Clause 23. — (Payment of Income Tax on certain copyright royalties by deduc- tion.)

Clause 10 (Time for payment of beer duty) ordered to stand part of the Bill. – in the House of Commons on 30th June 1927.

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Photo of Mr Harold Macmillan Mr Harold Macmillan , Stockton-on-Tees

I beg to move, in page 10, line 27, at the end, to add the words: (5) In this section the expression "royalties or sums paid periodically" shall include only royalties or sums paid periodically in respect of sales of copyright material absorbed in the United Kingdom. This Clause makes a non-resident owner of copyright material liable for Income Tax upon sums received as royalties in respect of the sales. Those who are engaged in the publishing trade are not quarrelling with the object of the Clause. It is quite clear that the sums which are received as royalties in respect of sales effected in the United Kingdom should be subject to Income Tax if the author or owner is resident abroad, but the argument seems to me to be strained when you say that those who reside abroad and draw profits for the sales of their works abroad should contribute through the Income Tax towards the general taxation of the country. It may not be within the knowledge of the Treasury that the publishing business in this country carry on their trade in many parts of the world; and what we are seeking to provide is that the sums payable to non-residents, or foreign authors, should not be liable to English Income Tax, merely because of the fact that their works are published by English publishing firms. If an English publishing house is carrying on business in France, or India, or Egypt, and a native of one of these countries, by the mere fact that he is doing business with a firm whose headquarters are in London, makes himself liable to Income Tax in this country, the result would be to drive away the business for English publishing houses, which would mean a loss to the Treasury and the publishing business. At present an English business carrying on a large part of its work in foreign countries, the profits on the business abroad and in England are subject to English Income Tax. We want to ensure that while in respect of the sales in this country it is right that Income Tax should be deducted for royalties paid to non-resident authors, there should not be brought about by this Clause a situation abroad which would reflect injuriously on the business carried on by such firms who have had the enterprise to carry their work into different parts of the world. The words which we propose may or may not be the correct legal phraseology to ensure this point. Indeed, we are not altogether certain, in the advice which we have received, whether such words are necessary at all and whether the Clause as drawn does not cover our point. I am sure it is not the intention of the Treasury to enact a Clause, the result of which would be to deprive English business firms of the opportunity of competing, in this respect, on equal terms with firms native to the countries where they are working. I hope the Government will accept the Amendment or else between now and the Report stage introduce other words which will make it quite clear that we are only seeking to tax non-resident authors in respect of the sums which they draw from sales of their works to the public of the United Kingdom.

It may be necessary to add that certain complications arise from the fact that in the case of many books by foreign authors, English publishers try to retain, where possible, the Dominions market as well as the United Kingdom market. For instance, many American books are sold to English publishers who handle them in the Canadian and Australian markets as well as in the English market. If the royalties in respect of sales made in Australia were made subject to English Income Tax—

Photo of Mr James Couper Mr James Couper , Glasgow Maryhill

On a point of Order. The hon. and gallant Member is referring to some Income Tax which is unknown in this country. I understand this is British Income Tax, not "English" Income Tax.

Photo of Mr Harold Macmillan Mr Harold Macmillan , Stockton-on-Tees

I am sorry if I have offended the hon. Member. If the mere fact of dealing with a British house made the author in that case liable to British Income Tax, the tax could easily be evaded by not giving the books in question to the British firms for marketing in the Dominions. That would be a loss both to the firms and to the Treasury.

Photo of Sir Douglas Hogg Sir Douglas Hogg , St Marylebone

My hon. and gallant Friend has accurately stated the intention of the Government in introducing this Clause. It is to carry out the recommendations of the Royal Commission on Income Tax to ensure that foreign authors who get royalties from the sale of their works in this country shall not escape the effective charge of Income Tax. It is certainly not the intention of the Government that, under the guise of a Clause to tax foreign authors' royalties in this country, we should do anything to discourage the printing and publishing in this country of foreign works which are going to be sold in the Dominions or abroad. We are very far from desiring to do so, but we are advised that it is doubtful whether or not that unhappy result would ensue from the Clause as drawn. There being that doubt, we cannot accept the actual words of the Amendment put forward, because, as my hon. Friend frankly said, they would not do, and, from the legal point of view, they would present difficulties. We are, however, willing to adopt the second alternative he put forward, that is, to introduce on Report stage words which will be apt to secure the object he has explained to the Committee. I hope that on that assurance my hon. Friend will see his way to withdraw the Amendment.

Photo of Mr Harold Macmillan Mr Harold Macmillan , Stockton-on-Tees

I wish to thank the Attorney-General for whate he has said, and, on the assurance he has given, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.