Unitary Tax (Hansard, 18 December 1986)

§ Mr. Norman Lamont

The following statement is being issued today by Her Majesty's GovernmentOn 5 September 1986 the British Government issued a statement welcoming the passage of legislation in California to limit the use of worldwide unitary taxation. At the same time it expressed reservations about some aspects of the legislation and restated its objective of achieving a comprehensive solution to the problem. Since then the Government has discussed developments in California with senior Parliamentarians and representatives of British industry. And the United States Administration, in testimony to Congress, has stated that, while a final resolution to the unitary tax problem has not yet been achieved, such significant progress has been made that federal legislation, or a solution by amendment of the United States-United Kingdom Double Taxation Treaty, would not be appropriate at this stage. The British Government shares the concerns of the United States authorities that, under the Californian legislation, a foreign company should have to pay a substantial election fee in order not to be taxed by the state on its foreign income; and, further, that in three states worldwide unitary taxation remains on the Statute Book. Over the coming months it will continue to work with British business interests for improvements in the Californian legislation, for acceptable arrangements for administering the new law and for legislative change in the remaining unitary states. The British Government welcomes the support which the Federal Administration is giving (for example, through the filing of amicus curiae briefs) to companies presently involved in unitary tax court cases brought against the Californian tax authorities. It will itself continue to support such litigation. In recognition of the progress which has been made in the last year towards resolving the unitary tax issue, the British Government is not proposing to take action under Section 54 of the Finance Act 1985 for the present. Equally, however, in view of the further progress that is necessary, it does not intend to recommend to Parliament that Section 54 should be repealed. Both the British Government and the United States Administration will continue to keep developments under careful review.