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Clause 49—(Charge Of Duty On Bonus Issues Of Securities, Etc)

Volume 440: debated on Wednesday 16 July 1947

The text on this page has been created from Hansard archive content, it may contain typographical errors.

It would be convenient to take the next two Amendments together.

I beg to move, in page 44, line I, to leave out "bonus," and to insert:

"capitalisation of profit balances otherwise distributable in dividend."
The purpose of this Amendment, and of the consequential Amendments, is to try to make clearer to the public and to everybody who has to read this Measure, the very complicated wording of the provisions of which Clause 49 is the first. This question of bonus issues has been full a misunderstanding. Even highly intelligent Members like the hon. Member for North Battersea (Mr. Jay) have found it extremely difficult to understand what a bonus issue is, and in one of his speeches the hon. Member clearly con- fused it with a bonus payment. For that reason, if for no other, I think it is desirable to seek to improve the wording of this Clause and to make it clearer to the general public. Because of the way the Chancellor has confused the use of the word "bonus," there are good reasons why there should be in other quarters also much confusion in the word "bonus." To begin with, when we were discussing the Borrowing (Control and Guarantees) Bill both the Chancellor and the Solicitor-General sought to teach us that a bonus was a form of borrowing. Then in the Finance Bill, which came earlier, we were told, on the question of the repayment of E.P.T. and the purpose for which repayments of E.P.T. could not be used, that a bonus issue was a distribution by a company of its assets, and complicated Clauses were introduced to prevent bonus issues, because they were not apparently borrowing as in the other case but the exact opposite—distribution of assets. Finally, we now have it turning up neither as borrowing nor as distributing but as a mulch cow, or even possibly two mulch cows which ought not to be allowed but which are to be taxed. Could confusion be worse confounded.

We ought clearly to define in this Bill what we really mean by a bonus, so that it is perfectly clear what we mean in this Bill and, in particular, what is in fact the case that when a company pays bonus it will not come under the provisions of this Clause and will not because it pays a bonus be subject to tax. I believe that I have in this correctly stated the position—and, no doubt, the Chancellor will correct me if I am wrong. The position is—I will say it again—that if a company pays a bonus, no tax is to be levied under this Clause. The need for clearing up the meaning of "bonus" is surely obvious. Moreover, in support of my suggestion for abandoning "bonus" and preferring "bonus issue" I would point out that the heading of the Clause uses the words "bonus issues" correctly and not the incorrect word "bonus."

Moreover, it would be a very good thing if as well as using the correct description "bonus issue" we should in the initial stages define what a bonus issue is. If we wish to define it I think there can be no doubt whatever that what is meant by a bonus issue is, in the words of the Amendment, "capitalisation of profit balances otherwise distributable in dividend." The purpose of this Amendment is therefore also to make that clear. In the House there has been great failure in understanding what the Clause is about. Even the Chancellor of the Exchequer has clearly misunderstood it. I have heard the hon. and gallant Member for Pollok (Commander Galbraith) rise from his seat and explode that the Chancellor of the Exchequer clearly did not know what a bonus issue was. This was when he talked of the reserves of the company being distributed as cash to its shareholders. I have also myself said and heard Members on this side saying that the Chancellor of the Exchequer is appealing to the ignorance of the extremists politically behind him.

If it is wrong, then let the right hon. Gentleman put it right, by making it so clear in this Clause that even the ignorant cannot be misled into making a mistake. We on this side regretfully have accepted the tax. We are not here disputing the principle of this Clause, although we have, in earlier Debates, made it quite clear that we dislike it very strongly on many grounds. But what we are asking for is a small Amendment which will make it more clearly describe what the tax is. The Chancellor of the Exchequer was good enough to accept an Amendment to a Bill of his to change its title from Investment (Control and Guarantees) Bill to Borrowing (Control and Guarantees). By so doing he made the purpose of the Bill clearer to the public generally. The President of the Board of Trade has been equally obliging over the Industrial Organisation and Development Bill—adding the word "development." I ask the Chancellor of the Exchequer therefore confidently in this friendly atmosphere to give us this particular Amendment.

I beg to second the Amendment.

I took some trouble to see if I could find whether there was any definite authority on the meaning of the word "bonus." It has, of course, been used before in Acts of Parliament, although I think they are limited to Acts passed during the life of the present Parliament; and on the whole it has not been used precisely as it is here, where we are putting on a tax on a bonus issue. My hon. Friend the Member for Bath (Mr. Pitman) has explained—and I think that the Chancellor knows—that this is not a tax on a bonus, because the word "bonus," curiously enough, has been defined, and in the courts had been held to mean a cash bonus; and a gift of bonuses under a will was held to exclude bonus shares issued. In other words, if we are to use the word "bonus" without any trimmings at all, we mean cash issued by the company; and it is not such cash which these Clauses are seeking to tax.

