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New Clause—(Relief In Respect Of Foreign Income Tax)

Volume 466: debated on Tuesday 28 June 1949

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

(1) In order to extend the provisions of the law relating to relief in respect of Dominion income tax so as to grant similar relief in respect of foreign income tax, the following enactments shall have effect in relation to the year of assessment commencing on the sixth day of April, nineteen hundred and forty-nine, and all future years of assessment, as if wherever reference is made in each such enactment to a Dominion, there appeared by way of alternative a similar reference to any foreign country:—

  • (a) section twenty-seven of the Finance Act, 1920, except paragraph (a) of subsection (8) of that section;
  • (b) section twenty-eight of the Finance Act, 1921;
  • (c) section forty of the Finance Act, 1927;
  • (d) paragraph (c) of subsection (9) of section thirty-one of the Finance Act, 1946.
  • (2) ( a) On the making of an Order in Council under section fifty-one of the Finance (No. 2) Act, 1945, (which provides as to arrangements for relief from double taxation of income) with respect to any arrangements relating to a foreign country, this section shall cease to have effect as respects that foreign country except in so far as the said arrangements otherwise provide.

    Provided that the preceding provisions of this subsection shall not apply where the said arrangements do not provide that tax payable under the laws of the foreign country concerned shall be allowed as a credit against tax payable in the United Kingdom.

    ( b) The provisions of this section shall not apply in relation to any taxes payable in the Republic of Ireland.

    (3) The expression "any Foreign Country" means any territory outside the United Kingdom which is not a British possession or which is not under His Majesty's protection or in respect of which a mandate is not being exercised by the Government of any part of His Majesty's Dominions.

    (4) In no case shall any charge to tax made upon any person be increased by virtue of the provisions of this section.—[ Mr. Eccles.]

    Brought up, and read the First time.

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

    This new Clause is important, in our view. It is very difficult to understand from reading the Order Paper, but I will endeavour to make the matter clear. The Clause seeks to extend compendiously, in one stroke, the provision of Dominion Income Tax reliefs so as to apply to Income Tax payable in foreign countries. The expression "foreign country" is defined in subsection (3).

    There are arguments for and against this important proposal. I have tried to give them careful consideration and I have come to the conclusion that it is right to press this Clause at this time because of the difficulties which face us in our export trade. The Committee will agree that if British companies and citizens are to have equal scope and equal encouragement to trade and earn money in foreign countries with citizens of other industrial countries, then they must not be handicapped by having to bear altogether more onerous taxation than their competitors. That seems to me to be a very clear proposition. Any company which embarks upon a foreign venture does so only if it is satisfied with the prospect of making a profit and also with the proportion of that profit which the taxation in the country of operation and the taxation here in the United Kingdom leaves to it for distribution.

    All trade is risky, but there are additional risks in doing business in a foreign country. That means to say that if the profits made by British companies in countries like Mexico or Siam, for example, are first taxed by the local government and afterwards taxed by His Majesty's Government at the standard rate of Income Tax, there will be only a modest fraction of the profit left to the British company. The fact is that the Government of the United States and the Government of Canada give unilateral relief from this kind of double taxation. For example, in the United States of America complete relief from foreign taxes is given up to the full rate of American taxation by Section 131 of the Internal Revenue Code. An American company which is operating, let us say, in Mexico, pays the Mexican Income Tax and can deduct the whole of that payment from its liabilities to United States Income Tax. Obviously, therefore, the attraction of doing new business in a country like Mexico is much greater to an American company than to a British company, since the American company knows that if it makes a profit it will be able to bring home a much larger proportion of its earnings.

    It is to get rid of this handicap that we have put down this new Clause. His Majesty's Government have been well aware of the problem for a long time and they have been tackling it on quite different lines. They have been negotiating a series of double taxation agreements with all those countries which were willing to enter into such agreements. Under those agreements the two countries concerned give reciprocal concessions and the scope of the agreements has been extended to cover property as well as income. These double taxation agreements are very useful and thoroughly to be commended. They have been made, or are still in the process of negotiation, with nearly all countries with whom we have a substantial two-way flow of income. It is quite obvious that if there is not income flowing from the United Kingdom to a foreign country, there is not much inducement to the foreign country to enter into a multilateral tax agreement with the Government of the United Kingdom.

    We come to the point where there remains a group of countries, of which the majority can be called undeveloped countries, with whom agreements are not being made and are not very likely to be made. Among the most important of these are the following: the Belgian Congo, Brazil, Burma, Colombia, Iran, Iraq, Mexico, Portugal, Siam, Spain and Venezuela. Of those countries it might be said that all except two are too young to make a double taxation agreement and two of them—Spain and Portugal—are too old.

    What are we going to do about the great handicap which is laid upon British business because we do not appear likely to be able to make these multilateral taxation agreements with these important countries? There seems to me to be two courses open to His Majesty's Government. Either they can go on hoping that one day or other they will be able to make double taxation agreements with this remaining group of countries or they can rest upon the number of multilateral agreements they have made so far and add a Clause to the Finance Bill of the type of which I am speaking which would give unilateral relief to British citizens in respect of this small remaining group of countries.

