§ 17. Mr. Ridleyasked the Chancellor of the Exchequer whether he will arrange for small investors paying little or no Income Tax to obtain a tax rebate on Income Tax paid by building societies on account of interest on their investments.
§ Mr. BarberNo, Sir. The tax charged on building societies in respect of the interest they pay reflects the fact that some investors are not liable to tax, or liable only at a reduced rate.
§ Mr. RidleyDoes not my hon. Friend agree that by charging this composite rate, which was 5s. 5d. last year, he is asking poorer investors who pay little or no tax to subsidise richer investors who pay at the full rate? Is not this very strange? Could he not sort this out so that in future it is worked on the usual principle on which tax is paid on investments?
§ Mr. BarberIf my hon. Friend is suggesting that we should no longer have the system of a charge of Income Tax at a composite rate in these cases, that is a much wider question. So long as this arrangement remains in being, one of its features is that the tax paid by building societies on the interest paid by them 546 takes account of the fact that some investors would be entitled to claim repayment if building society interest were paid under deduction of tax. In these circumstances it is clear that it would not be right to make tax repayments as well.
§ Mr. RidleyIn that case, will my hon. Friend publicise the fact that someone who pays little or no Income Tax is very unwise indeed to invest in building societies?
§ Mr. BarberIt is hardly for me to do that. I would only observe that of course it is for any investor to decide himself where he wants to place his money.