§ The first of these concerns a problem which arises when overseas countries give special tax reliefs to traders and others whose activities assist the development of their territory. If a United Kingdom company operating in an overseas territory becomes entitled to such relief, its overseas tax is reduced. But since our arrangements for the relief of double taxation provide for a credit against United Kingdom tax only for the overseas tax actually paid, the effect of this reduction in the overseas tax is to increase the United Kingdom tax. So, it is said, the overseas relief is frustrated.
§ Countries with which we negotiate double taxation agreements feel that we ought to be willing to include in the agreements some provision which would obviate this result. I think that there is substance in this and I propose, therefore, that the Finance Bill shall contain a Clause providing that, in respect of overseas tax reliefs designed to assist industrial or commercial development, double taxation agreements made with overseas Governments may include a provision under which credit may be given to a United Kingdom resident in respect of tax that is treated by the overseas Government as though it had been paid.