    I know there are arguments on both sides of this question, but I believe the time has come to adopt the latter course. The Solicitor-General may tell us that it would be unfair to those countries with which we have concluded a double taxation agreement now to rush in and give unilateral relief and encouragement to British traders in all the other countries who have not entered into such agreements. I do not think we should make too much of that argument. There is something rather disagreeable about the fact, but this is a hard world and we have to do the best we can for British trade. My hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) and I feel that we should take some notice of the argument, however, and therefore in our Clause we are not seeking to give the whole relief to the British taxpayer; we are seeking only to apply the provisions of Dominion Income Tax relief to those countries with which we have not a double taxation agreement. That still leaves to our Treasury negotiators some- thing to bargain with if it ever does become possible to make double taxation agreements with this remaining group of countries.

    6.45 p.m.

    The Committee is probably only too familiar with the exact rates and conditions of Dominion double taxation relief. Broadly speaking, that is the relief which is set against the United Kingdom tax on income, which is either the rate of foreign tax that has been suffered or half the standard rate of British tax, whichever is the lower. I do not know what the rate of tax may be, but if Income Tax in Brazil is 6s. in the £, under Dominion Income Tax relief it is roughly true to say the British company is relieved to the extent of 4s. 6d., being half of the British standard rate. That may not be exactly true, but it is near enough. So we are not even doing in our new Clause what I hope we may do one day, namely, to put British companies on all fours with the United States and Canadian companies in the matter. However, we are going a long way towards it, and it is an important step which I think we ought to take.

    It really must appear to the Government, in the present predicament of our balance of payments, that any suggestion which encourages the earning of foreign exchange by this country is worthy of very sympathetic consideration. It is quite clear that we are now entering a phase of international trade where the stocking boom is over, and that there is going to be very keen competition in the capital goods industries of the world to get the contracts to open up new sources of supply, to build harbours, railways, airfields, and things of that sort. There cannot be any doubt that the capital goods industries of the great industrial nations are going to have a hard tussle between each other to see who gets these contracts, and the Americans are as keen as anyone else. Is it right that we should handicap British business compared with American business?

    If I thought that the Treasury could negotiate double taxation agreements with all those remaining countries—taking particularly the Middle Eastern countries and Venezuela, where great development is bound to take place—if I thought it could do that within a very short period, I should leave it to the Treasury to do it. If anyone can do it, then I say—because I know them well—that the Treasury negotiators can do it. However, it is not so. Those developing countries do not see what they get out of an agreement of that sort, and so they do not enter into negotiations; or if they do, they pitch their demands so high that nothing ever comes of them. Therefore, as I say, this is one of the steps it is open to the Government to take to encourage foreign exchange earnings, and they ought to consider this proposal sympathetically.

    What would it cost? I do not know. I know only that the cost would be a mere fraction of the sort of sums which we place at the disposal of the President of the Board of Trade through the Export Credits Guarantee Department—the vast sums which are now being given to that Minister to spend where he thinks it is possible to back up projects for increasing our earnings overseas. I think it better to equalise the handicaps between British traders and American traders and let them "go to it." I believe that to be much the most economical way, from the point of view of the Revenue, and one that is likely to bring in more foreign exchange.

    I apologise for setting out the argument at some length, but obviously this is an important Clause. I hope that even if the Solicitor-General has not the Chancellor's permission to accept it, it may be that he will take this argument seriously, and that between now and Report stage something can be done about it. All our friends throughout the world are asking whether we are doing our best to get on our own feet. Here is something which we can do. I feel that the whole Committee will agree with me that there are no politics in this at all. We just want to make things equal as between Canadian business, American business and British business.

    I wish to support every word my hon. Friend the Member for Chippenham (Mr. Eccles) has said. During the last year I have been pressing on the Chancellor of the Exchequer to negotiate something in the way of an agreement to deal with taxation in France, Belgium and this country. Only a fortnight ago I asked a Question on that, and was told that it is very difficult indeed to arrive at a conclusion. How much more difficult is it to arrive at a conclusion with people not in the same advanced stage of business organisation as are those two countries.

    At the present moment, some of the greatest exports to which we have to look in the near and the distant future are those comprised in invisible exports. There is no doubt about it that the export of the "know-how," of knowledge and experience, in the near future, when we have a big economic crisis lowering down on us, will be a great potential source of revenue. I believe that other countries will turn to us as the most experienced traders and the most experienced solvers of difficult economic riddles—which we have proved ourselves to be over centuries—for our experience and knowledge.

    This great handicap put on the trader, which is much increased, should at this juncture be mitigated and, if possible, brought to an end. It took the Government a year or two to learn what invisible exports are—they did not appear in the Government's programme in their first year or two in office—and then they gave them high priority, especially under the present Chancellor. Just as they were slow to learn what invisible exports are, so must they learn that the extension of our invisible exports at present is of vital importance, and that there is no greater handicap—and I speak as one who has trading posts, so to say, in countries all over the world, from Indo-China to South America—than this harsh taxation, which presses extremely heavily on the working of any public company on behalf of shareholders. It means that directors are faced with a bet of something like four to one on behalf of their shareholders the whole time. Those are difficult conditions, and not what directors can face with any degree of equanimity.

