that it is our exceedingly high rates of direct taxation which would have a profound effect on the probable decisions of such people.
4.30 p.m.
I recognise that in bringing forward these Amendments we are departing from the strict recommendations of the Royal Commission, but that was what my right hon. Friend said when we discussed the matter before. Expediency had to prevail over logic in this case. The Royal Commission sought to produce tidy and rounded recommendations, but this is a hard and practical world. The Committee have to examine what will happen if we keep the Royal Commission's recommendations intact in the Bill.
It was not the business of the Royal Commission to inquire into the relative tax advantages which these people could get by staying away from this country or by moving across the Channel to the Continent. These are practical matters which any Government would have to take into consideration. Because we have come to the conclusion that it would be contrary to the national interest to enforce the full rigour of the law as defined in the original Clause, my right hon. Friend has decided to recommend the Committee to amend the Bill in this respect.
§ Mr. BeswickThe Financial Secretary says that the Amendments follow the statement made by the Chancellor earlier in the Committee stage. It is unfortunate 222 that he has yielded so easily on this point. The Amendments do not follow any principle at all. Both the Financial Secretary and the Chancellor confess that the Amendments are based upon expediency, and are designed to get us, they feel, some advantage in the short run. My opinion is that they will place us at a disadvantage in the long run.
If we go back to the position which existed before the Finance Bill was drafted, it is clear that there were people in this country, foreign citizens, who to a very large extent escaped taxation on their emoluments because of the difference between the tax laws of this country and the tax law in the country of origin of the companies for which they worked. It was possible so to arrange their affairs that they did not pay Income Tax on the greater part of their incomes.
Apparently the Royal Commission agreed that that was wrong and that the position should he set right. The Financial Secretary says that the Royal Commission did not take into account certain consequential effects which the original Clause might have had, but surely the Chancellor and the Government ought to have taken account of any consequential effects that might have arisen when they agreed to the inclusion of the original Clause. Did they not consider the matter in its broader aspects before they agreed to the changes going into the original Bill? Are we to understand that they accepted the drafting without giving any thought to the changes or redispositions that might be made by foreign firms operating in this country?
The same factors still exist and the position is not changed at all, save in one respect; that is, that the foreign firms have made their representations—and not the foreign firms always, but the foreign citizens resident in this country. They have suggested that they will take their businesses elsewhere unless changes are made. I have heard those representations described as "blackmail". Certainly, very strong pressure was exerted. I regret very much that the Government have yielded so easily. I admit that we are dealing only with individuals and not with companies and that the total amount involved is not very great compared with the concessions made in Section 39 of the Finance Act, 1947, which enabled foreign concerns to escape the full impact of 223 Profits Tax, Compared with that, the impact of the concession we are now discussing is very small.
But the arrangements laid down in the Finance Act, 1947, were reciprocal. When I called the attention of the Financial Secretary to that Section 39 he said that the advantage which foreign concerns gained from the operations of their companies in this country had their counterpart in the reliefs given to United Kingdom companies operating in corresponding circumstances in the United States. His excuse was that it was a matter of reciprocity; but there is no reciprocity in the concession that we have now made.
What thought are the Government giving to the possibility of getting reciprocity? Even if the financial results were not very great, dignity would, at any rate, be satisfied. There would be more possibility of our holding up our heads and saying that we did not always give in, particularly to pressure from the other side of the Atlantic. Many years ago in Sunday School I used to sing a hymn which contained this line:
Each victory will help you some other to win.We might change that and say: "Each concession compels us some other to yield." Every time we make another concession of this kind it puts us into a weaker position which compels us to make another concession later on.We might well ask ourselves if we are not much stronger than is sometimes indicated by the Government. We ought to say that it does not pay us in the long run to make these concessions so easily. In this case there is no question of unfairness to the individuals concerned. If they had been asked to pay at least the rate of tax which they would pay if the money had been earned in their own country, that would be reasonable. I could have understood it.
Switzerland makes special ad hoc arrangements with foreign firms operating there. So far as I know, no attempt has been made by the Government to make similar arrangements in this country. The Government have quite simply and easily yielded to the pressure of these foreign residents and have said that whatever money is earned in this society—which is kept going in its social arrangements by our taxation system—taxation 224 will not be levied on it. It has been suggested that the individuals concerned may well have commitments in their home countries such as children to educate and dependants to keep, for which a part of their emoluments has to be sent to their own country.
Suppose, however, that the children are not resident in that home country, but in this country. Suppose that in time of sickness these individuals avail themselves of our National Health Service, which is financed out of our taxation. Government supporters have criticised time after time the arrangements under which foreign residents can have the benefit of the National Health Service. They have said that it was a bad thing.
But here we have a situation in which it may well be that individuals who earn their bread and butter here are not making their full contribution to our social services although they probably avail themselves of those services in time of need. This seems to be wrong in principle. When this proposal was first put forward I felt that the Chancellor of the Exchequer was a little uneasy about it. I do not believe that he was very enthusiastic about the concession. He seemed to recognise that a principle was involved, and I do not think that he really wanted to go back upon it, even though he has since put down these Amendments.
