Clause 19. — (Powers of Taxation.)

Postponed Clauses. – in the House of Commons on 29th October 1920.

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(1) The power of the Parliaments of Southern Ireland and Northern Ireland to make laws shall include power to make laws with respect to the imposing, charging, levying, and collection of taxes within their respective jurisdictions, other than customs duties, excise duties on articles manufactured and produced, and excess profits duty, and (except to the extent hereinafter mentioned) Income Tax (including Super-tax), or any tax substantially the same in character as any of those duties or taxes, and the Governments of Southern Ireland and Northern Ireland shall have full control over the charging, levying, and collection of such taxes as their respective Parliaments have power to impose, and the proceeds of all such taxes shall be paid into the Consolidated Fund of Southern Ireland or Northern Ireland, as the case may be.

(2) Provision shall be made by the Parliaments of Southern Ireland and Northern Ireland for the cost within their respective jurisdictions of Irish services and, except as provided by this Act, any charge on the Consolidated Fund of the United Kingdom for those services, including any charge for the benefit of the Local Taxation (Ireland) Account, or any grant or contribution out of moneys provided by the Parliament of the United Kingdom so far as made for those services shall cease, and money for loans in Ireland shall cease to be advanced out of the Local Loans Fund.

(3) For the purposes of this Act the excise duty on a licence granted to a manufacturer or producer of an article, the amount of which varies either directly or indirectly according to the amount of the article manufactured or produced, shall be treated as an excise duty on an article manufactured or produced; but, save as aforesaid, nothing in this Act shall be construed as preventing the Parliaments of Southern Ireland and Northern Ireland from making laws with respect to excise licence duties, or duties of excise other than excise duties on articles manufactured or produced.

(4) Any articles which are brought into Great Britain from Ireland, or into Ireland from Great Britain, shall be deemed to be articles exported or imported for the purposes of the forms to be used, and the information to be furnished under the Customs Consolidation Act, 1876, and Section four of the Revenue Act, 1909, but not for any other purpose.

(5) Nothing in this Section shall be construed as authorising the Parliament or Government of Southern Ireland or Northern Ireland to impose, charge, levy, or collect any duties of postage so long as the postal service remains a reserved service.

Amendment proposed [28th October]: In Sub-section (1), after the word "duty" ["Excess Profits Duty"], to insert the words "Corporation Profits Tax and any other tax on profits."—[Sir L. Worthington-Evans.]

Question again proposed, "That those words be there inserted."

Question put, and agreed to.

Photo of Mr John Hills Mr John Hills , City of Durham

I beg to move, in Subsection (1), to leave out the words, "and (except to the extent hereinafter mentioned) Income Tax (including Super-tax)."

This Amendment is to leave Income Tax to the Irish Parliaments. We spent the whole of yesterday in discussing the question of Customs and Excise, and the Committee decided that those were not to be given to the Irish Parliaments or to a single Parliament in Ireland.

Notice taken that 40 Members were, not present; Committee counted; and 40 Members being found present

Photo of Mr John Hills Mr John Hills , City of Durham

The decision that the Committee came to yesterday was that Customs and Excise were to be reserved to the Imperial Parliament. The Amendment which I am now moving has a much smaller scope than the one which the Committee rejected yesterday. The Customs system of a country brings it into contact with foreign Powers, but Income Tax is entirely an internal matter. It raises no question of trade between Ireland and England. It does not touch the question of Free Trade. Therefore, all these big factors, which no doubt formed a large part of the reason why the Committee refused to give Customs to Ireland, do not apply to the gift of Income Tax. No priciple of separation is involved either, for I can imagine no service so much a matter of internal administration as the taxing of incomes. I want now to say a few words from the Irish point of view. Suposing that we leave Income Tax to be assessed and collected here, we do this: we fix the system of taxation which must compulsorily be applied to Ireland. She has no say in the system of Income Tax. I quite agree that Clause 23 gives her power to rebate Income Tax, and to rebate on any plan which her Parliaments may think right, and we were told yesterday by the President of the Board of Education that the present financial surplus would enable a rebate of 3s. in the £ to be made. I welcome that figure. Of course that is a very important power, but surely it is quite a different thing to control your own taxation and to be allowed to repay a certain amount of taxation that is imposed by somebody else. We want Ireland to have the scheme as well as the amount of Income Tax within her purview.

