HC Deb 28 July 1958 vol 592 cc1078-9

Motion made, and Question proposed, That the Draft Central Banks (Income Tax Schedule C Exemption) (No. 2) Order, 1958, a copy of which was laid before this House on 14th July, be approved.—[Mr. Simon.]

9.38 p.m.

Mr. Gordon Walker (Smethwick)

Although we do not want to keep the House at this time, I hope that the Financial Secretary will say something about the nature of this Order. I take it that this is an automatic consequence of the effect of the sovereign independence of Ghana and that this Order is made to bring it under the proper Acts and no more than that.

The Financial Secretary to the Treasury (Mr. J. E. S. Simon)

I am very glad to respond to the invitation of the right hon. Gentleman. It is not precisely that. The Order arises in view of the fact that the Bank of Ghana, which is the subject of the present Order, took over the functions of the issuing of currency in Ghana from the West African Currency Bank on 14th July of this year. The draft Order is made under Section 22 of the 1957 Finance Act, which enables an overseas central bank to be exempted in certain circumstances, which are satisfied here, by Order in Council from Income Tax on interest on its securities.

The House will remember that I moved a similar Order on 26th March of this year in respect of a number of overseas central banks, when I gave a full explanation of how this Section, and the Orders under it, worked. Perhaps I can say, quite briefly, that the Section is designed primarily to meet a situation that arises where the assets of a currency board are taken over by a new central bank; in other words, in precisely the circumstances that have occurred in this case.

A currency board is a Government agency, and its income is, therefore, immune from taxation in this country on the ground of sovereign immunity. A central bank, on the other hand, may be, and in this case is, a legal entity separate from the Government, and does not enjoy that sovereign immunity. For a number of reasons that appealed to the House generally when Section 22, the principal Section, was discussed, it is illogical and unfair that that immunity should be lost when there takes place a perfectly natural evolution such as one expects in the evolution of the modern Commonwealth; in other words, the replacement of a currency board by the central bank.

The Bank of Ghana satisfies the requirements of the Section that the Bank is not resident in the United Kingdom, and is entrusted by the Government of a territory outside the United Kingdom with the custody of the principal foreign exchange reserves of that territory. It is, in fact, wholly owned by the Government of Ghana, and, in those circumstances, I commend the Order to the House.

Question put and agreed to.

Resolved, That the Draft Central Banks (Income Tax Schedule C Exemption) (No. 2) Order, 1958, a copy of which was laid before this House on 14th July, be approved.