It is, therefore, essential that we should use an expression which does really say what we are intending to do, and I think it is of some importance that the House should realise what a bonus issue really is. A great many hon. Members opposite imagine that a bonus issue is a thing which all members of a company are in the habit of praying for, and it will astonish them to hear that, in fact, a bonus issue of shares by a company requires a restrictive provision in the company's articles of association. The creation of a bonus issue is, first of all, the payment out of a cash bonus by the company, and then the taking of action under the company's articles to prevent the actual payment of the cash and, instead, to issue shares of the company to be paid for out of that cash. In other words, the creation of bonus shares is a restriction on the right of the shareholders and not anything in the nature of a gift. [Laughter.] I am confirmed in the views I hold by the laughter which comes from hon. Members opposite. It is perfectly plain they have been imagining a position such as I suggested. It may surprise them to hear that a bonus issue of shares is a restriction on the right of the members of the company. The wording suggested in the Amendment is the precise wording taken from the article which is put into a company's regulations in order to give it the power to create a bonus issue of shares. I think that we should in a taxing Measure of this sort use precise words which will indicate what is meant.

8.45 p.m.

I am afraid that, whatever may be said on the merits of the argument, the words proposed by the hon. Member would, from the drafting point of view, not be appropriate. I cannot, in any case, accept this Amendment in the form in which it is put down. Apart from that, it is unsuitable for the further reason that it would limit the new duty which we are debating to what we have called in our previous discussions the pure bonus issue as distinct from the bonus element case. It is our view that this duty should fall on the bonus element case as well as on the pure bonus case—in the case where something is paid by the recipient of bonus shares in addition to the case where nothing is paid. In the case where nothing is paid, it is a pure bonus issue and in the case where anything is paid it is a bonus element issue. I think that the Amendment would not have that effect. The effect of the proposal would be to limit this duty to the pure bonus issue and to eliminate altogether the bonus element.

I think the right hon. Gentleman is saying a half-truth. He is right in one respect that it would exclude the particular case of the company that issues its fully paid up shares at par without any capitalisation of profits. That is not a bonus issue and has no bonus element in it. It is a different mulch cow altogether. Within the terms of this Amendment, however, would be caught the company which was raising part of its fresh capital in cash and the other part by capitalising part of its hitherto undistributed profits.

I agree with what the hon. Gentleman has said. This is a difficult and complicated matter, and we have tried to make sense of it in our proposals and to defend those proposals in the House. I think that hon. Members will agree that the effect of those proposals, apart from the drafting difficulties, will be considerably to limit the field of operation of this duty. I do not want to over-state and I want on this point to agree with the hon. Member if I can and to focus the issue. It would have the effect while not touching the incidence of the new duty on the pure bonus, of limiting considerably the field of operation of the duty as we have proposed it in the Bill as far as the bonus element issue is concerned. I do not think the hon. Member would deny that.

It would catch the pure bonus issues, and the part-bonus issues, which I call the bonus element, but it would not catch the issues where the full par value was paid for the share, but which, due to the fortuitous circumstances of the market, happened then to be at a high value.

These matters will be discussed on various later Amendments, including the Amendment about the precise pre-estimate of what the cost of the duty will be to a company, and so on. I do not want to anticipate the later discussions. I merely say it is clear that the effect of the hon. Member's Amendment, drafting niceties apart, will be considerably to limit the field of operation of this duty, and for that reason I do not think we can accept it. In the case of the bonus element, there is, strictly speaking, no capitalisation of profits. The capitalisation of profits is a phrase properly applicable to the pure bonus tax. It applies in some degree to the case where some payment is made. Capitalisation of profits is primarily an operation applied in the case of the pure bonus issue.

I would remind hon. Members that we are now on the Report stage, not on the Committee stage.

Division No. 313.]


[8.55 p.m.

Adams, Richard (Balham)Brooks, T. J. (Rothwell)Deer, G.
Adams, W. T. (Hammersmith, South)Brown, George (Belper)Delargy, H. J
Allen, A. C. (Bosworth)Brown, T. J. (Ince)Diamond, J.
Allen, Scholefield (Crewe)Bruce, Maj. D. W T.Dodds, N. N
Alpass, J. H.Buchanan, G.Donovan, T.
Anderson, A. (Motherwell)Burden, T WDriberg, T E. N
Attewell, H. CBurke, W. ADumpleton, C W
Austin, H. LewisButler, H. W (Hackney, S.)Durbin, E F. M.
Awbery, S. SCallaghan, JamesEde, Rt. Hon J. C.
Ayles, W. H.Carmichael, JamesEdwards, Rt Hon. Sir C. (Bedwellty)
Ayrton Gould, Mrs. BChamberlain, R. AEdwards, John (Blackburn)
Baird, JChampion, A. JEdwards, W. J. (Whitechapel)
Balfour A.Chetwynd, G REvans, S. N (Wednesbury)
Barstow, P GCocks, F. S.Ewart, R
Barton, C.Collick, P.Fairhursl, F.
Battley, J. R.Collins, V JFarthing, W J
Bechervaise, A E.Colman, Miss G. MFernyhough, E.
Belcher, J WCooper, Wing-Comdr. G.Field, Capt W. J
Benson, G.Corbet, Mrs. F. K. (Ca N. W.)Fletcher, E. G. M (Islington, E)
Bing, G. H. CCorvedale, VitcountFollick, M.
Binns, J.Cove, W. GForman, J. C
Blenkinsop, ADaggar, GFoster, W (Wigan)
Blyton, W. R.Daines, P.Gallacher, W
Bowden, Flg.-Offr. H. W.Dalton, Rt. Hon. H.Ganley, Mrs C. S
Bowles, F. G. (Nuneaton)Davies, Edward (Burslem)Gibbins, J
Braddock, Mrs. E. M. (L' Exch'ge)Davies, Ernest (Enfield)Gibson, C W
Braddock, T. (Mitcham)Davies, Harold (Leek)Glanville, J E (Consett)
Bramall, E. A.Davies, Hadyn (St. Pancras, S. W)Gordon-Walker, P. C
Brook, D. (Halifax)Davies, R J. (Westhoughton)Grenfell, D. R.