Secondly, I do not see why we should, for no reason that I can conceive, have the odium of tax-gathering in Ireland. It seems to me a quite gratuitous business. Some one has to collect Income Tax; some one has to go through the innumerable claims. Why should we in England do all this work? It is very unpleasant work. It brings us into conflict with Ireland at a hundred points, and we surely want some very strong arguments before we agree to do that which has got more possibility for friction than any system which you can imagine; for one cannot disregard the present position of Ireland, and it is surely plain that if we collected the Income Tax we should be called—unjustly, no doubt—a foreign country exacting tribute. Unless there are some very strong reasons, I do appeal to the Committee, as earnestly as I can, to think twice before they reserve Income Tax. The third and last reason is one that has been so often urged, that the Government who spend should have the burden of collecting the money. Unless you do that you will not get responsibility. Therefore, for every reason, for our own convenience, for the avoidance of friction in Ireland, which is a very real and serious matter, and for the purpose of giving the Irish Government a fair start, I think all the arguments will convince us into giving this tax. When we talked on the Financial Resolution last Friday, the Minister without Portfolio made rather fun of some of our propositions, and rather put himself before the House as a practical financier who was being asked by people like myself to do things that were idealistic. I wonder who is the real practical man in this matter. I have the greatest respect and admiration for my right hon. Friend, but surely it is no want of practicability to try to fit your laws to the facts; and we are, with all the limitations of private Members, trying so far as we can to make this Bill fit the facts of Ireland.

I come now to the reasons which, I think, have influenced the Government. I want to be perfectly fair with the arguments. I do not wish in the least to avoid the difficulties. I quite see the difficulties, but I think there is a way of meeting them. I believe the three reasons for retaining Income Tax are these. First of all, separatism; secondly, security for the Imperial contribution; and, thirdly, the wish to keep the collection of Income Tax at the source. So far as the first is concerned, I do submit there is no separatism involved. It is entirely a matter of internal convenience and administration, and the arguments which apply to Customs, and to a certain extent to Excise, do not apply to Income Tax. Then I come to the two important objections, and I quite recognise their importance. As to the Imperial contribution, if we collect the Income Tax we have an absolute security for a large part, at any rate, of the Imperial contribution. When the time comes, we shall suggest that the far better way of making Ireland pay what I have always said she ought to pay, a share of the War debt, is to impose a capital sum. When we talked about this last Friday the Minister in charge said it was a Utopian scheme, and that nobody would lend the Irish capital. I differ. If there were a Bill which had the least chance of acceptance, the Irish Government would get this money to-morrow. I am perfectly certain the banks in Ire land—

Photo of Mr James Lowther Mr James Lowther , Penrith and Cockermouth

I must at the outset, I think, direct the Committee that we must not re-open the discussion of yesterday, or last Friday. I purposely allowed the greatest width of discussion on those two occasions, in order that we might afterwards come to the details, and, as the hon. and gallant Member quite rightly said, we are now on the smaller point where the Income Tax is a proper tax to transfer to the Irish Authority.

Photo of Mr John Hills Mr John Hills , City of Durham

I really have finished on that point, and of course I bow to your ruling. Now I come to an objection of which I really see the force. We shall be told that if the Income Tax is given to Ireland, the collection at the source will be broken down. The collection at the source means that the dividends of joint stock companies have Income Tax taken off by the secretary of the company before the dividends are paid to the shareholders. It is a system of extreme convenience to the Government, and is very simple. The Government fear that if Ireland is given Income Tax, and thereby imposes a far lower tax than she has now, a large number of companies in this country will transfer their offices to Ireland and so escape the British tax. I think I have stated the main objection of the Government. London has been the home of the joint stock companies with business all over the world. They have come here for several reasons—because of the money market, and because our Company Laws are good and our conditions are stable, and they have the great advantage of our Stock Exchange, which is still the biggest stock market in the world. Therefore, I do not think at first sight a company would migrate across the Channel, leaving all those great advantages for Dublin, in the very uncertain future Dublin has got. An hon. Member asks whether they would go to Belfast. I am not so sure. Does the Committee think that a company with large financial interests would, for the sake of escaping a small amount of tax, give up all the enormous advantages that in the past have attracted companies all over the world? I cannot believe it. Would my right hon. Friend who sits beside me transfer the Great Northern Railway Head Office to Ireland? The thing is quite unlikely. Still, there is a possi- bility, and I agree that in this matter the Treasury can take no risks, and so we who support this Amendment must find some watertight scheme which still enables collection at the source to take place; otherwise the Chancellor of the Exchequer would not get the tax automatically, and he would be driven to apply to the individual shareholder here at great expense and subject to a great amount of evasion. Therefore, I admit we must find some watertight compartment.