    I believe that this Clause is in a way far more important even than it appears to be on the surface. If we are to get more multilateral trade, surely the last thing we ought to do is to handicap and hamstring those people who are able and willing and enterprising enough to undertake trade. If we continue to place such heavy handicaps on them, we shall kill enterprise, or we shall export it altogether, which is the possible alternative. I have very great pleasure in supporting my hon. Friend's new Clause.

    We feel, having given very careful consideration to this matter, that really it is undesirable to deal with these questions of foreign taxation otherwise than through bilateral arrangements. One has to remember this, that foreign tax is treated as a deduction in computing profits in this country both for the purpose of Income Tax and Profits Tax. Therefore, with the standard rate at 9s. in the £—if we can take Income Tax and Profits Tax together—approximately already, as the law stands at the moment, without any unilateral relief being afforded as suggested, relief is given to the extent of half the foreign tax. The whole foreign tax is treated as a deduction, and, therefore, relief is given in the respect of foreign tax, and is allowed against profits for Income Tax and Profits Tax.

    I do not feel that I really can put the matter any better—perhaps, it would be presumption on my part if I supposed I could—than it was put by the right hon. Member for the Scottish Universities (Sir J. Anderson) during his Budget speech on 24th April, 1945, when he was dealing with this particular topic. He was referring then to the convention at that time recently negotiated between the United Kingdom and the United States. I desire to quote what he said:
    "We could, of course, deal with the problem by ourselves if we liked. There is no reason why this House, if so minded, should not provide that income for assets coming under charge to tax in foreign countries should be charged in this country only to the extent that the appropriate British charge might exceed the foreign charge. Such an allowance, no doubt, provides an appropriate solution over part of the field, but the unilateral approach is not in my view the way to tackle the question. Double charges of this kind ought to be eliminated in a regulated fashion which will distribute the cost equitably between the Governments concerned and for that purpose we have to proceed by agreement with like minded foreign Governments."—[OFFICIAL REPORT, 24th April, 1945; Vol. 410, c. 704.]
    The case made by the hon. Member for Chippenham (Mr. Eccles) is that, in present-day circumstances, it is urgently necessary to lift from the shoulders of British undertakers operating in foreign markets, so far as we can, the burdens which impinge upon them. It is not as if we had not already made very substantial progress in regard to the conclusion of these bilateral agreements. If it could be said that this had been an extraordinarily slow business, and that we were making very little advance in concluding agreements which included other countries, then there would be more in the argument that we should proceed in this unilateral fashion. However, I think that probably the Committee would be interested to know and have from me a short statement as to the present position in the case of a number of countries. I shall just give the details showing what is the position approximately at the moment.

    Agreements have been so far made with the United States of America, Canada, Australia, New Zealand, South Africa, most of the Colonies, and the Netherlands. An agreement with Sweden has been signed but not yet ratified, and an agreement at the official level has been reached with Denmark. An agreement with France is at present being negotiated, and that was one of the countries the hon. Member for Bury (Mr. W. Fletcher) mentioned. Discussions are continuing with Belgium, which I think he also mentioned, and also with Burma. Draft agreements have been put to the Governments of Norway and Indonesia, and, in the Commonwealth, to India, Pakistan, and Ceylon. The first approach has been made to Finland.

    With regard to South American countries, which the hon. Member for Chippenham rather put in the forefront of his argument, the position is that we have recently concluded an agreement with the Argentine restricted to shipping and air transport, and we propose to follow it up with negotiations for a more comprehensive agreement not limited to those particular industries. Brazil, which I think he also mentioned as one of the countries he had particularly in mind, has expressed willingness to enter into discussions, and proposals will shortly be sent to Brazil. The hon. Gentleman also mentioned Venezuela, and Venezuela has also been recently asked whether it will negotiate an agreement of this sort.

    An approach has been made. It has not yet said it will, so far as I know from the note before me. However an approach has been made.

    What I am concerned to show is that substantial progress has been made, and I am attempting to argue that there would have been more force in the hon. Gentleman's case if such progress had not been made. But as I have established, as I hope he will agree I have established, that we have really covered a great many of the countries already, and that we are taking active steps to go further with this policy of bilateral agreements to include other countries with which we conduct international trade, then really the case which he submitted instead is much weaker than it may appear at first sight.

    7.0 p.m.

    As he said, there are two schools of thought. The question is: should we try to have an overall arrangement which embraces all the countries and which shares out the burden of expense equitably between the countries concerned in the negotiations, or should this country take it upon itself to afford relief unilaterally and at its own expense? I would remind the Committee of what the then Chancellor of the Exchequer said in 1945. We think that is right, and we do not really think that the situation can be said to have altered from what it was when he used, in relation to it, the words which I have quoted. An important consideration to bear in mind is that the burden really is only approximately half of what it was, as I understand from the argument of the hon. Member for Chippenham, because already there is taxation relief as to half the foreign tax. For those general reasons I hope the Committee will agree that the considerations against unilateral relief, on the whole, outweigh the considerations in favour of unilateral relief, and will therefore agree with the submission that I make that this new Clause ought not to be adopted.