I am subject to your Ruling, Mr. Deputy-Speaker. I am only anxious to get the matter clear as far as we can. I am anxious to see how far we can agree, and to find the exact point where we differ. This conception of the capitalisation of profits is primarily applicable to the pure bonus issue. Here we move on to the case of the bonus element where some, payment is made by the recipient.

The picture is a little smudged compared with the former case, where nothing is paid by the recipient. As I have said, I do not want to anticipate later discussions, but I had hoped that my acceptance of certain Amendments, particularly that which was moved by the hon. Member for Flint (Mr. Birch), where we are seeking to exclude relatively small accretions—5 per cent. is the figure—would go somewhere to meet hard cases. I do not expect the Opposition to agree, but I had hoped that my acceptance of that Amendment, and also the Amendment regarding amalgamations, would have removed a good deal of the sharp edge of opposition. This Amendment, drafting questions apart, does so far limit the field of operation of this duty that I cannot commend it to the House.

Question put, "That 'bonus' stand part of the Bill."

The House divided: Ayes. 251; Noes, 92.

Grey, C. FMallalieu, J P WSkeffington-Lodge, T. C
Grierson, EManning, Mrs L. (Epping)Skinnard, F. W.
Griffiths, D (Rother Valley)Marshall, F. (Brightside)Smith, C. (Colchester)
Griffiths, Rt. Hon. J. (Llanelly)Medland, H MSmith, H. N. (Nottingham, S.)
Griffiths, W. D (Moss Side)Middleton, Mrs. L.Smith, S. H. (Hull, S. W.)
Guest, Dr. L. HadenMillington, Wing-Comdr E RSorensen, R. W.
Gunter, R JMitchison, G. RSoskice, Maj. Sir F
Hale, LeslieMonslow, W.Sparks, J. A.
Hall, W. G.Moody, A. SStamford, W
Hamilton, Lieut.-Col. RMorgan, Dr. H. BStrachey, J
Hannan, W. (Maryhill)Mort, D. LStross, Dr. B
Harrison, J.Nally, W.Stubbs, A. E
Hastings, Dr SomervilleNaylor, T. E.Sylvester, G. O
Henderson, A. (Kingswinford)Neal, H. (Claycross)Symonds, A. L.
Henderson, Joseph (Ardwick)Nichol, Mrs M. E. (Bradford, N.)Taylor, H. B. (Mansfield)
Herbison, Miss MNicholls, H. R (Stratford)Taylor, R. J. (Morpeth)
Hobson, C. R.Noel-Baker, Capt. F. E. (Brentford)Taylor, Dr. S. (Barnet)
Holman, PNoel-Baker, Rt. Hon P J (Derby)Thomas, D. E. (Aberdare)
Holmes, H. E. (Hemsworth)Oliver, G. H.Thomas, I. O. (Wrekin)
House, GPaget, R. TThorneycroft, Harry (Clayton)
Hoy, J.Paling, Rt Hon. Wilt ( worth)Thurtle, Ernest
Hudson, J. H. (Ealing, W.)Palmer, A. M. F.Tiffany, S.
Hughes, H. D. (Wolverhampton, W.)Pargiter, G. ATimmons, J
Hutchinson, H. L. (Rusholme)Parker, J.Titterington, M. F.
Hynd, H. (Hackney, C.)Parkin, B. T.Tolley, L.
Irving, W. JPaton, J (Norwich)Tomlinson, Rt. Hon. G
Janner, BPearson, A.Ungoed-Thomas, L
Jay, D. P. TPeart, T. FViant, S P
Jeger, G. (Winchester)Poole, Major Cecil (Lichfield)Walkden, E.
Jeger, Dr S. W (St. Pancras, S..E.)Porter E. (Warrington)Walker, G H.
John, W.Porter, G. (Leeds)Wallace, G. D. (Chislehurst)
Jones, Rt. Hon A. C. (Shipley)Price, M. PhilipsWalkins, T E
Jones, D. T. (Hartlepools)Prill, D. N.Watson, W. M.
Jones, Elwyn (Plaistow)Proctor, W. T.Webb, M. (Bradford, C.)
Jones, J. H (Bolton)Pryde, D. J.Weitzman, D.
Keenan, WRandall, H. EWells, P. L. (Faversham)
Kenyon, C.Ranger, JWest, D. G.
Kinghorn, Sqn.-Ldr ERankin, JWhiteley, Rt. Hon. W
Kirby, B. V.Reeves, J.Wilkes, L
Lavers, S.Reid, T. (Swindon)Wilkins, W. A.
Lawson, Rt. Hon. J. J.Richards, R.Williams, D. J. (Neath)
Leonard, W.Ridealgh, Mrs. M.Williams, J. L. (Kelvingrove)
Leslie, J. R.Robertson, J. J. (Berwick)Williams, Rt. Hon. T. (Don Valley)
Lewis, A. W. J (Upton)Rogers, G. H. R.Williams, W. R. (Heston)
Lindgren, G. SRoss, William (Kilmarnock)Willis, E.
Logan, D GRoyle, C.Wills, Mrs. E A
Longden,Sargood, R.Woodburn, A.
Lyne, A. WScollan, TWoods, G. S
McAdam, WSegal, Dr. SWyatt, W.
McEntee, V. La T.Shackleton, E A. A.Yates, V. F.
McGhee, H. G.Sharp, GranvilleYoung, Sir R. (Newton)
Mack, J. D.Shawcross, C. N. (Widnes)Zilliacus, K
Mackay, R. W. G. (Hull, N. W.)Shurmer, P.
McKinlay, A. S.Silverman, J. (Erdington)TELLERS FOR THE AYES
Maclean, N (Govan)Silverman, S S. (Nelson)Mr. Snow and Mr. Popplewell.
McLeavy, FSimmons, C J