First of all, I would point out that we shall collect more Irish revenue here than Ireland will collect of English revenue. There are all the materials for a bargain out of that. The second point is that a bargain would be to Ireland's interest. Still I agree she may be unreasonable, and do something against her own interests. We have to provide for all cases, and we have to assume, for the purposes of argument, that she is foolish and unreasonable. I suggest you can meet the thing in this way. I am very sorry to be so long but I want to make the matter quite clear. There are several company concerns that I could mention, say a great company like Vickers and Maxim, and other great businesses physically here. That being so you can do what you like because they cannot escape from control. Let me take the strongest case of which I can think. Take the San Paulo railway of Brazil. They have not got a single works here, but their head office is here. They might be induced to migrate across the Channel so that their shareholders should get their dividends with only the Irish tax taken off and not the British. We could meet that in this way. Say that they cannot do any business here at all unless they have an office here where process can be served; unless they have that, and something more that I shall show in a moment, say that they cannot even sue here.

Just think what that means. They cannot sue a shareholder for calls. They cannot sue on a stock exchange bargain. They are absolutely deprived of the benefit of our laws, and besides that I should make them keep here a register of the shareholders resident here and make their pay the dividends here, with tax deducted, and unless they did this I would exclude them altogether from the benefit of our laws. It is absolutely in- conceivable that under these circumstances they would act contrary to their own interests. If they are likely to go, why did they not go to Amsterdam or Belgium years and years ago, or to the Channel Islands?

Take one more case, a very strong case, A big company like the Bankers' Investment Trust or some similar Trust Company whose business consists of the buying and selling of securities on the London Stock Exchange. They have no real works here that you can control. Assume that they were going across to Belfast, and trusting to the expectations of my hon. Friend below me, and assume they had a private telephone to the Stock Exchange and still continued to operate here. Would they do that if they could not even sue a broker on his bargain, if they were excluded from our courts, and anybody who dealt with them knew they could repudiate the bargain, and that no liability would follow. No company would possibly run in that way, solely to escape Income Tax which would not compensate them for that very real and very serious risk.

I have tried to meet all the objections that occur to my mind. I may have missed some; if so I hope my right hon. Friend will tell me. There is perhaps a stronger point. Let me appeal to what the Prime Minister said in February, 1918, when the Irish Convention was on the point of breaking down. The distinct point involved was the Customs. In the Convention there were three parties. There was first of all Lord Middleton's party, which consisted of the Southern Unionists, the Labour representatives, and the bulk of the Nationalist party. Then there was the extreme Nationalist party of which the hon. Member for the Falls Division (Mr. Devlin) was a member, and this party would compromise on nothing except the Customs. Then there was the Ulster party. There were these three parties at a deadlock. On February 25th the Prime Minister wrote them a letter. I will only read one sentence of that letter. First of all the right hon. Gentleman said: The Customs cannot be given during the war. But he did not absolutely exclude even the Customs. He also said: The Government consider that during the period of the war the control of all taxa- tion other than the Customs and Excise should be handed over to the Irish Parliament. All taxation including Income Tax! No question was raised then, and nobody said that Income Tax was to be a separate department. The Prime Minister accepted then absolutely that Income Tax should be given during the War—not now in peacetime, but during the War. I want to be quite clear about that argument. I quite admit that a good deal has happened in Ireland since 25th February, 1918, that a good many things, terrible things, have happened, that murder and outrages have made a difference. I quite recognise the consideration, but remember also—if hon. Members will cast their minds back—if the Prime Minister during the blackest period of the War did not even question the advisability of giving the Income Tax over to the Irish Parliament, surely we can do it now! That is all I have to say, but I would, in conclusion, refer to what was promised in the speech of the Chief Secretary at Belfast as to an extension of the Bill. When the right hon. Gentleman made that statement I am certain he had something in his mind. We have not seen that extension yet, and I can imagine no greater concession or one that will do more good to both countries than to grant Income Tax to the Irish Parliaments.

Photo of Mr James Lowther Mr James Lowther , Penrith and Cockermouth

I will put the Amendment to leave out the words "and (except to the extent hereinafter mentioned) Income Tax (including Super-tax)." The hon. and gallant Gentleman (Sir S. Hoare) will notice that I am not saving his Amendment which immediately follows, as it is unnecessary to do so.