Even now I hope that he will say either that money earned here must pay its full rate of tax, and that the double taxation provisions will apply anyhow, or, at any rate, that taxation shall be applied up to the level to which it would be paid at the rates existing in the country of origin of the foreign resident concerned. I should have thought that that would be a reasonable approach. No attempt has been made at a compromise, and I feel that we should vote against these Amendments.
§ Mr. F. A. Burden (Gillingham)Most hon. Members probably welcome the Amendments which my right hon. Friend has put down. If the hon. Member for Uxbridge (Mr. Beswick) will give the matter a little careful thought, I think that he, too, will agree that in this instance the Chancellor has taken the wise and reasonable course.
225 We should all like to see persons who come here charged reasonable Income Tax and not given special concessions, but in this case the whole question is whether or not the action proposed originally would react to the detriment of our export trade. I move among many exporters, and many Americans and Canadians who are resident in this country, and I am quite sure that if the Clause had been adopted in its original form it would have reacted very detrimentally to our export trade. Many of those who come to operate here do so because of their special qualities. They are extremely highly paid and very highly qualified in their own countries. If the course originally proposed had been followed, the effect would have been to reduce their standard of living when they came here.
§ Mr. BeswickNo.
§ Mr. BurdenI will give way to the hon. Member in a moment. These people are in a position to play a vitally important part in stimulating our export trade, as they do.
§ Mr. BeswickI wonder whether the buyers to whom the hon. Member is referring come here to buy our goods, which they feel are worth buying, or because they know they are going to get some tax concessions. Surely the prior consideration in these matters is the decision by the parent company as to the country in which it thinks it can best buy goods for its home market.
§ Mr. BurdenBut if they are extremely good buyers, and are told, "If you go to England the standard of living that you will enjoy there will be very much lower than it is here," those buyers will put up the utmost resistance to coming here.
§ Mr. Beswickindicated dissent.
§ 4.45 p.m.
§ Mr. BurdenI assure the hon. Member that that is so. They play an absolutely vital part in our export drive. They can assist very considerably in styling British merchandise for the American market. They know their home trade; they have served in it and have bought for it, and because they know their markets so well they know what sort of styling is required.
226 I can give the hon. Member an example of this, which came to my notice this morning. A certain British buying organisation, which had no American stylist, sent a large order of British men's pyjamas to America. They stuck in the stores there. A representative went over and investigated the matter. The reason for their unsaleability was a very simple one. The pyjamas did not sell because the Americans hang their pyjamas up, whereas in this country it is usual for pyjamas to be put under the pillow. The pyjamas that were sent out there had no tabs by which they could be hung up. Tabs were put on in future shipments and American sales went ahead. That is an instance of the sort of thing upon which American buyers can give advice and guidance.
The hon. Member for Uxbridge smiles, but it is a simple point, and absolutely vital in merchandising. These men have the "know-how ". They come here to find goods to sell in America. They are here searching the British market the whole time. They assist British manufacturers who may produce very high quality merchandise but work upon a small scale in small factories and so cannot afford to send representatives to the United States. It is the job of these American buyers to find and assist those firms in the matter of styling and packaging, and to ensure that prompt deliveries are maintained.
These people stimulate old sources of supply and create new ones. They are vital to our export trade. It is imperative that they should come here, and also that we should attract more of them. If the Clause had been passed as originally drafted, I believe that there would have been a resistance on the part of those people to coming here. Instead, many would have gone to the Continent, where they would have set up their buying organisations and sought out sources of supply in respect of goods which they can and do find in this country now They prefer to come here because difficulties of language which they experience on the Continent do not exist here.
Already many organisations are being set up on the Continent to compete with us in the sale of these goods, and if we allow this process to continue we shall suffer very considerably in the long run.
§ Mr. Edward Evans (Lowestoft)Does the hon. Member agree that these men are being subsidised by our taxpayers? Should not their emoluments be provided by their own organisations?
§ Mr. BurdenThe hon. Member says that they are being subsidised, but that is not so. They are being paid by overseas companies and are paying full tax upon that part of their salaries which they bring and use here. A very important point to bear in mind—which I am sure my right hon. Friend has taken into consideration in putting forward these Amendments—is that because many of these men are under contract to overseas concerns they pay very considerable sums towards pension schemes at the source of their incomes, which is in the United States. If the Clause had gone through in its original form, undoubtedly those men would have had to cut their pension schemes considerably, unless the American concerns had agreed to boost up their payment to compensate for that which they would have lost as a result of taxation. I am of the opinion that in many cases such a course would have been resisted by the American firms.
There is one point upon which I should like guidance from my right hon. Friend. It concerns the case of Englishmen—I have one particular case in mind, and there are others—who went to America and joined American companies with every intention of living in America. Then, because of their knowledge—having lived in the States for some time and become domiciled there—they return to this country to operate from the London office of their firm but with an American or a Canadian contract. I wish to know whether, under the Bill as it is amended, the incomes of such people will be treated as of old; that is, that they will pay tax only on that part of their income which they bring into this country; and whether, to all intents and purposes, otherwise they will be in the position of the Americans who come here.
