§ The Finance Bill will contain the detailed provisions about the management and administration of the Corporation Tax.
§ Among my proposals will be a provision that will remove an unintended restriction upon the overspill which can be claimed by groups of companies. Other amendments will remove anomalies which would have resulted in a loss to the Exchequer.
§ I propose to introduce certain amendments in the law relating to double taxation which arise out of the introduction of Corporation Tax.
§ First, I propose to fix 6th April, 1966, as the date for the coming into operation of the provision which withdraws unilateral relief for underlying tax on dividends from portfolio investments in the Commonwealth. I propose also to withdraw as from April, 1968, relief for underlying tax on dividends from portfolio investment in certain Commonwealth countries which use a system of company taxation similar to the one we had before the 1965 Finance Act. This will require a special procedure Resolution.
§ Second, I shall introduce an amendment made necessary by a change in our double taxation agreement with Switzerland. This amendment will remove an anomaly under which certain interest payments to Swiss residents made before 6th April, 1966, would qualify for what, in substance, would be a double allowance. The Swiss Government have agreed that this anomaly should be removed.
§ Third, I shall introduce, as I announced some time ago, a provision about dividends paid to residents in countries with which there is an existing double taxation agreement that does not in terms impose any limit on the rate of United Kingdom tax which can be imposed. In these cases the rate of United Kingdom tax will not exceed the rate which the other country could impose on dividends 1434 to United Kingdom shareholders in comparable circumstances.
§ I have one Surtax proposal arising out of the Corporation Tax. I propose to suspend for the one year 1965–66 the relief from Surtax which can be claimed in certain circumstances where more than one full year's dividends are received from a company in a year. Many companies paid extra dividends last year for tax reasons, and I see no reason to give the recipients Surtax relief as well.
§ There are difficulties this year about making any reliable estimate of the amount of revenue which a given rate of Corporation Tax would produce. There are a number of transitional reliefs and it is not easy to estimate how these will affect the yield in the current year. But they are expensive. In addition, the Schedule F tax on dividends is payable after the end of each month, so we shall get in the first year, 1966–67, only 11 months' payments into the Exchequer. These factors tend to push up the rate of Corporation Tax required to produce an equivalent yield from companies. I will come to the rate later.