    There is a factor in relation to double taxation which the Solicitor-General has not appreciated. The United States have been the pioneers in making double taxation agreements, and in 1944, when this country was very reluctant to enter into a double taxation agreement, it was due to the initiative and the arguments of the United States delegates that we were persuaded to enter into that first great agreement. Although the United States are the pioneers of double taxation, they also have a section in their law to which this new Clause approxi- mates, namely, Section 131 which is a very well-known provision in the realm of double taxation.

    This new Clause has a different object and a different result. It does not conflict in any way with the system of making bilateral agreements with foreign countries. Section 131, like this Clause, is designed to save people a certain amount of tax because it is felt that it is unfair to charge them tax twice over. The object of a bilateral double taxation agreement is to benefit the citizens of both countries; we give up some tax to a foreign country and they give up some tax to us. The Americans have kept it quite distinct. They have had Section 131 in their law for many years and they are also very anxious to conclude as many bilateral agreements as possible.

    Putting it in layman's language, the Clause says that if a person has paid some tax in a foreign country and he is assessable to British Income Tax, he is entitled to set off the amount of tax he paid in the foreign country against his British tax, but, following the line of British Dominion tax relief in relation to Section 131 of the United States Code, he does not get the whole of it; he gets either the British standard rate or another alternative which I have forgotten for the moment. [An HON. MEMBER: "Or the foreign tax."] I am obliged to my hon. Friend. That is quite a different object. I ask the Solicitor-General to consider this Clause from that point of view. It does not affect foreign countries in the least. A foreign country which realises that America has Section 131 does not say, "We will conclude a bilateral agreement." An undeveloped country which is not anxious to conclude a bilateral agreement is not affected one way or another by the principle of Section 131.

    The answer of the Solicitor-General, that foreign tax is deducted in computing profits and Income Tax, is not correct. A simple mathematical computation will show that if a person earns £100 abroad, after paying British Income Tax he gets a profit of £55. If a foreign country imposes a tax of 20 per cent., the present method is to charge 45 per cent. on £80, because £100 less £20 is £80. Suppose that this was a straight Section 131 principle; one would charge 45 per cent. in England, the man would be credited with having paid 20 per cent. abroad; he would pay 25 per cent. in England and 20 per cent. abroad, which is 45 per cent., and he would have 55 per cent. left, exactly as if he had paid 55 per cent. in England. That is the object of Section 131. The foreign tax rate is reduced to half the standard rate or the foreign rate whichever is the least.

    There is no antithesis between Section 131, which is the easy United States method, and double taxation agreements, The advantages are those set up by my hon. Friend the Member for Chippenham (Mr. Eccles). It encourages British subjects to export to those countries where they would get the benefit of what corresponds to Dominion tax relief. It is fair because they paid tax in a foreign country, and, instead of just getting the advantage of the foreign tax being counted as an expense, it would be counted as a credit against the tax which they paid here.

    There are still many reasons for concluding double taxation agreements, because with a system of Dominion taxation reliefs there are many anomalies and injustices on the taxpayer. In the British-American Agreement, there is a liberalisation of the tax systems of the two countries. For instance, professors and lecturers who go to the United States and who are domiciled in this country do not pay any more or any less Income Tax. It is levied on them here, and the same applies in the reverse case. That is very different from saying that a lecturer who pays American Income Tax should be entitled to credit it against his British Income Tax. The situation is quite different. In the case of American Corporation Tax, that is levied on corporations and, therefore, is attributable to each share in an American corporation.

    Under the double taxation agreement the Americans have let off British subjects—I use that expression to illustrate persons domiciled in this country and so on—paying that tax because they feel that it is a liberalisation of the economic relations between the two countries. One could go through the British-American double taxation agreement and find many instances where we have given up the tax for persons who came over here—for instance, persons other than those in the entertainment industry who spend less than 168 days in England. Those people are let off the tax. We get a corresponding advantage. People who go to the United States are let off the American tax. The double taxation agreement works the same in both countries. It says, "We in England will do so-and-so to your people if you will do so-and-so to ours."

    All that this provision says is that if our people have to pay tax abroad they will get a credit. I ask the Solicitor-General to consider this Clause from that point of view and to appreciate that it is not a question of bilateral agreements against unilateral agreements. They are not in opposition. We are proposing a relief to our people who trade abroad, to encourage them to trade, and to develop invisible exports so that these people will receive, not more profit than if they had traded in England, but at least as much. A man who can sell for £100 profit in England gets £55. After a lot of trouble in exporting and so on, let us assume that he gets £100 in the Argentine. If he pays £20 in Argentine tax he only gets 45 per cent. of £80. Why should he go to all that trouble if he can sell in this country? We want him at least to be able to make as much in foreign markets as he makes in this country. To penalise a man who trades in a country where he has to pay foreign tax cannot be sensible. There is no question of party politics; this is a technical matter.