The reason such men come back to this country is because of their knowledge. I believe that the concession should apply to them because, with their British background and American experience, their influence as executive heads is vital in the case of American, Canadian and other overseas buying agencies such as I have indicated. I should be grateful if 228 my right hon. Friend would clarify that point for me, and I hope that the concession will apply to such men.
I consider the decision taken today by my right hon. Friend an extremely wise one, though from the point of view of taxation it appears to be a generous course to adopt. The amount which he would receive by way of taxation would probably be about half a million. But the amount we should lose in exports, and the reduced possibility of new American companies coming to this country, would be very much more. It is the case now that new American companies coming to this country have to retain their highly trained executives here for an initial period of perhaps four years until they have taught our people the know-how. I believe it vital to the future of the export trade of this country that these people be encouraged to come here; and at the cost of the pittance which we might otherwise gain in taxes I think this a step well worth while. I appreciate the point made by the hon. Member for Uxbridge, and emotionally one is in full sympathy with him. But here it is a case of practical business, and that is what must sway us.
§ Mr. Douglas Jay (Battersea, North)The trouble about the attitude of the Government to this problem is that they skip light-heartedly—or perhaps one should say light-headedly—from one extreme to another without, so far as we can see, making any attempt to find a reasonably practical compromise. We are now discussing how we should tax that part of the income earned here, by someone working and resident in this country, but domiciled elsewhere, which is not remitted to this country.
Before the Chancellor rushed in with Clause 9 of this Bill as it was previously, it was only the part of the income remitted here which came under the weight of British taxation. That was criticised by the Royal Commission on the Taxation of Profits and Income; and then, presumably after fully considering all these matters which the Financial Secretary has mentioned and the economic consequences, the Chancellor adopted the whole of the Commission's proposals, marched bravely up the hill and presented the proposals in that form to the Committee.
229 At the time I ventured to say that I thought there was something in the argument now advanced by the hon. Member for Gillingham (Mr. Burden), that if we had gone to that logical extreme it might have had certain undesirable consequences. The Chancellor, having embraced logic up to that point, told us that he thought expediency had to be taken into account as well. We suggested that it might be possible to find a compromise between the extremes of logic and expediency. I said that we could not see why all these foreign nationals living in this country should pay no tax at all in either country on that part of their income earned here which was not remitted here. That is what the position will be, if the present proposal of the Chancellor is accepted.
I do not see, and I do not think the Government have explained, why it is not possible to find a suitable compromise. My hon. Friend the Member for Uxbridge (Mr. Beswick) suggested that it might be practicable to tax, on that part of the income not remitted here, such a sum as would have been due in taxation had it been normally subject to tax in the other country. Alternatively, I suppose we might take a certain proportion of the untaxed income and subject it to British taxation. Or again, my hon. Friend says that in Switzerland, to take one example, it has been found possible to make ad hoc arrangements for each taxpayer. I am not saying which compromise would be possible, but I had hoped that the Chancellor, having given more consideration than we can to these and other ideas, would find it possible to discover a resting point between these two extremes.
However, the Chancellor has not done that. He has rushed back to the other extreme and surrendered unconditionally at the first sight of the enemy or, rather, at the first sight of the hon. and learned Member for Northwich (Mr. J. Foster), who originally raised the banner of revolt. Having run right round the course on the grounds of logic, we are not satisfied that it is necessary to run the whole way back on the grounds of expediency. If logic had such force that the Chancellor, having thought over the whole matter, was prepared originally to put this Clause in 100 per cent. form in this Bill, logic must have some force, even though weighted against expediency. We do not feel that the case has been made out for 230 this unconditional surrender by what the Financial Secretary said.
Although the Chancellor has made one of his rare appearances in the Committee, he has not had the face to get up and advance this unconvincing case himself. We remain far from satisfied by what has been said so far by the Financial Secretary.
§ Mr. F. M. Bennett (Torquay)I wish to applaud the Chancellor for having taken this step but to repudiate completely the suggestion that it is taken solely on the grounds of expediency. That deals with the remarks of the right hon. Member for Battersea, North (Mr. Jay).
I do not think one could do better than read an extract from The Times leader of Tuesday, 5th June:
If general salary levels were the same in all countries, it would be fair.That is, the proposal as it was before the Amendment today.But is the British tax scale appropriate to the whole pay of Americans working for American firms in this country? They have always been taxed on the British scale on the portion of their pay which is remitted to—and, therefore, presumably spent in—this country. That is just. But most have continuing responsibilities—for family expenses, education, life assurance and pension funds—which are payable in their own countries and remain related to the dollar economy with its higher pitched scale of taxable incomes. These responsibilities are normally covered by the portions of their pay left in America. It is hardly just that these amounts should be brought into income taxed on the United Kingdom scale, which is designed for lower levels of income and expenditure.
§ 5.0 p.m.
§ Mr. BeswickI appreciate that point. What I cannot appreciate is how the other American citizens who also have family responsibilities, insurance, education, health and other responsibilities, manage to get along while paying tax at the American rate.
§ Mr. BennettIt is not for the Committee to decide the scale of tax applicable within the United States. It is not fair to impose our scale of tax, which is related to our sort of economy, on the American economy with the responsibilities that go with it. That is the point I am making.