Amory, D. HeathcoatGammans, L. D.Marshall, D. (Bodmin)
Assheton, Rt. Hon. RGeorge, Lady M. Lloyd (Anglesey)Marshall, S. H. (Sutton)
Beechman, N AGrant, LadyMaude, J. C.
Bennett, Sir PGridley, Sir A.Mellor, Sir J
Birch, NigelHarvey, Air-Comdre. A. VMolson, A. H. E.
Bossom, A. C.Hurd, A.Morris, Hopkin (Carmarthen)
Bower, N.Hutchison, Col. J R. (Glasgow, C)Noble, Comdr. A. H. P.
Boyd-Carpenter, J. A.Jarvis, Sir JO'Neill, Rt. Hon. Sir H
Bromley-Davenport, Lt.-Col. WJennings, ROrr-Ewing, I. L
Buchan-Hepburn, P. G. T.Keeling, E. H.Osborne, C.
Clifton-Browne, Lt.-Col. GLambert, Hon. G.Peake, Rt. Hon. O
Conant, Maj. R. J. ELangford-Holt, J.Peto, Brig C. H. M
Cooper-Key, E. M.Law, Rt. Hon. R. KPickthorn, K.
Corbett, Lieut.-Col. U. (Ludlow)Linstead, H N.Pitman, I J
Crookshank, Capt. Rt. Hon. H. F. C.Lipson, D. LPonsonby, Col. C. E
Crosthwaite-Eyre, Col O. E.Lloyd, Selwyn (Wirral)Ramsay, Maj. S
Cuthbert, W. N.Low, Brig. A. R. WRayner, Brig. R
Digby, S. WLucas-Tooth, Sir HReed, Sir S. (Aylesbury)
Dodds-Parker, A. DMacdonald, Sir P. (I. of Wight)Roberts, H. (Handsworth)
Donner, Sqn.-Ldr. P WMackeson, Brig. H. R.Robinson, Wing-Comdr. Roland
Dower, Lt.-Col. A. V G. (Penrith)Maclay, Hon. J. S.Ropner, Col. L.
Drayson, G BMacpherson, N. (Dumfries)Sanderson, Sir F
Drewe, C.Marlowe, A. A. H.Shepherd, W S. (Bucklow)
Fletcher, W (Bury)Marples, A. E.Smiles, Lt.-Col, Sir W.
Fyfe, Rt. Hon Sir D. P. MMarsden, Capt. ASmith, E. P. (Ashford)

Spearman, A. C. MTurton, R. H.Williams, Gerald (Tonbridge)
Stanley, Rt. Hon. OWadsworth, G.Winterton, Rt. Hon. Earl
Stoddart-Scott, Col. MWalker-Smith, D.York, C
Sutcliffe, HWard, Hon. G. R
Teeling, WilliamWheatley, Colonel M. J.TELLERS FOR THE NOES:
Thorneycroft, G E P. (Monmouth)White, Sir D. (Fareham)Mr. Studholme and
Touche, G C.White, J B. (Canterbury)Lieut.-Colonel Thorp.