    I would refer the Solicitor-General to some very learned articles and proceedings in the two Congresses of the International Fiscal Association, which has been adopted as one of the societies working under United Nations. They have done a lot of study on this, and in one of their proceedings it was pointed out that Section 131 of the United States code was a very enlightened Section when passed. It has been of very great benefit to the Americans, and all we are asking is to give us half of that back.

    I must say that my hon. Friend the Member for Northwich (Mr. J. Foster), who has very great knowledge on this particular topic, has put up a formidable case, and I trust that some further answer will be given from the Treasury Bench. As he says, this is not a matter which raises any party division. It is a technical matter, and with the general object I think we are all agreed. We want to give to the industrialists trading abroad a fair deal compared with their fellow industrialists who trade in this country. It is, indeed, the avowed object of this Government to make it, on the whole, more advantageous to trade abroad than to trade at home. Therefore, I think that all of us start with a desire to clear up this anomaly, unless there are very grave reasons against it.

    I admit straight away that I was impressed by the Solicitor-General's speech. If it is true that there is a complete antithesis between the method proposed in this new Clause, the method of unilateral legislation, and the method which has been pursued now for three or four years, then all of us would prefer the method of bilateral agreements so long as that method still has a chance. It is quite clear that if we fall back on that method alone, a time will come when bilateral agreements have been completed with all the countries with which we are likely to be successful, and then, presumably, we legislate for the rest. The Solicitor-General produced a not at all unsatisfactory list of agreements which have been concluded or are being discussed, and he made a good case for saying that this bilateral method is still going well, even if finally we have to deal with the residue by legislation, and that we ought to give the treaty method a chance for a bit longer. That, of course, depends on there being this antithesis between the two methods.

    The purpose of my hon. Friend's speech was to point out that experience shows that no such antithesis exists in America, the country which is the pioneer in this field and which has on its statute book the type of Clause we are proposing here. It is that argument, from experience and not from theory, that no antithesis exists which right hon. Gentlemen opposite have got to meet. I must confess that, unless they have some answer to the proved fact that the United States, devoted as they are to the methods of bilateral agreements, have yet found it necessary and advisable and in no way disadvantageous to have a Clause of this character, that fact will certainly guide me in my action upon this Clause.

    We are all looking for the same thing, and we do not want to press this to a conclusion now, if the Solicitor-General wishes to look at the matter again. It is certainly a matter of considerable importance to which at some time or other we must have an answer, which we all hope will be a favourable one.

    7.15 p.m.

    I fear that I did not make my argument completely clear, thus producing the impression that there was an antithesis. What I was trying to convey is that there are two methods. There is the Section 131 method, which puts the whole of the cost of relief on the country which gives the relief, and there is the bilateral method, the method by which each country shares the cost, which is the method we prefer. The only antithesis is that the methods differ in that respect. We think, as the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) thought, that it is in the long run desirable that the bilateral method should be adopted. When the right hon. Gentleman used the words I quoted, he had fully in mind Section 131 of the American Code. That has been part of the American Code for a long time, it was part of the American Code before the right hon. Gentleman made his speech in 1945. I have not the smallest doubt that, with his great experience of these matters, he must have considered it. He was particularly talking in relation to the American Convention which had been concluded.

    The two systems are, in a sense, complementary, but we think we should aim at the cost of this taxation relief being equally borne. The case I have tried to make is that we have made substantial progress along that path. I did not mean Members opposite to understand that the relief which is obtained from the fact that foreign tax is relief against expenses is as advantageous as the relief afforded under either system to the taxpayer. On the contrary, foreign tax is treated as deductions both for Profits Tax and Income Tax purposes, with the result that there is relief, not in respect of the whole of the foreign tax, but in respect of half—that is, crediting the Profits Tax and Income Tax at 9s. in the £. I used that argument, not to destroy the argument which was used against me, but to submit that it would have less force if any relief were given under the existing law. For these reasons, notwithstanding the invitation extended to me, and in spite of the arguments of the hon. Member for Northwich (Mr. J. Foster), we feel that we must adhere to the decision we have given. Therefore, I invite the Committee to reject the new Clause.

    I am sorry, but I think that there is a fallacy underlying the Solicitor-General's argument. The relief in a double taxation convention is not shared by both countries. In a double taxation convention each country gives relief to its own people, and under Section 131 agreements one country gives relief to its own people. The cost is never shared under bilateral agreements.

    If he said so, he is wrong. Without giving away any official secrets one can say that the attitude of the Treasury at that time was very much against double taxation, and there was a great deal of difficulty in persuading them. Take the British subject who owns £100. He pays £20 in the Argentine and is taxed on the £80. Section 131 gives him relief in the sense that he pays tax on £100 and gets credited with the £20 he has paid in the Argentine. It is difficult to work out the fraction, but it means that a British subject has relief of tax to the extent of about £7 or £8. If a bilateral agreement is made with the Argentine they will not take £3 10s. They will say, "We shall let our own people have £7. In certain other cases, where you tax Argentinians and we tax British subjects, we will give you relief and you will give us relief."

