INCOME TAX ORDERS (Hansard, 30 March 1971)

§ The Financial Secretary to the Treasury (Mr. Patrick Jenkin)
I beg to move, That an humble Address be presented to Her Majesty, praying that the Double Taxation Relief (Taxes on Income) (France) Order 1971, be made in the form of the draft laid before this House on 26th February. 1453 It would be right to say a few words about the Order so that an explanation of it should be on the record.
The Order embodies a protocol amendment of the Double Taxation Convenvention with France and it provides that United Kingdom residents receiving dividends from French companies in which they have portfolio shareholdings will normally be entitled to receive a refund from the French Treasury of part of the French tax on the company profits out of which their dividends are paid. The refund is equivalent to the tax credit known as the avoir fiscal to which French shareholders in French companies are normally entitled.
When the main Convention was negotiated France did not make refunds of this sort to non-residents. The refunds were made to their own residents but not to investors from abroad. However, since then, the French Government have decided that foreign investors resident in countries which have a double taxation agreement with France may receive a cash payment in lieu of the avoir fiscal. I am sure that the House will think it right that we should take advantage of this offer on behalf of the United Kingdom investors.
I speak to the Order only because it is a very good example showing how an imputation system of corporation tax can work in the international environment when one is enabled to equate the position of a foreign investor with a domestic investor in a company operating within a territory which has an imputation tax system.
This agreement was negotiated by out predecessors, but, despite that, I willingly commend it to the House. If any hon. Member has any questions which he would like to raise, I should be happy to try to answer them.

§ Mr. Joel Barnett (Heywood and Roy-ton)
The Financial Secretary has spoken about the imputation system at which I only briefly glanced in the Green Paper. I do not know whether he was implying—and it was not clear from the speech of the Chancellor of the Exchequer today—that the Government definitely intend to bring it in regardless of what the Common Market decides to do.
1454 The Van Den Tempel Report came down in favour of our present system. I do not know whether the Government intend to bring in either this system or some other system if the Common Market came down in favour of the Van Den Tempel system, which is ours.

§ Mr. Patrick Jenkin
If I may reply to the hon. Gentleman, it is interesting and significant that we should be debating this Order within two or three hours of my right hon. Friend the Chancellor having announced the proposal for the reform of corporation tax. It might be better to explore this question during the Budget debates. It does not arise directly out of the Order.
I think that we must wait and see to what extent the Common Market countries are prepared to accept the recommendations of the Van Den Tempel Report. This is one reason why my right hon. Friend suggested that it would not be right to legislate for company tax reform this year, but that we should wait until next year, by which time we imagine the situation will be somewhat clearer.