I beg to move, in page 44, line 15, at the end to insert:

"(4) A company may deliver to the Commissioners a statement prior to issuing any securities or varying the rights or liabilities attached to any securities previously issued as mentioned in Subsection (1) of this Section together with a declaration that such proposed issue or variation of rights or liabilities does not contain any element of bonus as mentioned in that Subsection or an estimate of what in its opinion is the value of the bonus which would be likely to arise by reason of the proposed issues or variations of rights or liabilities in accordance with the principles of the next two succeeding Sections and on the receipt thereof the Commissioners shall soon as may be confirm the declaration or estimate or assess an alternative value of the bonus and if the company accepts the value so assessed by the Commissioners the duty charged by Subsection (2) of this Section shall be assessed in accordance with such confirmation estimate or assessment and no further claim shall be made on the company in respect thereof."
This Amendment is the same as one which was discussed during Committee. Briefly, its intention is to transfer from the company to the Government the responsibility for estimating the terms of the bonus issue or elements of bonus contained in an issue. I would remind the House that under the Clause as it stands at the moment, the company has all the responsibility for estimating the bonus element. It may well happen, as hon. Members know, that circumstances can alter. Technical modifications may happen or new discoveries may take place with the result that, however fair the terms may have been thought by the company at the time the issue was settled, when the rights of these shares become operative or within one month after the issue has been launched, the whole situation may be altered. Some bonus element never considered by the company will, in fact, be disclosed and the company itself will not have either the means or the available cash to meet the tax requirements of the Treasury.

Under the Stamp Act, 1891, it was clearly laid down that it was the responsibility of the Inland Revenue Commissioners to assess taxes. The Chancellor of the Exchequer, during the Committee stage, admitted that, and went on to say that there was a gamble under the present proposal and that if that gamble were to be taken, he could not see any reason why the Inland Revenue Commissioners should be more capable of taking it than the companies. But it was this Government which laid down the gamble, and it is against the principle of this gamble we have expressed ourselves most vigorously from this side of the House. There is a gamble involved which no company can foresee, and if the Chancellor wants to prevent the gratuitous distribution of profits by a company to its shareholders, surely at least the additional undisclosed gamble, which this Amendment seeks to cover, must be the responsibility of the Government. If he is not willing to accept that responsibility, all those arguments he has advanced for the introduction of this tax must fall to the ground.

Towards the end of the Debate in Committee, the Chancellor of the Exchequer indicated that he would seriously consider this Amendment. I understood from what he said to my right hon. Friend the Member for the City of London (Mr. Assheton) that he was of opinion that this Amendment would guarantee certainty of revenue to the Treasury, and for that reason he was very inclined to accept it. I must admit for myself I was very surprised when I did not see an Amendment on the Order Paper at this stage to accept our principle. It seems to me that the Chancellor has set out to fulfil one object, to prevent the gratuitous distribution of profits to companies by their shareholders, and if that be so, he can accept this Amendment. At any given moment any company can assess the bonus element in or the bonus of the issue which it wishes to make. What it cannot do is foresee the future. If the Chancellor wishes to stop the gratuitous distribution of reserves to shareholders he can do it irrespective of this Amendment. If he refuses, it can only mean that he is seeking revenue without justification and placing a burden on industry which it is incapable of bearing. He is making them do something which he is unwilling to do for himself. It is for these reasons that I hope the Chancellor will find himself able to accept this Amendment. It seems to be logically just and entirely in conformity with those principles which he has enunciated so often and so vigorously from the Front Bench opposite.

I beg to second the Amendment.

When it was moved in Committee, the Chancellor expressed some surprise that we should put it forward. Why he expressed that surprise I do not know, because one of the first principles of taxation is that it should be certain in its incidence, that is to say, someone should know when they undertake anything precisely to what tax they are liable. Under this Clause it is a pure guess, and what we are trying to ensure is that somebody, before he embarks on any transaction, will know for what he is liable. We say that it is wrong that somebody should have to gamble. Whether shares go up or down has practically nothing whatever to do with somebody who is issuing any particular security

For instance, supposing the other day somebody had been making an issue in connection with the oil industry. Knowing that the Chancellor of the Exchequer is against increases in dividends, it would have been surprising if he had guessed that there would be a sharp rise in the Anglo-Iranian dividend—a company which the Chancellor controls. It would be difficult to foresee that. The effect of that naturally would be to put up oil shares, and therefore somebody making an issue at that particular time would have been liable to a much heavier tax than he could have guessed, entirely because the Chancellor was doing something which no rational man could have assumed he would do. That clearly is wrong. There is no question under this Amendment of anybody trying to evade tax. As the Chancellor very well knows, on this side we hold it to be a thoroughly bad, stupid and foolish tax, and we are trying to mitigate to some extent the evil which is being done. We are not asking for any charge on the Revenue; we are only asking that a businessman should know where he is.

