CENTRAL BANKS (INCOME TAX) (Hansard, 6 March 1967)

§ The Financial Secretary to the Treasury (Mr. Niall MacDermot)

I beg to move, That the Central Banks (Income Tax Schedule C Exemption) Order 1967, a draft of which was laid before this House on 16th February, be approved. This Motion seeks approval for a draft Order under Section 22 of the 1957 Finance Act. This section was designed primarily to meet the situation which arises when the assets of a currency board are taken over by a new central bank. This commonly occurs when a former colonial territory acquires independence and establishes its new central bank.

The currency boards are regarded as Government agencies, and, consequently, their income is exempt from tax on grounds of sovereign immunity. A central bank, on the other hand, may be, and quite frequently is, a separate legal entity from the Government of the country concerned, and, therefore, is independent in law and does not qualify for that exemption on grounds of sovereign immunity.

The purpose of the section is to enable Orders to be made, where it is thought the right thing to do, to give the same immunity from tax to the newly formed central bank as was enjoyed previously by the currency board which it replaced. This is what the Order does, and does in relation to the Bank of Guyana which came into existence in October, 1965, as an autonomous institution. Although its capital is wholly owned by the Guyana Government, it appears that it has such independence of the Government that it does not qualify for the sovereign immunity exemption.

The Bank satisfies the conditions of Section 22 in that it is entrusted with the custody of the principal foreign exchange reserves of Guyana, and the policy is within the policy of the section in that it is the successor in the territory to the currency board. From an immediate point of view, the effect of extending 967 this exemption in terms of cost to us is really nil, because it is only extending a privilege which existed before, and it is clearly to our interest that that central bank should have the same advantages and the same incentive to hold its reserve assets in the form of investments in this country.