    In the case of royalties, following the British-American pattern, the English would say, "We shall not tax Argentinian authors" and the Argentine would say, "We shall not tax British authors in the Argentine." In any case British and Argentine subjects would share the relief given by the British to British subjects. There is no question of that. The British are saying, "We do not care for a moment what other countries are doing; we think it only fair that British subjects should pay taxes abroad and have that amount of relief against English taxes." In other words, 45 per cent. of the £s will be what they gain.

    The Section 131 principle, divided by half, has been working for many years in the Dominions. There is no question of Australians and us sharing relief given to United Kingdom people who have to pay Australian taxes. If the Australians do the same to their own people, that is no concern of ours. There is no question of the cost we incur being later taken over by a double taxation agreement with other countries. I press the Government to say that the Section 131 principle is a good one and that it encourages our export trade and should be introduced in this country on the principle of extending to foreign countries relief which we think is right for our people who suffer taxation in the Dominions.

    We put down this Clause with the object of equalising the handicaps between business men of Britain and other countries. I am sure that Members on all sides of the Committee will agree with that object. The only reason for withdrawing the Clause would be if the Solicitor-General had convinced the Committee that the adoption of the principle of Section 131 would make it much more difficult to conclude double taxation agreements. Personally, I like such agreements; they cover a wide range of things and I think they are a good thing. The Solicitor-General has not put forward any argument to show that the adoption of the Clause would impede the Government's negotiators any more than Section 131 has impeded the American Government's negotiators. That being so, I hope the Clause will be pressed to a Division.

    The Solicitor-General quoted a speech made by my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) some time ago, and said that the situation today was very much the same as it was at the time that speech was made. We differ from that suggestion. My hon. Friend the Member for Bury (Mr. W. Fletcher) pointed out that the importance of invisible exports is now realised, and that there is a growing realisation of their importance. That being so, what is involved is not only what is made as profit in this country but profit made by means of royalties on what is sold abroad, such as books. The Debate has shown all reasonable and right-minded people that this is an important point, and it is very unsatisfactory that the Government should say that the situation today is as it was when my right hon. Friend made his speech, and allow the matter to go by default.

    I deplore the fact that the technical aspect of this matter should be stressed so much. We should come back to the commonsense point of view. We should all agree that there ought not to be double taxation, that invisible exports should be encouraged and that people who use their energy to create these exports should not be put at a disadvan-

    Division No. 185.]


    [7.27 p.m.

    Amory, D. HeathcoatHinchingbrooke, ViscountPonsonby, Col. C. E.
    Assheton, Rt. Hon. R.Hogg, Hon. Q.Price-White, Lt.-Col. D.
    Baldwin, A. E.Hollis, M. C.Prior-Palmer, Brig. O.
    Boles, Lt.-Col. D. C. (Wells)Howard, Hon. A.Raikes, H. V.
    Bower, N.Hudson, Rt Hon. R. S. (Southport)Ramsay, Maj. S.
    Boyd-Carpenter, J. A.Hurd, A.Rayner, Brig. R.
    Braithwaite, Lt.-Comdr. J. G.Hutohison, Col. J. R. (Glasgow, C)Renton, D.
    Bullock, Capt. M.Jeffreys, General Sir G.Roberts H. (Handsworth)
    Channon, H.Joynson-Hicks, Hon. L. W.Roberts, W. (Cumberland, N.)
    Clarke, Col. R. S.Kendall, W. D.Robinson, Roland (Blackpool, S.)
    Clifton-Brown, Lt.-Col. G.Kerr, Sir J. GrahamRopner, Col. L.
    Conant, Maj. R. J. E.Langford-Holt, J.Savory, Prof. D. L.
    Cooper-Key, E. M.Law, Rt. Hon. R. K.Scott, Lord W.
    Corbett, Lieut.-Col. U. (Ludlow)Lennox-Boyd, A. T.Shephard, S. (Newark)
    Crookshank, Capt. Rt. Hon. H. F. C.Linstead, H. N.Spearman, A. C. M.
    Crosthwaite-Eyre, Col. O. E.Lipson, D. L.Stanley, Rt. Hon. O.
    Cuthbert, W. N.Lloyd, Selwyn (Wirral)Stewart, J. Henderson (Fife, E.)
    Darling, Sir W. Y.Low, A. R. W.Strauss, Henry (English Universities)
    Digby, Simon WingfieldLucas, Major Sir J.Stuart, Rt. Hon. J. (Moray)
    Dodds-Parker, A. D.Lucas-Tooth, Sir H.Studholme, H. G.
    Drewe, C.McCorquodale, Rt. Hon. M. S.Sulcliffe, H.
    Dugdale, Maj. Sir T. (Richmond)Macdonald, Sir P. (I. of Wight)Taylor, C. S. (Eastbourne)
    Duthie, W. S.Mackeson, Brig. H. R.Teeling, William
    Eccles, D. M.Maclean, F. H. R. (Lancaster)Thomas, Ivor (Keighley)
    Foster, J. G. (Northwich)Maitland, Comdr. J. W.Thornton-Kemsley, C. N.
    Fox, Sir G.Marlowe, A. A. H.Thorp, Brigadier R. A. F.
    Fraser, Sir I. (Lonsdale)Marples, A. E.Turton, R. H.
    Gage, C.Maude, J. C.Vane, W. M. F.
    Galbraith, Cmdr. T. D. (Pollok)Meltor, Sir J.Wadsworth, G.
    Galbraith, T. G. D. (Hitthead)Morris, Hopkin (Carmarthen)Wakefield, Sir W. W.
    Gammans, L. D.Morris-Jones, Sir H.Walker-Smith, D.
    Glyn, Sir R.Morrison, Rt. Hon. W. S. (Cirencester)Ward, Hon. G. R.
    Gomme-Duncan, Col. A.Mott-Radelyffe, C. E.Williams, C. (Torquay)
    Grimston, R. V.Noble, Comdr. A. H. P.Williams, Gerald (Tonbridge)
    Hannon, Sir P. (Moseley)Odey, G. W.York, C.
    Harden, J. R. E.O'Neill, Rt. Hon. Sir H.
    Harris, F. W. (Croydon, N.)Osborne, C.TELLERS FOR THE AYES:
    Harvey, Air-Comdre. A. V.Peake, Rt. Hon. O.Commander Agnew and
    Haughton, Colonel S. G. (Antrim)Peto, Brig. C. H. M.Colonel Wheatley.
    Headlam, Lieut.-Col Rt. Hon. Sir C.Pickthorn, K.