When this matter was raised by the right hon. Member for the City of London (Mr. Assheton) I undertook to give it careful consideration and I have so done. The question is, what is a reasonable function to place upon the Inland Revenue in this regard? It is quite true, as a general proposition, as the hon. Member for Flint (Mr. Birch) said, that so far as possible you should have complete certitude in advance as to what is the payment due to be made. There are, however, many taxes in the modern world of which we cannot say that. We are living in a world movement of prices, and so forth, and it is not in practice possible always to predetermine what the tax will be that we shall have to pay next year. Even our Income Tax next year depends on what we get this year.

The question, therefore, is who should try to fix this figure? I have carefully considered the suggestion that the Commissioners of Inland Revenue should be required to make a forward estimate of what prices would be in the event of a bonus issue and, consequently, on what basis the tax should be levied. I have great confidence, within their proper field, in the Commissioners of Inland Revenue; they are a very fine branch of the machinery of Government, but I have not been able to convince myself that they would be capable of performing this task, which is outside their field, with reasonable efficiency and, after carefully considering it, I do not think it would be fair to put it upon them.

9.15 p.m.

The Inland Revenue should not be asked to try to assess in advance factors of this kind which involve probable price movements following upon dividend declarations and the like. Inevitably there must remain some element of uncertainty. I do not see how we can in this, as in many other tax cases, assure ourselves with certainty of the result. If this task were put on the Inland Revenue, it would be possible to make a guess, but I do not think that we could feel that that guess would be nearer the truth than the guess which would be made in such a case as this by the company themselves before deciding whether or not to make a bonus issue.

We have debated bonus issues in general a great deal, and I have not concealed my opinion that bonus issues are not a necessary financial operation, except in very exceptional cases where it is reasonable that some payment should be made. If it be the case that my refusal of this Amendment—and I must refuse it—will be to leave companies less ready to make such issues because they will be unable to estimate what the liability will be through the difficulty of estimating how the prices will move following the bonus issue, I should not think that an evil thing. On the contrary, although I would not get revenue because the issue would not be made, I would not feel that any disaster had occurred if the issue were not made owing to the difficulty of forecasting price movements; nor should I feel that any very serious setback had happened so far as our industrial development was concerned.

I would, therefore, not be moved in this case by the argument that leaving this uncertainty on the shoulders of the company rather than on the Inland Revenue might somewhat diminish the number of bonus issues made. On the other hand, although I am anxious to get the fullest service—as we do get it—from the Inland Revenue, I do not think it would be reasonable to ask them to undertake this additional function which falls quite clearly outside their ordinary duties. For that reason, I do not feel able to advise the House to accept the Amendment.

The right hon. Gentleman has on this occasion fallen into an error which is not uncommon with him, that of thinking that two bad arguments make one good one. He started by addressing hon. Members on this side of the House in the most courteous and friendly way and telling them that he had looked with interest and sympathy at the Amendment and had gone into it with great consideration and found that it was impracticable purely from a point of view of machinery. That in itself was a bad argument. His argument was that we have here a tax which is bound to impose an element of uncertainty on someone and that the uncertainty should fall on the taxpayer and the gamble should not be taken by the Treasury.

On the contrary we feel that if the Government assume the responsibility of putting on a tax which is in itself a gamble, it is only right that the element

Division No. 314.]


[9.21 p.m.

Amory, D. HeathcoatBossom, A. C.Buchan-Hepburn, P. G. T.
Assheton, Rt. Hon RBower, N.Clifton-Browne, Lt.-Col G
Bennett, Sir PBoyd-Carpenter, J A.Conant, Maj. R. J. E.
Birch, NigelBromley-Davenport, Lt.-Col. W.Corbett, Lieut.-Col U (Ludlow)

of uncertainty and chance should be assumed by the Department on whose advice the tax is imposed, and not by the unfortunate taxpayer. My hon. Friends have said that there is no attempt here, much as we dislike the tax, to provide that a man pays less in any particular case. It is only an attempt to see—all of us would recognise that this is a thing at which we should aim—that a man knows before he does a certain operation what tax he will have to pay in the long run as a result of it. Therefore, we think that the Chancellor's first argument is a bad one—that it is right that the element of uncertainty should be allowed to rest on the taxpayer and not be assumed by the Inland Revenue.

In order to bolster an argument which he himself recognised as of the lamest possible character, he went on to drop entirely the suavity with which he had opened the case and abandoned entirely all those thoughts about the difficulties of machinery and how much he would like to meet us if he possibly could. He simply went on to say, "Well, if it does make things difficult and unfair to the people who want to issue bonus shares and stops them from doing so, so much the better because, as the House knows, I do not like bonus issues. If that is his attitude why is he not honest about it and why does he not stop bonus shares? He has power to do so through the Capital Issues Committee and the whole elaborate machinery we spent months in debating last year. It is fantastic that he should first of all say that it is immoral to make bonus issues and then try to stop them, first by making them expensive and then by making them uncertain. It is for this reason that I accuse the Chancellor of the faulty arithmetic of adding together two extremely bad arguments and thinking that they make a good one. It is also the reason why we shall pursue the course at this stage—as I believe we did on the last—of dividing the House on the matter.

question put, "That those words be there inserted in the Bill."