It would be a pity if we accepted that this Amendment was put forward only on the grounds of expediency. It is thoroughly justified on grounds of principle as well.
231 I cannot see either why the Chancellor should be accused of going from one extreme to the other, considering that all he has done in this respect is to revert to the law as it was. That position seemed to be quite satisfactory to right hon. And
§ hon. Gentlemen opposite during the six years of their tenure of office.
§ Question put, That those words be there inserted:—
§ The Committee divided: Ayes 256, Noes 204.
233| Division No. 256.] | AYES | [5.2 p.m. |
| Agnew, Cmdr. P. G | Foster, John | Linstead, Sir H. N. |
| Aitken, W. T. | Freeth, D. K. | Lloyd, Maj. Sir Guy (Renfrew, E.) |
| Allan, R. A. (Paddington, S.) | Galbraith, Hon. T. G. D. | Lloyd, Rt. Hon. Selwyn (Wirral) |
| Alport, C. J. M. | George, J. C. (Pollok) | Lloyd-George, Maj. Rt. Hon. G. |
| Amery, Julian (Preston, N.) | Gibson-Watt, D. | Longden, Gilbert |
| Amory, Rt. Hn. Heathcoat (Tiverton) | Glover, D. | Lucas, Sir Jocelyn (Portsmouth, S.) |
| Anstruther-Gray, Major Sir William | Godber, J. B. | Lucas-Tooth, Sir Hugh |
| Armstrong, C. W. | Gomme-Duncan, Col. Sir Alan | McAdden, S. J. |
| Ashton, H | Gough, C. F. H. | Mackeson, Brig. Sir Harry |
| Astor, Hon. J. J. | Gower, H. R. | Mackie, J. H. (Galloway) |
| Atkins, H. E. | Graham, Sir Fergus | McLaughlin, Mrs. P. |
| Baldock, Lt.-Cmdr. J. M. | Grant, W. (Woodside) | Maclay, Rt. Hon. John |
| Baldwin, A. E. | Grant-Ferris, Wg Cdr. R. (Nantwich) | Maclean, Fitzroy (Lancaster) |
| Balniel, Lord | Green, A. | McLean, Neil (Inverness) |
| Barber, Anthony | Grimond, J. | MacLeod, John (Ross & Cromarty) |
| Barlow, Sir John | Grimston, Hon. John (St. Albans) | Macmillan, Rt. Hn. Harold (Bromley) |
| Barter, John | Grimston, Sir Robert (Westbury) | Maddan, Martin |
| Baxter, Sir Beverley | Hall, John (Wycombe) | Maitland, Cdr. J. F. W. (Horncastle) |
| Beamish, Maj. Tufton | Hare, Rt. Hon. J. H. | Maitland, Hon. Patrick (Lanark) |
| Bell, Ronald (Bucks, S.) | Harris, Frederic (Croydon, N.W.) | Manningham-Buller, Rt. Hn. Sir R. |
| Bennett, F. M. (Torquay) | Harrison, Col. J. H. (Eye) | Markham, Major Sir Frank |
| Bevins, J. R. (Toxteth) | Harvey, Ian (Harrow, E.) | Marlowe, A. A. H. |
| Bidgood, J. C. | Harvey, John (Walthamstow, E.) | Marshall, Douglas |
| Biggs-Davison, J. A. | Harvie-Watt, Sir George | Mathew, R. |
| Birch, Rt. Hon. Nigel | Hay, John | Maudling, Rt. Hon. R. |
| Bishop, F. P. | Head, Rt. Hon. A. H. | Mawby, R. L. |
| Black, C. W. | Heath, Rt. Hon. E. R. G. | Maydon, Lt.-Comdr. S. L. C. |
| Body, R. F. | Henderson, John (Cathcart) | Medlicott, Sir Frank |
| Bossom, Sir Alfred | Hill, Rt. Hon. Charles (Luton) | Milligan, Rt. Hon. W. R. |
| Boyd-Carpenter, Rt. Hon. J. A. | Hill, Mrs. E. (Wythenshawe) | Molson, Rt. Hon. Hugh |
| Braine, B. R. | Hill, John (S. Norfolk) | Monckton, Rt. Hon. Sir Walter |
| Braithwaite, Sir Albert (Harrow, W.) | Hinchingbrooke, Viscount | Moore, Sir Thomas |
| Brooke, Rt. Hon. Henry | Hirst, Geoffrey | Nabarro, G. D. N. |
| Brooman-White, R. C. | Holland-Martin, C. J. | Nairn, D. L. S. |
| Browne, J. Nixon (Craigton) | Holt, A. F. | Nicholls, Harmar |
| Buchan-Hepburn, Rt. Hon. P. G. T. | Hornby, R. P. | Nicholson, Godfrey (Farnham) |
| Burden, F. F. A. | Hornsby-Smith, Miss M. P. | Nicolson, N. (B'n'm'th, E. & Chr'ch) |
| Butcher, Sir Herbert | Horobin, Sir Ian | Noble, Comdr. A. H. P. |
| Campbell, Sir David | Horsbrugh, Rt. Hon. Dame Florence | Nugent, G. R. H. |
| Channon, H. | Howard, Hon. Greville (St. Ives) | Oakshott, H. D. |
| Chichester-Clark, R. | Howard, John (Test) | Ormsby-Gore, Hon. W. D. |
| Clarke, Brig. Terence (Portsmth, W.) | Hughes Hallett, Vice-Admiral J. | Orr, Capt. L. P. S. |
| Cole, Norman | Hughes-Young, M. H. C. | Page, R. G. |
