A.—4

360

Day.] Double Income Tax. [16 June, 1911. General BOTHA— cont. Dominions whereby incomes were relieved from double taxation. As a basis for a settlement of this character, I would suggest an extension of the principle embodied in the Imperial Death Duty legislation— vide section 20 of the Finance Act, 1894 — and that profits earned in the Dominions and received by residents in the Mother Country be charged only with any difference between the Imperial tax and that levied in the Dominions. Necessarily the converse of this proposition would also have to be recognised. If some such understanding were arrived at, I submit that it would tend to stimulate the investment of British capital in British countries and to discourage the diversion of capital to foreign enterprises. Incidentally I should like to call attention to a special hardship which, under existing conditions, is suffered by colonial holders of British securities. In the Imperial Finance Act, 1910, provisions were included which imposed a new liability to income tax upon small colonial investors in British securities. A foreigner, or colonist, residing out of the United Kingdom, who received income from this country, could previously claim the same relief as persons resident in the United Kingdom if he could satisfy the Inland Revenue Commissioners that his total income derived from the United Kingdom fell below the amounts specified in the Act in respect of which relief is granted. It followed that income which could not be assessed need not be included in the statement showing aggregate income, and thus a person who might actually be in receipt of a large income abroad could claim repayment of tax deducted from his investments in the United Kingdom if the amount of the income from the latter fell below 700?. per annum. This privilege was taken away by the Finance Act, 1910 ; but before the Bill was passed the High Commissioner for the Union of South Africa had correspondence on the subject with the Chancellor of the Exchequer through the Colonial Office, urging that the privilege then possessed by persons living in a colony should not be taken away. Mr. Lloyd George treated the High Commissioner's appeal most courteously, and pointed out that it did not appear fair to make the same exemptions in favour of colonists in respect of income drawn from this country, whatever their total income might be, as were made in favour of residents here in respect of their total income. He further pointed out that it would be, from an administrative point of view, impracticable to deal with the total income of persons living abroad. I submit that the reasons adduced in support of this change in the law by the Chancellor of the Exchequer are insufficient. It is probable that a few rich foreign and colonial investors have been enabled to claim relief, but they did so within the provisions of the law. I am unaware whether any evidence has been taken to show what number of rich foreigners or colonials had taken advantage of their legal privilege, but I would urge that the Chancellor of the Exchequer, even if influenced by the anomaly of rich men claiming relief, has now gone to the other extreme, by imposing the full tax on persons whose incomes are well within 160?. The result will probably be that foreign and colonial investors will withdraw from English securities. A letter in the " Economist " dated 25th February states this to be highly probable so far as Consols are concerned. Another argument advanced is that persons residing abroad and claiming exemption from income tax do not contribute to the finances of the United Kingdom. Any dealings by them in property or securities are, however, subject to stamp duty, and when they die their investments in this country are subject to estate duty. But a colonist deriving an income of 150?. from the United Kingdom is, in addition, under the Finance Act, 1909-10, taxed at the rate of Is. 2d. in the £ and contributes 9?. 6s. Sd. annually, which is far in excess of his fair share of the taxation. Certain exceptions are granted in the Finance Act, 1910, in favour of present or former servants of the Crown, missionaries, servants of native States under British protection, residents in the Isle of Man and Channel Islands, and persons residing abroad for their health. This is a fairly comprehensive list of exceptions, and must have cut deeply into the amount of tax which would otherwise have gone into the Exchequer. The term " servant of the Crown " has been construed by Somerset House to cover persons employed in the service of a Colonial Government, so the anomaly of a Civil servant in South Africa being entitled to whole or partial relief from which other citizens are debarred immediately presents itself. It is impossible to draw a proper distinction between colonists and residents