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Income Tax

Volume 319: debated on Tuesday 2 February 1937

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asked the Chancellor of the Exchequer whether he will take steps to remedy the present system under which the foreign firms importing meat into this country operate through associated British companies, and the foreign controlling company fix the prices at which the meat is purchased and sold by the British company, so that a minimum of British Income Tax is payable?

I would draw the attention of my right hon. Friend to the fact that the Income Tax Act, 1918, in Rule 7 of the General Rules applicable to all Schedules, already contains a provision enabling an appropriate charge of Income Tax to be made upon a foreign concern which, owing to its close connection with a British concern, is able so to arrange the course of business between them that the business done by the British concern produces less than the ordinary profits which might be expected to arise. My right hon. Friend may rest assured that steps are taken in the normal application of the Act to secure the assessment of any tax that is due.

Can the right hon. Gentleman give the House an assurance that the foreign firms will be taxed equally with the British firms?

That is a rather larger assurance that I should be prepared to give.

52, 53 and 54.

asked the Chancellor of the Exchequer (1) whether he will state the amount of the income for the year ended 31st March, 1936, arising in the United Kingdom subject to double taxation generally and, in particular, by reason of taxes imposed by the United States of America;

(2) whether he will state the amount of income arising in the United States of America subject to United Kingdom Income Tax for the year ended 31st March, 1936;

(3) whether there is any obstacle to an arrangement with the United States of America granting reciprocal relief from double taxation?

I regret that I am unable to furnish any estimate of the income arising in the United Kingdom or in any foreign country which may be subject to double taxation. As regards the question of relief from double taxation as between the United Kingdom and the United States of America, I would remind my hon. Friend that our law provides for arrangements on a reciprocal basis with foreign countries for relieving from double Income Tax shipping and air transport profits and profits derived from business carried on through agencies, and the arrangements already in force include one with the United States for the mutual exemption of shipping profits. No proposals for any extension of the sphere of relief provided by the existing law have been made to us by the United States Government, and as at present advised I do not think the time opportune for raising the question from this side.

Is my right hon. Friend aware that in the United States Revenue Act, 1936, Section 131, relief is given to American nationals on such of their income as is already subject to tax in this country? Is he also aware that owing to the increase of taxation throughout the world the question of double taxation is becoming important and a real hindrance to the revival of international trade?

The question is whether we should derive advantage or disadvantage by such an arrangement as my hon. Friend proposes. As at present advised, I do not think that we should derive advantage.