    Acland, Sir RichardBeswick, F.Castle, Mrs. B. A.
    Adams, Richard (Balham)Bevan, Rt. Hon. A. (Ebbw Vale)Chamberlain, R. A.
    Albu, A. H.Binns, J.Champion, A. J.
    Allen, A. C. (Bosworth)Blackburn, A. R.Chetwynd, G. R.
    Alpass, J. H.Blenkinsop, A.Cluse, W. S.
    Anderson, A. (Motherwell)Blyton, W. R.Cobb, F. A.
    Attewell, H. C.Bowden, Flg. Offr. H. W.Cocks, F. S.
    Austin, H. LewisBraddock, Mrs E. M. (L'pl. Exch'ge)Collick, P.
    Awbery, S. S.Braddock, T. (Mitcham)Collins, V. J.
    Ayles, W. H.Bramall, E. A.Colman, Miss G. M.
    Ayrton Gould, Mrs. B.Brook, D. (Halifax)Cook, T. F.
    Bacon, Miss A.Brooks, T. J. (Rothwell)Cooper, G.
    Baird, J.Broughton, Dr. A. D. D.Corlett, Dr J.
    Balfour, A.Brown, George (Belper)Crawley, A.
    Barnes, Rt. Hon. A. J.Brown, T. J. (Ince)Crossman, R. H. S.
    Barsbow, P. G.Bruce, Maj. D. W. T.Cullen, Mrs.
    Barton C.Burden, T. W.Daggar, G.
    Battley, J. R.Burke, W. A.Daines, P.
    Bechervaise, A. E.Butler, H. W. (Hackney, S.)Davies, Edward (Burslem)
    Bellenger, Rt. Hon. F. J.Callaghan, JamesDavies, Ernest (Enfield)
    Benson, G.Carmichael, JamesDavies, Harold (Leek)

    tage. When a Clause such as this has been brought forward, after deep thought, it is wrong for the Government to say that they prefer some other method, and to rely on something which has been said in the past. I ask the Solicitor-General to give the matter further consideration.

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

    The Committee divided: Ayes, 115; Noes, 272.