Photo of Mr Worthington Evans Mr Worthington Evans , Colchester

The Committee has listened to a very interesting and closely reasoned speech from my hon. and gallant Friend. Let me take up the first point which I understand was made—that there was a sort of promise that even during the War the Income Tax might be transferred. May I point out that the conditions which were then anticipated referred to a single Irish Parliament, and there was no proposal for a transfer of the Income Tax to two Irish Parliaments. I think what has been done by Clause 23 is the best administrative method of giving freedom to both Parliaments with regard to the Income Tax. I think my hon. Friend hardly did justice to the proposal in the Bill, which is that either Parliament can make rebates to any individuals or class of individuals they choose. So that, although the Income Tax is selected by a single tax by the Imperial Parliament, say, at the rate of 6s. in the £, each Irish Parliament can reduce that down to 2s, 3s., 4s., or 5s. by abatements, just as they choose. I think that is an exteremely wide power, and just as wide as if they had the original taxing rights. If it were possible to give original taxation rights without a great many difficulties, some of which my hon. and gallant Friend has referred to, we should have to come to a choice whether we give those rights or whether we adopt the plan of the Bill and give rebates. Let me deal with the difference. This is not a matter merely of separation, it is a matter of convenience. Is a single tax which preserves taxation at the source a better system, or is it better to give each separate Parliament direct taxing powers?

Let me look at some of the difficulties which have been dealt with. The difficulty of the double tax was not dealt with. We have as between the Empire and ourselves many examples of the most disastrous effects upon the individual of the heavy Income Tax in this country, and the equally heavy Income Tax imposed by our Dominions. Only last Session there was a great deal of discussion, and after examination by a Royal Commission or a Departmental Committee, a plan was devised by agreement between the Dominions and this country permitting a rebate on Income Tax, so that this country and the Dominions by mutually giving up a portion of the tax which would otherwise accrue to it, thus lighten the burden upon the individual. That has only been arrived at after the greatest difficulty, and even now it is not in full operation. What would happen if each of those Parliaments were able to levy an Income Tax?

Photo of Viscount  Turnour Viscount Turnour , Horsham and Worthing

Is it not a fact that the proposal to which the right hon. Gentleman refers, although not in full operation, has been adopted by the whole of the Dominions and our Crown Colonies?

Photo of Mr Worthington Evans Mr Worthington Evans , Colchester

It does not rest with us whether it comes into operation or not, but with the Dominions and us. We have made a standing offer to the Dominions and have said "If you choose to come into this plan, we will reduce our Income Tax to 3s., provided you make a reduction on your Income Tax, so that in the total the tax upon the individual will be the same." It may be said we can make the same offer to Southern and Northern Ireland, and that you can rely upon them just the same as you do on the Dominions, and arrange that you should not place a double tax on the individual taxpayer. It is not merely a question of a double tax, but it may well be a treble tax. Take either railway companies or private individuals who carry on business both in England and Northern and Southern Ireland. One of the great difficulties which has undoubtedly influenced the Government in resisting this Amendment which would arise would be that even if we did make that offer to the two Parliaments and they were accepted you would still have an individual taxpayer subjected to three different systems of income Tax.

In these matters you have to pay some attention to the taxpayer, and you must not look at it solely from the point of view of the Government or the drafting of a Bill. You have to consider what the taxpayer will be subjected to in the three different countries. He would have to make a return in the North of Ireland and in the South, and they might be different, because the Income Tax might be calculated on a different basis and the same person would also have to make a return here. I say quite frankly that my fear is that we should not be able to relieve the individual taxpayer of all the trouble that would fall upon him from possibly three different systems of income tax, and the result would be that we should lose the tax at the source. I wonder whether my hon. and gallant Friend really realises what the value of taxation at the source is to this country. I think he must have some idea of it, because he has shown, with his ingenious mind at work, various ways in which we could keep companies in this country so as to prevent them migrating and avoiding taxation at the source.

Photo of Mr John Hills Mr John Hills , City of Durham

You must keep taxation at the source.

Photo of Mr Worthington Evans Mr Worthington Evans , Colchester

If you subject the individual taxpayer to the burden and trouble of dealing with three different systems of Income Tax the demand will be almost impossible to resist, and the taxpayer will say, "I will make a return to you and each of the other Governments, but you must only tax such of my income as arises within your jurisdiction." A company may have an office here where they have the seat of control. I know it is valuable to have an office in the City of London because it offers them facilities which they have not got in any other part of the world, but if we get into the position of only being able to tax the income arising within our jurisdicton, what about the profits in connection with the San Paulo Railway, which was mentioned by my hon. and gallant Friend. How much Income Tax should we get out of the profits of that company?

The shareholders living here are taxed to the full extent of 6s. in the £ upon their dividends. If by complicating the system of Income Tax levy and collection by having three different systems within the United Kingdom, then we should drive the Income Tax payer into revolt, and he would say, "each of these Parliaments shall only tax the income arising within their jurisdiction." In this way we should lose over £1,000,000 of tax which we now enjoy. My hon. and gallant Friend said that the Government are running no risk, and I entirely agree with him. We can run no risk. What did he offer instead of the security that we have at the present time? He offered a very ingenious system of saying to a company which was not carrying on business with physical effects in this country, such as the San Paulo railway: "If you come and register yourselves in Dublin or Belfast, we will treat you, not with any brotherly affection because you have turned yourselves into an Irish company, but more fiercely and with greater restrictions than at the present time we treat foreign companies who carry on business in the city of London." That is what my hon. and gallant Friend is driven to in order to get the security which he realises is necessary, because he recognises perfectly well that no government can afford to take the risk of breaking up the whole system of collection of Income tax at the source.