The House divided: Ayes, 92; Noes, 248.

Crookshank, Capt. Rt. Hon. H. F. C.Lloyd, Selwyn (Wirral)Robinson, Wing-Comdr. Roland
Crosthwaite-Eyre, Col. O. E.Low, Brig A. R. W.Ropner, Col. L.
Crowder, Capt. John ELucas-Tooth, Sir H.Sanderson, Sir F.
Cuthbert, W. N.Macdonald, Sir P (I. of Wight)Shepherd, W S. (Bucklow)
Digby, S. W.Mackeson, Brig H. RSmiles, Lt.-Col. Sir W.
Dodds-Parker, A. DMaclay, Hon J S.Smith, E. P. (Ashford)
Dormer, Sqn.-Ldr. P. w.Macpherson, N. (Dumfries)Spearman, A. C. M.
Dower, Lt -Col A. V G. (Penrith)Manningham-Buller, R E.Stanley, Rt. Hon. O.
Drayson, G B.Marples, A. EStoddart-Scott, Col. M
Drewe, C.Marsden, Capt. A.Sutcliffe, H.
Fletcher, W. (Bury)Marshall, D. (Bodmin)Teeling, William
Fyfe, Rt. Hon. Sir D. P. MMarshall, S. H. (Sutton)Thorneycroft, G. E. P. (Monmouth)
Gammans, L. D.Maude, J C.Thorp, Lt -Col R. A F.
George, Lady M. Lloyd (Anglesey)Mellor, Sir JTouche, G. C.
Grant, LadyMolson, A. H. E.Turton, R H.
Gridley, Sir A.Morris, Hopkin (Carmarthen)Wadsworth, G.
Harvey, Air-Comdre A. V.Molt-Radclyffe, Maj. C. E.Walker-Smith, D.
Head, Brig. A HNoble, Comdr. A. H. P.Ward, Hon. G. R.
Holmes, Sir J. Stanley (Harwich)O'Neill, Rt. Hon. Sir H.Wheatley, Colonel M. J.
Hurd, A.Orr-Ewing, I. L.While, Sir D. (Fareham)
Hutchison, Col J R. (Glasgow, C.)Osborne, C.White, J. B. (Canterbury)
Jarvis, Sir JPeake, Rt. Hon. O.Williams, Gerald (Tonbridge)
Jennings, RPeto, Brig C. H. MWinterton. Rt Hon. Earl
Keeling, E. H.Pickthorn, K.York, C.
Lambert, Hon. G.Pitman, I. J
Langford-Holt, J.Ponsonby, Col C. E.TELLERS FOR THE AYES:
Law, Rt. Hon. R KRaikes, H. V.Mr. Studholme and
Lipson, D. LRayner, Brig R.Major Ramsay.