| Cooper, Sqn. Ldr. Albert | Hurd, A. R. | Partridge, E. |
| Cooper-Key, E. M. | Hutchison, Sir Ian Clark (E'b'gh, W.) | Peyton, J. W. W. |
| Cordeaux, Lt.-Col. J. K. | Hutchison, Sir James (Scotstoun) | Pilkington, Capt. R. A. |
| Corfield, Capt. F. V. | Hyde, Montgomery | Pitman, |
| Craddock, Beresford (Spelthorne) | Hylton-Foster, Sir H. B. H. | Pitt, Miss E. M. |
| Crouch, R. F. | Iremonger, T. L. | Pott, H. P. |
| Crowder, Sir John (Finchley) | Irvine, Bryant Godman (Rye) | Powell, J. Enoch |
| Crowder, Petre (Ruislip—Northwood) | Jenkins, Robert (Dulwich) | Prior-Palmer, Brig. O. L. |
| Cunningham, Knox | Jennings, J. C. (Burton) | Profumo, J. D. |
| Dance, J. C. G. | Johnson, Dr. Donald (Carlisle) | Raikes, Sir Victor |
| Davidson, Viscountess | Johnson, Eric (Blackley) | Rawlinson, Peter |
| Davies, Rt. Hon. Clement (Montgomery) | Johnson, Howard (Kemptown) | Redmayne, M. |
| D'Avigdor-Goldsmid, Sir Henry | Joseph, Sir Keith | Rees-Davies, W. R. |
| Deedes, W. F. | Joynson-Hicks, Hon. Sir Lancelot | Remnant, Hon. P. |
| Dodds-Parker, A. D. | Keegan, D. | Renton, D. L. M. |
| Donaldson, Cmdr. C. E. McA. | Kerby, Capt. H. B. | Ridsdale, J. E |
| Doughty, C. J. A. | Kerr, H. W. | Rippon, A. G. F. |
| Drayson, G. B. | Kershaw, J. A. | Robertson, Sir David |
| du Cann, E. D. L. | Kimball, M. | Rodgers, John (Sevenoaks) |
| Dugdale, Rt. Hn. Sir T. (Richmond) | Kirk, P. M. | Roper, Sir Harold |
| Duncan, Capt. J. A. L. | Lagden, G. W. | Ropner, Col. Sir Leonard |
| Duthie, W. S. | Lambert, Hon. G. | Russell, R. S. |
| Eden, Rt. Hn. Sir A. (Warwick & L'm'tn) | Lancaster, Col. C. G. | Schofield, Lt.-Col. W. |
| Eden, J. B. (Bournemouth, West) | Langford-Holt, J. A. | Scott-Miller, Cmdr. R. |
| Elliot, Rt. Hon. W. E. | Leather, E. H. C. | Sharples, R. C. |
| Errington, Sir Eric | Leavey, J. A. | Simon, J. E. S. (Middlesbrough, W.) |
| Finlay, Graeme | Leburn, W. G. | Smyth, Brig. Sir John (Norwood) |
| Fisher, Nigel | Legge-Bourke, Maj. E. A. H. | Soames, Capt. C. |
| Fletcher-Cooke, C. | Lindsay, Hon. James (Devon, N.) | Spearman, Sir Alexander |
| Fort, R. | Lindsay, Martin (Solihull) | |
| Speir, R. M. | Thompson, Lt.-Cdr. R. (Croydon, S.) | Ward, Dame Irene (Tynemouth) |
| Spens, Rt. Hn. Sir P. (Kens'gt'n, S.) | Thornton-Kemsley, C. N. | Waterhouse, Capt. Rt. Hon. C. |
| Stevens, Geoffrey | Tiley, A. (Bradford, W.) | Whitelaw, W.S.I. (Penrith & Border) |
| Steward, Harold (Stockport, S.) | Tilney, John (Wavertree) | Williams, Paul (Sunderland, S.) |
| Stewart, Henderson (Fife, E.) | Turner, H. F. L. | Williams, R. Dudley (Exeter) |
| Stoddart-Scott, Col. M. | Turton, Rt. Hon. R. H. | Wills, C. (Bridgwater) |
| Stuart, Rt. Hon. James (Moray) | Tweedsmuir, Lady | Wilson, Geoffrey (Truro) |
| Studholme, Sir Henry | Vane, W. M. F. | Wood, Hon. R. |
| Summers, Sir Spencer | Vickers, Miss J. H. | Woollam, John Victor |
| Taylor, William (Bradford, N.) | Vosper, D. F. | Yates, William (The Wrekin) |
| Teeling, W. | Wakefield, Edward (Derbyshire, W.) | |
| Thomas, Leslie (Canterbury) | Walker-Smith, D. C. | TELLERS FOR THE AYES: |
| Thomas, P. J. M. (Conway) | Wall, Major Patrick | Mr. Legh and Mr. Bryan. |
| Thompson, Kenneth (Walton) | Ward, Hon. George (Worcester) | |
| NOES | ||
| Ainsley, J. W. | Griffiths, Rt. Hon. James (Llanelly) | Paling, Rt. Hon. W. (Dearne Valley) |
| Albu, A. H. | Hale, Leslie | Paling, Will T. (Dewsbury) |
| Allaun, Frank (Salford, E.) | Hall, Rt. Hn. Glenvil (Colne Valley) | Palmer, A. M. F. |
| Allen, Arthur (Bosworth) | Hamilton, W. W. | Pannell, Charles (Leeds, W.) |
| Allen, Scholefield (Crewe) | Hannan, W. | Pargiter, G. A. |
| Anderson, Frank | Harrison, J. (Nottingham, N.) | Parker, J. |
| Awbery, S. S. | Hastings, S. | Parkin, B. T. |
| Bacon, Miss Alice | Hayman, F. H. | Pearson, A. |
| Baird, J. | Healey, Denis | Plummer, Sir Leslie |
| Balfour, A. | Henderson, Rt. Hn. A. (Rwly Regis) | Popplewell, E. |