There was one other point to which my hon. and gallant Friend called attention, and that was the security which the collection of Income Tax according to the present method gives this country for the payment of an Imperial contribution. As he says, so long as we have the Income-tax in our hands it is a very substantial security indeed. It is an automatic security. It is not a security which keeps on thrusting itself into vision. It is not a security which to make good steps have to be taken. The collection of Income-tax at the source will bring in the necessary amounts to be accredited to the Imperial contribution, and, when there is a surplus, of course that will be paid over. My hon. and gallant, Friend has another method of securing the Imperial contribution by a capital sum. An amendment is going to be moved converting the Imperial contribution into a capital sum, and I shall have to deal with it then. The Committee, from my hon. and gallant Friend's own speech, will recognise the great difficulty that he has and the care that he saw was necessary to give security. He had to invent an ingenious but highly complicated procedure which would have to be applied to companies which might otherwise migrate. The Committee, I think, will come to the conclusion that the Government are right in saying that they cannot accept an amendment which could only be accepted at too great a risk.

Photo of Colonel Sir James Greig Colonel Sir James Greig , Renfrewshire Western

The right hon. Gentleman has described the objections to this scheme. I want to go a little further. He has pointed out that if the concession be given to Ireland you will have complicated the Income Tax by three different systems. What is going to happen if this Home Rule Bill goes through, as we all hope that it will? Within a very short time Scotland will be demanding a Home Rule Bill and Wales also will be demanding a Home Rule Bill, and the concession which will have been granted to Ireland in respect of Income Tax will be equally demanded by Scotland and Wales. I am one of those who say that we ought to be prepared to give everything to Ireland which we asked for ourselves and nothing more. Instead, therefore, of having three systems we should have five systems, and if England got two Parliaments of her own there would be seven. With regard to the suggestion of preventing companies departing, what would happen? Ireland might offer certain advantages to a company to register there. Do you suppose Scotland would keep quiet and not offer similar concessions? The mere statement of these things shows that the suggestion of the hon. and gallant Member will not hold water.

Lieut-Commander HILTON YOUNG:

It has to be admitted by anyone supporting this Amendment that if you accede to the proposal to set up in Ireland a new system of Income Tax, independent of that in the country, you will necessarily create a new doubtful area of double Income Tax. What are the real difficulties and disadvantages of that doubtful area? We have all felt them in recent legislation, and very largely they have been already solved. The first difficulty was to find some sensible scheme of agreement between two countries connected by the double Income Tax area. That has been found as between ourselves and the Dominions. It is, as I understand it, the identical scheme which was originally proposed for application to Ireland by the Primrose Committee. The scheme has been found. In the second place, the difficulties are largely matters of negotiation. When parties are at arm's length, it is an inducement to them to come together. In this case such difficulties can be avoided, because the parties are not yet at arm's length. The provisions can be put into this Bill and can be made part of your system. The right hon. Gentleman said, "Surely you must consider the interests and convenience of the taxpayer." It is the consideration of the interests and convenience of the taxpayer which seems to me to point in a diametrically opposite direction from that which he has taken. His objection that it will subject the taxpayer to the inconvenience of two or three systems will only apply to a limited class, namely, those who happen to have income arising from the two countries, but the system proposed by the Bill will have the disadvantage of inflicting greater inconvenience on every taxpayer in England and Ireland. That is one of the gravest disadvantages of the proposals of the Bill.

It will impose immense inconvenience upon every taxpayer in the North and South of Ireland. It will really be a system of the most extraordinary complexity. Under it every taxpayer, and not only those liable to double Income Tax, would first of all have to make a return of his income according to the system of the United Kingdom, and another according to the Irish system, and then get a rebate in North Ireland if his income be derived from the North and from Southern Ireland if his income be derived from the South. The dangers and disadvantages of a double Income Tax apply only to a small class of income taxpayer and can be avoided, but the dangers and disadvantages under the scheme of this Bill apply to all taxpayers and cannot be avoided. I venture to think that the right hon. Gentleman hardly apprehended the extent of the bearing of the arguments so lucidly advanced by my hon. and gallant Friend (Major Hills). The contention of the right hon. Gentleman, as I understand it, was that the safeguards of the collection at the source could not be extended to the income of a company, say a rubber company, which was earned in the Malay Straits and which chose to move its head offices to Dublin. There are two essential conditions for effective taxation, and I cannot put it better than in the words of the Royal Commission on Income Tax, namely,— (a) A condition of effective taxation occurs when either

