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New Clause—(Mineral Rights Duty)

Volume 155: debated on Wednesday 28 June 1922

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An owner paying Mineral Rights Duty shall for the purposes of Income Tax and Super-tax be allowed as a deduction or as a repayment in respect of expenses of management or supervision one-eighth of the amount upon which he is assessed for such duty.—[Deut.-Colonel Wheler.]

Brought up, and read the. First time.

I beg to move, "That the Clause be read a Second time."

It is a simple point that I am asking for owners paying Mineral Rights Duty. As everybody knows, they have to employ a mines engineer or some competent person in order to make the assessment of the income. They have to incur a certain amount of expense and should be allowed a legitimate amount of deduction for Income Tax for these expenses that are so created. It seems to me unfair that any owner of these rights should be called upon to pay the tax on what he cannot possibly receive.

May I on behalf of the Government say that we accept this Clause, subject to an alteration in the amount. The principle of the Clause is obviously right. It is consistent with the whole scheme of the Income Tax Acts, and the cost will be trivial.

We are very much interested in knowing how much it is going to cost. The Clause has been on the Order Paper for some time, and surely the officials could have made some calculation as to the cost. Some hon. Gentlemen asked for an allowance on Income Tax for widows, and the amount involved, £50,000, was refused. Now the Solicitor-General accepts another Amendment moved from behind by supporters of a certain way of thinking, and we ought to know what he is giving away in the way of revenue in view of what he declined to give away on other Amendments.

I am very sorry my Friend the Solicitor-General has accepted this Amendment. Surely these people have no claim to any reduction in Income Tax. The Solicitor-General must have forgotten that these people take all the money out of mineral rights and pay not one farthing in local taxation in any shape or form. We have raised the question and answer in the House selected from the various Departments as to their paying nothing towards what is being done locally, and they get clear of all this. In coming here and to ask for further reduction of taxation, it seems to me you are not dealing fairly with these people. The mine-owners and people who have risked their money and put it into mines, risking whether anything is to he got out or not—these people have not only to pay the taxes levied in this House but they have to pay the heavy local taxation.

I think the hon. Member is under a misapprehension, and possibly other Members are, too. This is no concession; this is no relief from taxation of anybody. Mineral Rights Duty is a duty that is to be paid by royalty owners on the amount of royalties. In order to get the money into their own pocket they have to collect the royalties. The collection of the royalties, as those hon. Members who are familiar with mines know, involves the employment of surveyors in order to check the amount of coal got each three months or six months, as the case may be, and a considerable amount of expense is involved in this. It is to allow the expenses of collection so as to make the tax payable on the net royalty received instead of on a gross sum, the whole of which in fact is not received.

I submit to the Solicitor-General these people are in no different position from other people who are engaged in industry. To give way in a matter like this is going to cause a tremendous amount of discontent in the country. This is the only way you get anything out of these people who get their money for little or no risk. I hope the Solicitor-General will reconsider his decision.

I think we ought to he more clearly informed of what we are asked to do in respect to this Amendment. There are many people, probably, in this country who are in receipt of royalties on which they pay Mineral Rights Duty, and that at the present time they pay on the gross amount they receive, with no deductions allowed on account of expenses in ascertaining what amount is due to them and in collection. I understand that to be the position, and that the claim is put forward on the ground that, in respect of other kinds of income derived from other sources, deductions are made. All this Amendment does is to bring this particular kind of income under the same law applicable to other incomes. As a general proposition, I do not know that dissent can be offered, though question comes as to whether this amount here of one-eighth—

I have said definitely we cannot agree to one-eighth. We must look into it very carefully in order to see if the allowance made is not more than the actual estimate for the cost of collection, so as to put it on exactly the same footing as expenses incurred in collecting any other form of income.

On that point, I understand that what is going to be done is that an inquiry is going to be made between now and the Report stage into what is a fair thing to deduct, and that when the Clause comes before us on Report the Government will be in a position to put before us the results of their inquiry.

The reception given to this proposal is a surprise to us. These people have absolutely no risks. They gather in enormous royalties, which are such a burden to all the industries of the country, adding to the cost of living and to the cost of our products in all the markets of the world. Now the Budget is to be re-cast in their favour.

It would not be in order now to discuss the Mineral Rights Duty. The only question is the cost of collection, and whether any allowance should be made for that.

What we are disappointed at is, that this matter should be considered at all. These people are extremely well off as they are. They have no financial obligation, but they gather in immense sums. In spite of that we find that the Chancellor of the Exchequer is prepared to give them even a larger amount than they are receiving to-day. In this Budget the only people who are going to get concessions are those who are saddling the nation with big burdens. it is a shame. More human considerations, that should have received relief, have been waived aside. We had hoped that these people would have been called upon to face their liabilities instead of being given concessions.