| Bence, C. R. (Dunbartonshire, E.) | Herbison, Miss M. | Price, J. T. (Westhoughton) |
| Benn, Hn. Wedgwood (Bristol, S. E.) | Hobson, C. R. | Probert, A. R. |
| Benson, G. | Holman, P. | Proctor, W. T. |
| Beswick, F. | Holmes, Horace | Pryde, D. J. |
| Blackburn, F. | Howell, Denis (All Saints) | Randall, H. E. |
| Blenkinsop, A. | Hoy, J. H. | Rankin, John |
| Boardman, H. | Hubbard, T. F. | Redhead, E. C. |
| Bottomley, Rt. Hon. A. G. | Hughes, Cledwyn (Anglesey) | Reid William |
| Bowden, H. W. (Leicester, S. W.) | Hughes, Emrys (S. Ayrshire) | Robens, Rt. Hon. A. |
| Bowles, F. G. | Hughes, Hector (Aberdeen, N.) | Roberts, Albert (Normanton) |
| Boyd, T. C. | Hunter, A. E. | Roberts, Goronwy (Caernarvon) |
| Braddock, Mrs. Elizabeth | Hynd, J. B. (Attercliffe) | Robinson, Kenneth (St. Pancras, N.) |
| Brockway, A. F. | Isaacs, Rt. Hon. G. A. | Shinwell, Rt. Hon. E. |
| Broughton, Dr. A. D. D. | Janner, B. | Shurmer, P. L. E. |
| Burke, W. A. | Jay, Rt. Hon. D. P. T. | Silverman, Julius (Aston) |
| Burton, Miss F. E. | Jeger, George (Goole) | Silverman, Sydney (Nelson) |
| Butler, Herbert (Hackney, C.) | Jeger, Mrs. Lena (Holbn & St. Pncs, S.) | Simmons, C. J. (Brierley Hill) |
| Callaghan, L. J. | Jenkins, Roy (Stechford) | Skeffington, A. M. |
| Castle, Mrs. B. A. | Johnson, James (Rugby) | Slater, J. (Sedgefield) |
| Champion, A. J. | Jones, Rt. Hon. A. Creech (Wakefield) | Smith, Ellis (Stoke, S.) |
| Chapman, W. D. | Jones, David (The Hartlepools) | Sorensen, R. W. |
| Chetwynd, G. R. | Jones, Elwyn (W. Ham, S.) | Steele, T. |
| Clunie, J. | Jones, T. W. (Merioneth) | Stewart, Michael (Fulham) |
| Coldrick, W. | Kenyon, C. | Strachey, Rt. Hon. J. |
| Collick, P. H. (Birkenhead) | Key, Rt. Hon. C. W. | Summerskill, Rt. Hon. E. |
| Collins, V. J. (Shoreditch & Finsbury) | King, Dr. H. M. | Swingler, S. T. |
| Corbet, Mrs. Freda | Lawson, G. M. | Soskice, Rt. Hon. Sir Frank |
| Cove, W. G. | Lee, Frederick (Newton) | Thomas, George, (Cardiff) |
| Craddock, George (Bradford, S.) | Lever, Leslie (Ardwick) | Thomas, Iorwerth (Rhondda, W.) |
| Cronin, J. D. | Lindgren, G. S. | Thomson, George (Dundee, E.) |
| Crossman, R. H. S. | Lipton, Lt.-Col. M. | Thornton, E. |
| Cullen, Mrs. A. | Logan, D. G. | Timmons, J. |
| Daines, P. | Mabon, Dr. J. Dickson | Tomney, F. |
| Dalton, Rt. Hon. H. | MacColl, J. E. | Turner-Samuels, M. |
| Darling, George (Hillsborough) | McInnes, J. | Ungoed-Thomas, Sir Lynn |
| Davies, Ernest (Enfield, E.) | McKay, John (Wallsend) | Warbey, W. N. |
| Davies, Harold (Leek) | McLeavy, Frank | Weitzman, D. |
| Deer, G. | MacPherson, Malcolm (Stirling) | Wells, Percy (Faversham) |
| de Freitas, Geoffrey | Mahon, Simon | West, D. G. |
| Delargy, H. J. | Mallalieu, J. P. W. (Huddersfd, E.) | Wheeldon, W. E. |
| Dodds, N. N. | Mann, Mrs. Jean | White, Mrs. Eirene (E. Flint) |
| Donnelly, D. L. | Marquand, Rt. Hon. H. A. | Wilkins, W. A. |
| Dugdale, Rt. Hn. John (W. Brmwch) | Mayhew, C. P. | Williams, David (Neath) |
| Dye, S. | Mellish, R. J. | Williams, Rev. Llywelyn (Ab'tillery) |
| Edwards, Rt. Hon. John (Brighouse) | Messer, Sir F. | Williams, Rt. Hon. T. (Don Valley) |
| Edwards, Rt. Hon. Ness (Caerphilly) | Mikardo, Ian | Williams, W. R. (Openshaw) |
| Evans, Albert (Islington, S. W.) | Mitchison, G. R. | Williams, W. T. (Barons Court) |
| Evans, Edward (Lowestoft) | Moody, A. S. | Willis, Eustace (Edinburgh, E.) |
| Evans, Stanley (Wednesbury) | Morrison, Rt. Hn. Herbert (Lewis'm, S.) | Wilson, Rt. Hon. Harold (Huyton) |
| Fernyhough, E. | Mort, D. L. | Winterbottom, Richard |
| Fletcher, Eric | Moss, R. | Woodburn, Rt. Hon. A. |
| Forman, J. C. | Mulley, F. W. | Yates, V. (Ladywood) |
| Fraser, Thomas (Hamilton) | Noel-Baker, Francis (Swindon) | Younger, Rt. Hon. K. |
| Gaitskell, Rt. Hon. H. T. N. | Oliver, G. H. | Zilliacus, K. |