  1. (1) a source of income arises in any State, or
  2. (2) the owner of an income resides in any State.
In the case which has been quoted, there is just the same possibility of effective control as if the company had their factory or plantation in this country. If their shareholders reside here, if their capital was derived in this country, it is just as essential that they should have the right to sue and be sued here. They cannot get on without it, and in granting it you can impose any conditions you please upon them. In passing this Amendment we shall at any rate be simplifying the task of that unfortunate body, the Joint Exchequer Board. If we retain the system laid down in this Bill, this unfortunate body will have to fight out at arm's length the question of the due contribution of income and the yield of Income Tax and Super-tax. That is a theoretical question involving the application of practical facts the bearing and nature of which have never yet and never can be agreed. If only to preserve the possibility of harmonious relations in the Joint Exchequer Board it would be well worth while to pass this Amendment.

1.0 P.M.

Photo of Mr Samuel Hoare Mr Samuel Hoare , Chelsea

I rise to make a few observations on what was said by the right hon. Gentleman the Minister without Portfolio, who made great difficulties about accepting this Amendment. It seems to me the answer to him is a very simple one. Under the last Finance Act we actually proposed making an Income Tax Agreement with every one of self-governing Dominions and Colonies, and surely if we could do that with a score or more of these various Governments, we could do it with two Parliaments in Ireland. Suppose that were impossible, it still would be perfectly possible to follow the suggestion thrown out just now by my hon. and gallant Friend opposite to actually put a clause into the Bill making this agreement an integral part of the Bill. That has already been done in the case of the Death Duties, and Clause 28 in the Bill enacts that no double death duties shall be imposed. Surely the same course can be taken in the case of the Income Tax. Lastly, the right hon. Gentleman seemed in no way to meet what I think was the strongest point in my hon. and gallant Friend's contention that thi3 proposal to give Income Tax to the Irish Government was actually made in 1918 by the Prime Minister himself to the Irish Convention. Observe the time at which it was made. It was made at the moment which was the very darkest in the War, and when the resources of the country were strained to the very uttermost, yet even at that critical moment when every penny of taxation was necessary for the country, the Prime Minister made a proposal that might have broken up the principle of taxation at the source, and even at that critical moment he was prepared, in the interests of agreement in Ireland, and with a desire to make the Irish self-governing, to give Income Tax to the Irish Government. I do not think I need add anything more. After the answer we have heard from the right hon. Gentleman to-day we need have no illusions as to Income Tax concessions being given by the Government in the course of this Debate, and, that being the case, it seems to me it is hardly worth while for any Member of this Committee to make any further attempts. The Government obviously intend to make no concession, and it would be a waste of time to do anything more.

Photo of Sir John Butcher Sir John Butcher , City of York

No one doubts the obvious sincerity of my hon. and gallant Friend in bringing forward this proposal, but for my part I am quite content with the answer which has been made by the Minister without Portfolio, who has shown us that the difficulties attending it are, if not insuperable, at any rate of such a grave nature as to convince him that he would be ill-advised in accepting it. There is one question, and a very material one, which I would like to ask. Which of the opponents of this Bill are likely to be conciliated if this Amendment is passed? Are the Republicans likely to be conciliated? Will it affect their minds? Will they say, "now we have the power of imposing Income Tax we will abandon our opposition to this Bill, suppress our murderous organisations and fall into line with the British Empire and with the United Kingdom in support of law and order." I see no indication of that. Will the right hon. Gentleman the Member for Paisley (Mr. Asquith) and his following, whatever it may be, be content with this proposal? Will the right hon. Gentleman, if it is granted, abandon his insane and impossible proposal to grant Dominion Home Rule to Ireland? He is not here Not one of his supporters is here to give their views on this subject. Therefore I assume that neither he nor they take any interest in it whatever. I ask further, will those who support Dominion Home Rule for Ireland—that nebulous form of Home Rule which does not include the power to raise an army, as some say, although others say it does—will those people be conciliated? I confess that I know so very little about their operations, and still less about the amount of support that they have in Ireland, that I do not know that it matters very much what they say; but they, at any rate, have not told us that they are in the slightest degree interested in this question of the Income Tax being levied by Ireland. I would ask one further question: From whom has this demand come? Has it come from the persons who, as I venture to think, ought to have, and who have, the greatest interest in this matter, namely, those in the great industrial centres of Ulster? I have heard no claim made from Ulster in support of this proposal, and I think that, if it has not been made publicly, we may assume that they have no interest in the proposal. Therefore we are driven to the conclusion that the proposal made—in all good faith, I grant—by my hon. Friends opposite, has no support, whether from rebels or from loyalists, except from themselves and, possibly, a very small minority, who certainly have not made themselves heard.