    Davies, Haydn (St. Pancras, S. W.)Lavers, S.Rhodes, H.
    Davies, R. J. (Westhoughton)Lee, F. (Hulme)Ridealgh, Mrs. M.
    Davies, S. O. (Merthyr)Lee, Miss J. (Cannock)Roberts, Goronwy (Caernarvonshire)
    Deer, G.Leonard, W.Robertson, J. J. (Berwick)
    Delargy, H. J.Leslie, J. R.Robinson, Kenneth (St. Pancras, N)
    Diamond, J.Levy, B. W.Rogers, G. H. R.
    Dobbie, W.Lewis, T. (Southampton)Ross, William (Kilmarnock)
    Dodds, N. N.Lindgren, G. S.Royle, C.
    Driberg, T. E. N.Lipton, Lt.-Col. M.Scollan, T.
    Dye, S.Logan, D. G.Scott-Elliot, W.
    Edwards, W. J. (Whitechapel)Longden, F.Segal, Dr. S.
    Evans, Albert (Islington, W.)Lyne, A. W.Sharp, Granville
    Evans, E. (Lowestaff)McAdam, W.Shawcross, C. N. (Widnes)
    Evans, John (Ogmore)McAllister, G.Shurmer, P.
    Evans, S. N. (Wednesbury)McEntee, V. La T.Silverman, J. (Erdington)
    Ewart, R.McGhee, H. G.Silverman, S. S. (Nelson)
    Fairhurst, F.McGovern, J.Simmons, C. J.
    Farthing, W. J.Mack, J. D.Skeffington-Lodge, T. C.
    Fernyhough, E.McKay, J. (Wallsend)Skinnard, F. W.
    Field, Capt. W. J.Mackay, R. W. G. (Hull, N. W.)Smith, S. H. (Hull, S. W.)
    Follick, M.McKinlay, A. S.Sorensen, R. W.
    Foot, M. M.McLeavy, F.Soskice, Rt. Hon. Sir Frank
    Forman, J. C.MacPherson, Malcolm (Stirling)Sparks, J. A.
    Fraser, T. (Hamilton)Macpherson, T. (Romford)Stubbs, A. E.
    Gallacher, W.Mainwaring, W. H.Swingler, S.
    Ganley, Mrs. C. S.Mallalieu, J. P. W. (Huddersfield)Sylvester, G. O.
    Gilzean, A.Mann, Mrs. J.Symonds, A. L.
    Glanville, J. E. (Consett)Marquand, Rt. Hon. H. A.Taylor, R. J. (Morpeth)
    Gordon-Walker, P. C.Mathers, Rt. Hon. GeorgeThomas, D. E. (Aberdare)
    Grey, C. F.Mayhew, C. P.Thomas, George (Cardiff)
    Grierson, E.Mellish, R. J.Thomas, I. O. (Wrekin)
    Griffiths, D. (Rother Valley)Messer, F.Thomas, John R. (Dover)
    Griffiths, Rt. Hon. J. (Llanelly)Middleton, Mrs. L.Thorneycroft, Harry (Clayton)
    Griffiths, W. D. (Moss Side)Mitchison, G. R.Thurtle, Ernest
    Guest, Dr. L. HadenMoody, A. S.Timmons, J.
    Gunter, R. J.Morley, R.Titterington, M. F.
    Hale, LeslieMorris, Lt.-Col. H. (Sheffield, C.)Tolley, L.
    Hall, Rt. Hon. GlenvilMorris, P. (Swansea, W.)Tomlinson, Rt. Hon. G.
    Hamilton, Lieut.-Col. R.Mort, D. L.Turner-Samuels, M.
    Hardy, E. A.Moyle, A.Ungoed-Thomas, L.
    Henderson, Joseph (Ardwick)Murray, J. D.Vernon, Maj. W. F.
    Herbison, Miss M.Nally, W.Viant, S. P.
    Hewitson, Capt. M.Naylor, T. E.Walker, G. H.
    Hobson, C. R.Neal, H. (Claycross)Wallace, G. D. (Chislehurst)
    Holmam, P.Nichol, Mrs. M. E. (Bradford, N.)Warbey, W. N.
    Holmes, H. E. (Hemsworth)Noel-Buxlon, LadyWarkins, T. E.
    Horabin, T. L.Oldfield, W. H.Webb, M. (Bradford, C.)
    Houghton, A. L. N. D. (Sowerby)Oliver, G. H.Weitzman, D.
    Hoy, J.Orbach, M.Wells, P. L. (Faversham)
    Hubbard, T.Paling, Will T. (Dewsbury)West, D. G.
    Hudson, J. H. (Ealing, W.)Palmer, A. M. F.Wheatley, Rt. Hon. John (Edin'gh, E.)
    Hughes, Emrys (S. Ayr)Pargitsr, G. A.White, H. (Derbyshire, N. E.)
    Hughes, Hector (Aberdeen, N.)Parker, J.Whiteley, Rt Hon. W.
    Hughes, H. D. (W'lverh'pton, W.)Parkin, B. T.Wigg, George
    Hutchinson, H. L. (Rusholme)Paton, Mrs. F. (Rushcliffe)Wilkes, L.
    Hynd, H. (Hackney, C.)Paton, J. (Norwich)Wilkins, W. A.
    Hynd, J. B. (Attercliffe)Pearson, A.Willey, F. T. (Sunderland)
    Irving, W. J. (Tottenham, N.)Peart, T. F.Williams, D. J. (Neath)
    Isaacs, Rt. Hon. G. A.Poole, Cecil (Lichfield)Williams, J. L. (Kelvingrove)
    Jay, D. P. T.Popplewell, E.Williams, Ronald (Wigan)
    Jeger, G. (Winchester)Porter, E. (Warrington)Williams, Rt. Hon. T. (Don Valley)
    John, W.Porter, G. (Leeds)Williams, W. R. (Heston)
    Jones, Rt. Hon. A. C. (Shipley)Price, M. PhilipsWillis, E.
    Jones, D. T. (Hartlepool)Proctor, W. T.Wills, Mrs. E. A.
    Jones, Elwyn (Plaistow)Pryde, D. J.Woodburn, Rt. Hon. A.
    Jones, J. H. (Bolton)Pursey, Comdr. H.Wyatt, W.
    Keenan, W.Randall, H. E.Yates, V. F.
    Key, Rt. Hon. C. W.Ranger, J.
    Kinley, J.Rankin, J.TELLERS FOR THE NOES:
    Kirby, B. V.Rees-Williams, D. R.Mr. Collindridge and Mr. Hannan.
    Lang, G.Reid, T. (Swindon)