| Gibson, G. W. | Oram, A. E. | |
| Gooch, E. G. | Orbach, M. | TELLERS FOR THE NOES: |
| Gordon Walker, Rt. Hon. P. C. | Oswald, T. | Mr. J. Taylor and |
| Greenwood, Anthony | Owen, W. J. | Mr. G. H. R. Rogers. |
| Grenfell, Rt. Hon. D. R. | Padley, W. E. | |
| Grey, C. F. | Paget, R. T. |
§
Further Amendment made: In page 9, line 6, at end insert:
(and the emoluments are not excepted as foreign emoluments)".—[Mr. H. Brooke.]
§
Amendment proposed: In page 9, line 18, at end insert:
Subject to that Schedule, the emoluments excepted from Cases I and II as foreign emoluments are emoluments of a person not domiciled in the United Kingdom from an office or employment under or with any person, body of persons or partnership resident outside, and not resident in, the United Kingdom.—[Mr. H. Brooke.]
§ Mr. Geoffrey Stevens (Portsmouth, Langstone)I beg to move, as an Amendment to the proposed Amendment, after "domiciled", to insert:
or if domiciled not ordinarily resident".I understand that with your permission, Sir Charles, we can discuss this Amendment and the next Amendment to the proposed Amendment, at the end to add:or under or with a permanent overseas establishment of a company resident in the United Kingdom".I heard my right hon. Friend the Financial Secretary point out earlier this afternoon that his Amendments to Clause 10 are designed to leave the position of foreign nationals resident in this country as it is at present, namely, that their income shall be taxed upon a remittance basis and not on an earnings basis. I support my right hon. Friend in that, but I feel that the way in which he has seen fit to give effect to that very desirable object has led to a number of anomalies.Whereas I think the effect of the Amendment moved by my right hon. Friend will be to leave the income of foreign nationals resident in this country taxable on their remittances and not on their earnings, as the Clause is drawn we shall have British subjects domiciled abroad but resident in this country—persons of British domicile resident in this country—taxed on their earnings instead of on the remittance basis.
That seems to be absolutely wrong. To claim the full benefit of the Amendment moved by my right hon. Friend, a person must have a foreign domicile and be employed by an organisation which is not managed or controlled in the United Kingdom. It is true that a number of foreign employees come to this country and, although the organisation is not resident in the United Kingdom, they have British domicile. It seems quite wrong 236 that those persons of British domicile should be charged on the earnings basis and not on the remittance basis.
Furthermore, there is the type of case of the British employee resident overseas, employed with a British company which may be operating overseas, who may be brought here to the head office of the company for a year's training. He will not be so well off as an American living in this country who is a foreign domiciled person. Those British trainees who come to this country for a year will be assessed for tax, not on the remittances paid by an overseas subsidiary of the United Kingdom company, but on their earnings.
5.15 p.m.
The second Amendment in my name seeks to ensure that, to get the full benefit of the Clause as redrawn, the person must be an employee of a subsidiary company formed overseas, but a subsidiary of a United Kingdom company. There are a large number of United Kingdom companies operating very widely overseas, not through subsidiary companies established overseas, but through branch offices. The branch office has no legal entity of its own and, therefore, a person employed by that branch office is treated for tax purposes as though he were employed by the head office. He is employed by an organisation which is ordinarily resident in this country and not resident overseas.