Photo of Sir John Butcher Sir John Butcher , City of York

That was given in totally different circumstances, and under totally different conditions.

Photo of Mr James Lowther Mr James Lowther , Penrith and Cockermouth

That is raising an even wider Debate than that of yesterday. We have agreed to keep closely to the question of the Income Tax as a business proposal in the present case.

Photo of Sir John Butcher Sir John Butcher , City of York

I was drawing my remarks to a conclusion when my hon. and gallant Friend interrupted me. I was going to confine myself to the pure and simple question whether, in view of the almost insuperable difficulties of this proposal, we are not entitled to say that it should be at once rejected, having regard to the fact that there is no important party inside or outside Ireland which supports the demand.

Photo of Mr John Macdonald Mr John Macdonald , Stirling and Falkirk District of Burghs

This Amendment has been argued as if the concession to the Irish Parliaments of the right to impose Income Tax would be unquestionably of benefit to Ireland, and as if, when we are considering it here, the one thing that we have to keep in view is the safeguarding of British interests. I am not really concerned about the safeguarding of British interests, because I honestly believe that the Treasury here can look after its own interests, and that it will not suffer in the slightest degree from the concession for which this Amendment asks. I should like, however, to ask those who are in favour of it how it would work in Ireland itself. I do not know whether they would propose that, when Parliaments are set up in Ireland, and they have the right to impose their own Income Tax, the Irish Parliament is to tax at the source, or to have an individual declaration of income, and impose the tax on that declaration. In either case I am cer- tain that the Irish Parliament would lose a very large portion of the revenue to which it would be justly entitled. Many of the difficulties which have been suggested in reference to the working of a proposal of this kind would be got rid of by a system which we must, I think, sooner or later adopt—a system of declaration of domicile. A good many of the arguments have rested on the assumption that what is taxed is income, and not the individual—that the tax falls on the income as possessed and owned by an individual. Undoubtedly we shall sooner or later have to adopt that system. Under the system of declaration of domicile, wherever the individual taxpayer is domiciled, his holding would be subject to the tax levied in the interests of the locality in which he is domiciled; and I think that that would get rid of all the difficulties about double income tax and most of the other difficulties that have been mentioned.

Let us assume, however, that Ireland is going to tax at the source. I do not think it matters in the least whether you adopt that assumption, or the assumption that there is to be an individual declaration of income on the part of the Irish income tax payer, and that the tax is levied on that declaration. Let us assume that one or other of these systems is adopted—I do not mind which. Then I will undertake to say that the Irish Exchequer will lose a very large amount of the income tax to which it is entitled, because it will have no means of tracing the sources or discovering the income of the individual taxpayer. Suppose, for example, that an official, let us say a Government official, in Ireland, derives income from his office, and that he has, besides, an investment in some business that is carried on, let us say, in England. If he chose, he could avoid the Income Tax on the income liable to the English tax. Under any system of separate Irish Income Tax, there would be unquestionably a very large amount of evasion, of which the Irish Exchequer would not get rid. In the United States at this moment each State has, and always has had since the States were founded, the power of imposing a separate Income Tax; and, just because of the difficulty that is arising of discovering income as the commercial and industrial life of the States has developed, and the sources of income have spread beyond the limits of the State, so the separate system of Income Tax in the United States has broken down. At this moment there is a very strong movement in the United States in favour of the separate States handing over their power of taxation to Congress, in order that the difficulties which arise under the system that has prevailed since the States were founded may be overcome. Personally, I am convinced that Ireland would lose by the right to impose a separate Income Tax. It is not on the ground of any loss to the British Exchequer that I oppose this Amendment, but on the ground that it would be inimical to the interests of Ireland itself.

Photo of Mr Thomas Adair Mr Thomas Adair , Glasgow Shettleston

I have listened to all the arguments against this Amendment, but a more important one still, which is concerned with the first principle of the Bill, has been overlooked. We are not setting up in Ireland two Dominions. The relative position of the six Ulster counties and of the remainder of Ireland in the United Kingdom appears to me to be exactly the same as that of Nova Scotia or Quebec in the Dominion of Canada. Nova Scotia and Quebec do not have a separate Income Tax; as part of the Dominion they are under the Dominion system of Income Tax. I maintain that the six counties in Ulster and the remainder of Ireland are in exactly the same position in relation to the United Kingdom as are the provinces of Nova Scotia and Quebec to the Dominion of Canada.

