§ Mr. Goodlad
asked the Chancellor of the Exchequer what representations he has received in connection with clause 9.4 of the United States-United Kingdom double taxation treaty; what representations he has made to the United States Government; and if he will make a statement.
§ Mr. Joel Barnett
Representations have been received from bodies representing United Kingdom business concerns which have branch or subsidiary company operations in the United States and others who feel strongly about the issue of principle involved. As is to be expected, these show extreme disappointment with the decision of the United States Senate on 27th June 1978 to approve the proposed new double taxation convention subject to the reservation that the provisions of article 9(4)—which prohibits the use of the widely criticised unitary basis of taxation—shall not apply to the policial sub-divisions or local authorities of the United States. This reservation is important because the unitary56W basis is used by some individual states of the United States.
The situation has been explored with the United States but it must be understood that the decision on the reservation was that of the United States Senate and not a decision of the United States Government which will remain bound as regards federal taxes by the prohibition in article 9(4).
New proposals for the convention are now under consideration and a statement will be made shortly.