Adams, Richard (Balham)Gallon, Rt. Hon. H.Holmes, H. E. (Hemsworth
Adams, W. T. (Hammersmith, South)Davies. Edward (Burslem)House, G.
Allen, A. C. (Bosworth)Davies, Ernest (Enfield)Hoy, J.
Allen, Scholefield (Crewe)Davies, Harold (Leek)Hudson, J H. (Ealing, W.)
Alpass, J. H.Davies, Hadyn (St. Pancras, S W)Hughes, H. D. (Wolverhampton, W.)
Anderson, A (Motherwell)Deer, G.Hynd, H. (Hackney, C.)
Attewell, H. CDelargy, H. J.Irving, W. J.
Austin, H. LewisDiamond, J.Janner, B
Awbery, S. S.Dodds, N. NJay, D. P. T
Ayles, W. H.Donovan, T.Jeger, Dr S. W. (St. Pancras, S. E.)
Ayrton Gould, Mrs. B.Driberg, T. E. N.John, W
Baird, J.Dumpleton, C. W.Junes, D. T. (Hartlepools)
Balfour A.Durbin, E. F. M.Jones, Elwyn (Plaistow)
Barstow, P. GEde, Rt. Hon J. C.Jones, J H. (Bolton)
Barton, CEdwards, Rt. Hon Sir C. (Bedwellty)Keenan, W.
Battley, J. R.Edwards, John (Blackburn)Kenyon, C.
Bechervaise, A. E.Edwards, N (Caerphilly)Kinghorn, Sqn.-Ldr. E.
Bellenger, Rt. Hon F. JEdwards, W J. (Whitechapel)Kirby, B. V.
Benson, G.Evans, S. N (Wednesbury)Lavers, S.
Bing, G. H. C.Ewart, ft.Lawson, Rt. Hon. J. J.
Binns, J.Fairhurst, F.Leonard, W.
Blenkinsop, A.Farthing, W. JLeslie, J. R.
Blyton, W. R.Fernyhough, E.Lewis, A. W. J. (Upton)
Bowden, Flg.-Offr. H. W.Field, Capt. W. J.Lindgren, G. S.
Bowles, F. G. (Nuneaton)Fletcher, E. G. M. (Islington, E.)Logan, D. G.
Braddock, Mrs. E. M. (L'pl, Exch'ge)Follick, M.Longden, F
Braddook, T. (Mitcham)Forman, J. C.Lyne, A. W.
Bramall, E. A.Foster, W. (Wigan)McAdam, W.
Brook, D. (Halifax)Ganley, Mrs. C. SMcEntee, V. La T.
Brooks, T. J. (Rothwell)Gibbins, J.McGhee, H. G.
Brown, George (Belper)Gibson, C. WMack, J. D.
Brown, T. J. (Ines)Glanville, J. E. (Consett)Mackay, R. W. G. (Hull, N. W.)
Bruce, Maj D. W. T.Gordon-Walker, P. CMcKinlay, A. S.
Buchanan, G.Grenfell, D. R.Maclean, N. (Govan)
Burden, T. W.Grey, C. F.McLeavy, F.
Burke, W. A.Grierson, E.Mallalieu, J. P. W.
Butler, H. W. (Hackney, S.)Griffiths, D. (Rather Valley)Manning, Mrs. L. (Epping)
Callaghan, JamesGriffiths, Rt. Hon. J. (Llanelly)Marquand, H. A.
Carmichael, JamesGriffiths, W. D. (Moss Side)Marshall, F. (Brightside)
Chamberlain, R. A.Guest, Dr. L, HadenMedland, H. M.
Champion, A. J.Gunter, R. J.Middleton, Mrs. L.
Chetwynd, G. R.Guy, W. H.Millington, Wing-Comdr. E. R.
Cocks, F. S.Hale, LeslieMonslow, W.
Collick, P.Hall, W. G.Moody, A. S.
Collins, V. J.Hamilton, Lieut.-Col. R.Morgan, Dr. H. B.
Colman, Miss G. M.Hannan, W. (Maryhill)Morris, P. (Swansea, W.)
Cooper, Wing-Comdr. G.Hardy, E. A.Mort, D. L.
Corbet, Mrs. F. K. (Camb'well, N. W.)Hastings, Dr SomervilleNally, W.
Corvedale, ViscountHenderson, A. (Kingswinford)Naylor, T. E.
Cove, W. G.Henderson, Joseph (Ardwick)Neal, H. (Clayeross)
Crawley, AHerbison, Miss MNichol, Mrs M. E. (Bradford, N.)
Daggar, G.Hobson, C. R.Nicholls, H. R. (Stratford)
Daines, P.Holman, P.Noel-Baker, Capt. F. E. (Brentford)

Noel-Baker, Rt. Hon P J. (Derby)Segal, Dr. S.Tolley, L.
Oliver, G. HShackleton, E. A. ATomlinson, Rt. Hon G
Paget, R TSharp, GranvilleUngoed-Thomas, L.
Paling, Rt. Hon. Wilfred (Wentworth)Shawcross, C. N. (Widnes)Usborne, Henry
Palmer, A. M. FShurmer, P.Viant, S. P.
Pargiter, G. Silverman, J. (Erdington)Walkden, E.
Parker, J.Silverman, S. S. (Nelson)Walker, G. H.
Parkin, B. T.Simmons, C. J.Wallace, G. D. (Chislehurst)
Paton, J. (Norwich)Skeffington-Lodge, T. CWatkins, T. E.
Pearson, A.Skinnard, F. W.Webb, M. (Bradford, C.)
Pearl, T. F.Smith, C (Colchester)Weitzman, D.
Poole, Major Cecil (Lichfield)Smith, H. N. (Nottingham, S.)West, D. G.
Porter E. (Warrington)Smith, S. H. (Hull, S.W.)Whiteley, Rt. Hon. W
Porter, G (Leeds)Sorensen, R. W.Wilkes, L
Price, M. PhilipsSoskice, Maj. Sir F.Wilkins, W. A.
Pritt, D. N.Sparks, J. A.Williams, D. J. (Neath)
Proctor, W. T.Stamford, W.Williams, J. L. (Kelvingrove)
Pryde, D. J.Stross, Dr. BWilliams, Rt. Hon. T. (Don Valley)
Randall, H. EStubbs, A. E.Williams, W. R. (Heston)
Ranger, JSylvester, G. O.Willis, E.
Rankin, JSymonds, A. L.Wills, Mrs. E A
Reeves, J.Taylor, H. B. (Mansfield)Woodburn, A.
Reid, T. (Swindon)Taylor, R. J. (Morpeth)Woods, G. S.
Richards, R.Taylor, Dr. S. (Barnet)Wyatt, W.
Ridealgh, Mrs. M.Thomas, D. E. (Aberdare)Yates, V. F.
Robertson, J. J. (Berwick)Thomas, I. O. (Wrekin)Young, Sir R (Newton)
Rogers, G. H. R.Thorneycroft, Harry (Clayton)Zilliacus, K.
Ross, William (Kilmarnock)Thurtle, Ernest
Sargood, RTimmons, JMr. Snow and Mr. Popplewell.
Scollan, T.Titterington, M. F.