Amendment negatived.

Photo of Mr David Reid Mr David Reid , Down East

I beg to move, in Sub-section (1), after the word "Super-tax" ["Income Tax, including Super-tax"], to insert the words "duties on negotiable instruments."

This is really only a drafting Amendment. The Committee accepted an Amendment adding negotiable instruments to the matters which are excluded from the powers of the Irish Parliament. I think it is possible that if the duties on these instruments are left on at all the exemption might have been possibly evaded in that way It may be suggested that the exemption of negotiable instruments removes them from the power o£ taxation, but on careful consideration I think that is not so, at any rate it is not clear, because Clause 19 gives a quite definite power to make laws with respect to the imposing, and so on, of taxes within their respective jurisdictions and then follow certain exceptions. That power is quite general. Clause 4, which is the Clause containing the exemptions, begins: "Subject to the provisions of this Act," which shows that the Clause is subordinated, and furthermore Sub-section (7), which deals with trade with any place out of the part of Ireland within their jurisdiction, goes on: except so far as trade may be affected by the exercise of the powers of taxation given to the said Parliaments. My submission is that those words clearly recognise the existence of a power of taxation in the Parliaments. If there were no power of taxation that exception would not be in. Therefore if what I believe to be the intention of the Committee is to be carried out, purely as a question of drafting I submit that some word ought to be added in Clause 19 so as to cover the point I have raised.

Photo of Mr Denis Henry Mr Denis Henry , Londonderry South

The Amendment is, in the opinion of the Government and its advisers, quite unnecessary because the reserving Clause 4 was amended to include negotiable instruments, and the words in that Clause dealing with the effect of the reservation are that the Parliaments of Southern and Northern Ireland shall not have power to make laws in respect of the following matters in particular, and then are set out in Sub-section (12)— Coinage, legal tender or any change in the standard of weights and measures, and we added "negotiable instruments."

Photo of Mr David Reid Mr David Reid , Down East

I can only say I do not agree with the Attorney-General, but if he will not make any concessions, of course I can carry the matter no further. I can only hope that in the future the point will be cleared up.

Photo of Mr John Hills Mr John Hills , City of Durham

I do not think it can be intended that there shall be a different duty on negotiable securities. I see all sorts of difficulties.

Photo of Mr Denis Henry Mr Denis Henry , Londonderry South

The effect of what I have said and the effect of the reservation is to guarantee that there will not be any different duty.

Photo of Mr John Hills Mr John Hills , City of Durham

If the rest of the stamp duties in Ireland are within the purview of the Irish Parliament, you may have great discrepancies.

Amendment negatived.

Photo of Mr Walter Elliot Mr Walter Elliot , Lanark

I beg to move, at the end of Sub-section (1), to insert the words Provided that on and after the date of Irish union the powers reserved to the Imperial Parliament under this sub-section shall be transferred to the Irish Parliament. I recognise that, owing to the latitude the Chair allowed yesterday, we had this subject vey fully thrashed out, but I should like to ask the Government if they cannot see their way to make any concession. They have already examined the possibility of it in Clause 34, where they say that if an Address is presented by both Houses of the Parliament of Ireland the Joint Exchequer Board shall forthwith take into consideration the transfer to the Parliament of Ireland of the Customs and Excise. All we ask is that in putting in this sub-section they should make that promise a definite one, and thereby dissipate to some slight extent the tremendous atmosphere of unreality that hangs over the whole of this Bill. I simply ask for the pledge of the British Government that Customs and Excise shall be transferred at that time. I do not wish to enter into a general debate on the point. I simply move.

Photo of Mr Worthington Evans Mr Worthington Evans , Colchester

The Government cannot accept this Amendment. It really compels the transfer of these powers after the union. The utmost the Government can do is to allow Clause 34 to stand as it is, namely, that after Irish union, upon the Irish Parliament making acceptable proposals for the securing of an Imperial contribution, the whole question of reserved taxes shall be re-considered. My hon. and gallant Friend made no reference in his quite short speech to the feature of the security for an Imperial contribution, which would be entirely avoided if the Amendment were accepted.

Amendment negatived.

Amendments made: In Sub-section (4), after the word "Britain" ["brought into Great Britain"], insert the words "or the Isle of Man."

After the word "Britain" ["or into Ireland from Great Britain"] insert the words "or the Isle of Man."

Leave out the words, "and Section four of the Revenue Act, 1909," and insert instead thereof the words, "or any Act amending that Act."—[Sir L. Worthington-Evans.]

Clause, as amended, ordered to stand part of the Bill.