§ First, there are the industrial and commercial companies, whose liquidity next year will be considerable, partly because of the exceptional delay in the collection of taxes and partly because company expenditure on new capital equipment may not catch up with company income until later in the year. The need to do something to appeal to companies has 255 become particularly clear in recent months as company liquidity has steadily been channelled into bank deposits, so contributing to the growth in the money supply.
§ To some extent the fiscal system has itself contributed to this development because under existing tax law the interest element on the sale of certificates of deposit held by non-financial institutions escapes liability to tax. I propose with immediate effect to remove this anomaly and give the public sector a chance to compete on equal terms with the banks for company funds. Gains on sales of these certificates will be made liable to corporation tax, or income tax in the case of an individual holder, and the new charge will apply to gains on certificates acquired after today.
§ But I intend to go further. A new facility will be made available to all incorporated businesses. With effect from 1st April companies will be able to open accounts, which will be operated by Inland Revenue Collection Offices, into which they can deposit surplus funds. If these funds are subsequently applied to the payment of a company's mainstream corporation tax liability, the interest credited on them will be the average Treasury Bill rate for the period of the deposit plus a bonus of 2½ per cent, a year. If, on the other hand, the funds are withdrawn, the bonus will not be paid and the interest will be simply that payable on Treasury Bills. I believe that corporate treasurers will find these tax deposit accounts a useful medium for employing liquid funds, preferably in anticipation of a tax liability but with no substantial penalty if they are needed for other purposes.