In equity, what the Solicitor-General has agreed to is perfectly just. Royalty owners have to employ a large staff to look after the underground workings for the purpose of complying with certain laws and Regulations, and they are not allowed to charge the expenses. In the case of the colliery owner, who has to do the same thing, he employs a large staff and he is permitted to charge that against costs. It is perfectly just that what is right for one ought to he right for the other.

This may be a small point, but it is a very great principle, and I am surprised that it has been conceded. Only a day or two ago, when we asked for some abatement for a man going by train to produce those minerals the Chancellor of the Exchequer refused. Now, when it comes to this, the Government give in. On other points, when they have refused, they have told us what the concession would cost. On this point they cannot tell us. I think the owners of royalties ought to be very glad to pay for the management of the money they are getting. We are now in the worst time, as a mining industry, that we have ever seen, but royalties come in just as before. The royalty owners are getting exactly what they got before, and they are now asking that the management should be paid out of the money that ought to go to the State. It is unfair and unjust, and we protest against it.

What I am surprised at is that we should be surprised at what has happened after our experience with this Budget. The Chancellor has got great kudos. He has become a strong man. If he goes on he will be the strongest Chancellor of modern times. I am surprised that hon. Members moving these Clauses did not come to an arrangement with the Chancellor of the Exchequer and then go home and leave him to talk about little concessions that we know we will not get. Take the case of the workman who asks for a small concession for expenses. He has to be charged Income Tax upon his gross income, but in the case of persons who are reaping wealth as the result of mineral rights, I have never heard a single person in this country justifying a person of that kind being allowed to deduct this expenditure from the amount of his Income Tax. This is a much bigger question than the Chancellor of the Exchequer realises. If he is going to give anything at all, he will have to be very cautious about it. Some colliery owners are at the same time royalty owners. We have a right to ask what this is going to cost the Exchequer. Time and time again we have asked that question. I would like to ask the Chancellor what is the total amount of the grants that he has given to the classes behind him. I venture to say it will amount to many millions. He is well on the way to becoming.a strong Chancellor, but a few more Chancellors of that kind will stir up a spirit which will not be good for this country.

I think we are entitled to a little more information as to the reason why this concession has been made. After all, it is about 12 years since the Mineral Rights Duty became part of the fiscal policy. I suppose the concession will be greater than the one-eighth that is asked him. It may be made one-tenth on the Report stage. We know that at least 7 million pounds per year is paid on coal royalties alone, as distinguished from Super-tax, which is also included in this particular Clause. I think we might easily say that beyond the actual payment for mineral royalties, plus the payment that would be due for Super-tax, there would be not less than 8 million pounds involved.

We know more than the Sankey Commission. It is considerably more than 6 millions. One shilling in the pound is, I think, the charge; therefore upon the minerals alone there is 4;350,000 in the year. If you take it at one-eighth, there is at least £44,000 being given away in a breath, and I am not now talking of the Super-tax. I do say it is impossible for the Chancellor to say that under existing conditions of financial stress there is anything which can justify him in giving this concession, especially when for 12 years no claim has been made by the royalty owners. It is perfect nonsense to say that royalty owners have a large staff of people watching the conditions under which their royalty arrangements are to he conducted. A mining engineer can do the whole lot easily. This Committee is entitled to know from the Chancellor what the conditions are which make it possible to give these reductions. We do not think it is right, but quite, wrong, and we think, in face of the refusal which the Chancellor of the Exchequer has probably felt himself compelled to give, it is not right that the class of the community who toil not nor spin should he given this concession. I trust the Committee will vote against it.

The Committee is entitled to receive from the Government some estimate of what this is going to cost the Revenue. As far as I remember, the Mineral Rights Duty includes not only coal but the royalties paid on ironstone, limestone, lead and all the other minerals that are gotten in this country. I believe the total of that duty to the Revenue amounts to over a million pounds. If the Government is going to give away one-eighth or one-tenth it is going to give away the tax on £100,000, and Income Tax and Super-tax on that may amount to £50,000 and must amount to over £25,000. That is really a large amount to give, considering our experience to-night. I would like to call attention to the manner in which these concessions are being given wholesale by the Government to their friends behind them.

An hon. Member representing the landed interest gets up and proposes a new Clause which gives to his constituents the right to brew extra beer and he is welcomed with open arms. An hon. Member here gets up with a proposal for the reduction of the duty on soda water and he cannot have it. Now another hon. Member gets up and proposes a new Clause which will grant relief to owners of mineral rights and the Chancellor of the Exchequer accepts it at once. An hon. Member here gets up and moves a Clause which gives an exemption to widows from a small demand for Income Tax, and he cannot have it. It is not fair. The Government is treating the Opposition with contempt. We may be worthy of contempt, but I venture to remind the Government that they will not get their Finance Bill any the easier for treating us with contempt. We are entitled to know what this concession is going to cost, and unless the Chancellor of the Exchequer can give us the answer I beg leave to move to report progress.