I commend both Amendments to the attention of my right hon. Friend. They represent genuine attempts to clear up what seem very serious anomalies.
§ Mr. F. M. BennettI wish to support my hon. Friend the Member for Langstone (Mr. Stevens) and to give an illustration so that my right hon. Friend may see the force of what we are saying. At present, there are banks in this country with branches overseas where British personnel are employed for many years at a time, but they remain domiciled in this country although their work, their life and their families are abroad and they have to face the higher costs of the economy abroad. A young man leaving his family abroad comes here for a period of leave, a period of training, or of attachment to head office. Unless the Amendment to the Amendment, or a similar provision, were adopted, that young man would have discrimination made against him because he happened to be domiciled in this 237 country in contradistinction to a foreign citizen.
I should have thought that the words suggested by my hon. Friend would go all the way to get rid of that anomaly, which I cannot think can have been in the mind of the Chancellor when he drafted the main Amendment.
§ Mr. H. BrookeThe effect of these two Amendments to the proposed Amendment would be that persons who are domiciled in the United Kingdom but not ordinarily resident here, and who work here for an employer not resident in the United Kingdom, or for an overseas branch of a British company, would be chargeable to tax on a remittance basis only and then only in years in which they are resident for tax purposes.
That all sounds rather complicated and technical. I will try to put it in practical terms. The Amendments would mean that a person whose permanent home was in this country, but who had been working abroad for some time for an overseas concern or an overseas branch of a British concern, and had become not resident for tax purposes and then returned to the United Kingdom to work for a period not of sufficient duration to render him ordinarily resident, would not be liable to tax at all if he remained not resident and would be chargeable only on the remittance basis if he became resident.
The Committee will appreciate that he would become ordinarily resident when he had been back here for three full years and, if at some earlier date he formed the intention of staying here a longer period, he would be regarded as ordinarily resident from that date. My hon. Friends have argued that anomalies would be created if these Amendments were not accepted, but I must put this to the Committee. In the Amendments which have been accepted, we have made a dent in the strictly logical basis of the Clause as founded on the recommendations of the Royal Commission. Because we have made that dent, it is not in itself an argument for making further dents, and it does not appear to my right hon. Friend that there are in these very special cases to which the Amendments refer the same grounds of expediency.
The Amendments that have been accepted have been accepted because of certain very undesirable results to the 238 British economy which would follow if the Clause had remained unamended, but there is no consideration of that kind here.
It is quite true that the individuals whom my hon. Friend the Member for Langstone (Mr. Stevens) has in mind may have hitherto, in some cases at any rate, been assessable on a remittance basis, but if we accept this Clause at all we accept it as based on the recommendation of the Royal Commission that liability to tax should be determined primarily by reference to the places where the duties are performed. For strictly practical reasons, we have agreed to make an exception in the one class which has been mentioned. I do not think that would justify us in extending the exceptions further where there are not the same practical reasons cogently operating. On those grounds, while I congratulate my hon. Friends on their watchfulness, I cannot recommend the Committee to accept the Amendments to the proposed Amendment.
I should like to take this opportunity of replying to the point raised by my hon. Friend the Member for Gillingham (Mr. Burden) because it is relevant here as well as to the Amendment on which he raised it. The type of person whom he mentioned would have his tax liability determined by whether he was domiciled here or abroad. If my hon. Friend studies the law of domicile further, he will understand why I am not anxious to give a firm answer "Yes" or "No" to any particular case. The people whom my hon. Friend has in mind would do well, if they are considering where they should work in future, to examine very carefully where their legal domicile will be.
§ Mr. JayI am very glad on this occasion briefly to support the Financial Secretary. I should have thought that if he gave way on this proposal, not merely would indefensible anomalies be created but it would be highly probable that the door would be opened to evasion. If it were really possible for a British subject resident, at any rate for periods, in this country and working for a foreign company or for the subsidiary abroad of a British company nevertheless to be taxed only on the remittance basis, I should have thought that would give rise to schemes the main purpose of which would be to avoid taxation.
On the other hand, the plausibility of the argument of the hon. Member for 239 Langstone (Mr. Stevens), who moved the Amendment to the proposed Amendment, largely arose from the extent to which the Government had gone on this Clause as a whole. It is because the Government made this extreme sort of concession that these apparent hardships arise, and they reinforce the argument which we advanced in the earlier debate. Nevertheless, I am sure that the right hon. Gentleman is convinced of the rightfulness of his case and if on this occasion a Division is called we shall support the Government.
§ Mr. StevensI am disappointed with my right hon. Friend's remarks. It only shows how dangerous it is, even in financial matters, to depart from purity. Look at the mess in which we can land ourselves. I do not want to land my right hon. Friend in further difficulties and therefore I beg to ask leave to withdraw the Amendment.
§ Question, That those words be there inserted in the proposed Amendment, put and negatived.
§ Proposed words there inserted.
§ Clause, as amended, ordered to stand part of the Bill.