The last speaker is under some misapprehension as to what I said. I pointed out that, although we accepted the principle of the Amendment as we understood it, we were not sure as to the wording of it, and were not sure as to the figure of one-eighth. I said, in terms, that what we conceded as right was that the cost of collecting rents should be treated as a deduction, so that the tax should be paid only upon the net rent received, which, after all, is the man's income. I am not sure whether I used a phrase which was misleading to the Committee, but I want to call the attention of the Committee to the wording of the Clause proposed. It says:

"the owner paying Mineral Rights Duty."
That means the owner who is making an income out of the mineral rights or royalties, and therefore paying the Mineral Rights Duty shall, for the purpose of Income Tax and Super-tax, be allowed as a deduction, or as a repayment, in respect of the expenses of management or supervision, one-eighth of the amount upon which he is assessed for such duties. I am not sure what, the word "supervision" means. All we want to say to-night is that if this Clause be now withdrawn we will consider a form of words which will give the mere expenses of collection, so that the tax shall be paid only on the actual income the man receives, which is the ordinary principle of the Income Tax Acts. It is quite true that it has not been given before, but it. is an obvious injustice.

I am sure the hon. Member will forgive me for saying that that is an entirely different thing. In this particular case the man has been taxed upon income he has not got; because a man does not get the gross income, but only gets the net income. The question of the widow is the question of giving exemption upon an income she does get. I told the Committee that I could not say at present what it costs and that we must look into it and see what it does, and on the Report stage the House must be informed as to what it will cost. That is why I am asking for the withdrawal of the Motion now.

I must draw attention to this extraordinary state of affairs. A Clause has been on the Paper for weeks stating specifically what the allowance is supposed to be, and now the Solicitor-General informs us that he cannot really say what the loss of revenue would be if it were accepted. He has pledged the Government to accept it in this or some other form, and yet he cannot tell us what the loss of revenue is going to amount to. In the case of any Amendment he is opposing he knows at once. This is bitter to us who supported the Budget in 1909, because this is another hole, it is destroying another part of it—

The hon. Member for Bridgeton (Mr. Macallum Scott) supported the imposition of the Mineral Rights Duty.

This is an allowance in respect of Income Tax and Super-tax, and not of the Mineral Rights Duty.

One thing has been said which has brought me to my feet, because I cannot let it pass. My hon. Friend the Member for East Middlesbrough (Mr. P. Williams) suggested that I had been treating my friends differently from what I had been treating hon. Members opposite. Practically all the instances he quoted as exemplifications of his statement were Motions which I had rejected. He instanced the case of the Mineral Waters Duty proposed by the hon. Member for Camlachie (Sir H. Mackinder), one of the strongest supporters of the Government in this House. Then the hon. Member for Moseley (Mr. Hannon) proposed a series of Amendments.

And so I could go on. I venture to say that for every Amendment proposed from the Benches opposite which has been rejected there have been three or four rejected which were from supporters of the Government.

Will the right hon. Gentleman deal with the question of the Beer Duty?

3.0 A.M.

Although the proposal was made by an hon. Member behind me, it is obviously not a proposal in his favour. It is a proposal in favour of the workmen living in his part of the country who find the burden of existence very severe. My hon. Friends opposite always make the mistake of supposing that there must be divisions between people which make them hostile to each other. I beg them to get rid of that notion as early as possible. As to what my hon. and gallant Friend the Member for Leith (Captain W. Bonn) has said, I should like him to read this proposed Clause. It does not deduct anything from the Mineral Rights Duty at all. It allows for Income Tax purposes expenses which he incurs in collecting his income. People do not pay upon the gross receipts that they get. In a shop they pay upon what they have got after deducting the expenses of running the shop. Let me take the case of the miners. They deduct from their income the cost of their tools. The case is not made any better for my hon. Friend, who says it has been so long delayed and that the allowance has been due for some time. What is proposed in this Clause is that there shall be deducted before assessment for Income Tax the expenses he is put to before he gets the amount that is included in his income. The thing is so patent, and the Royal Commission on Income Tax, which reported not so long ago, refers to the matter under Section 5. In regard to property-owning companies:

"These companies shall be granted an allowance for their management expenses to the same extent as financial companies."
With regard to owners of mineral or mineral rights:
"The owner of Mineral or Mineral Rights shall be allowed the expenses of management or supervision."
That Report is signed by several Labour Members of this House, none of whom took any exception to the general conclusion to which the whole Commission came. It is perfectly ridiculous to suggest that there is any new principle sought to be established. One of the hon. Member's coadjutors on that side of the Committee, who spoke with great experience of these matters, was obviously deprived of any argument on the matter. Accordingly, I venture to submit to the Committee that we ought now to he allowed to do what we have suggested, that the Clause should be withdrawn and that we should put down on the Report stage words which will be necessary to carry out the proposal. I wish to make known to the Committee that I cannot say accurately or even approximately at the present time the cost which will be involved in this proposal. In my view it will not exceed something like £25,000.

Question, "That the Clause be read a Second time," put, and negatived.