§ Notwithstanding anything contained in article three of Part I. of Schedule Four of the principal Act deduction shall be allowed of such an amount as is placed to reserve for the purpose of providing for depreciation by reason of wear and tear and for contingent losses, provided such amount does not exceed the sum which the Commissioners for general or special purposes think may justly and reasonably be allowed for those purposes.—[Mr. G. Terrell.]
§ Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."
I wish the Chancellor of the Exchequer could see his way to accept this very reasonable Amendment. The proposal is that for the purpose of Excess Profits Duty full depreciation for wear and tear and for contingent losses should be allowed. It is common knowledge that though the allowances for wear and tear have been materially increased in the last few years, yet they are not anything like the allowances which a prudent business man would make in his business. I do not ask that any sum which an owner of a business might demand should be allowed, but 2831 only such sum as the Commissioners for general and special purposes think might reasonably and justly be allowed for those purposes. It is most important from the point of view of firms registered in this country which carry on their business in the main or wholly abroad. It was stated in the House the other day that in taxes from these companies we are deriving £35,000,000 a year, and there is a feeling amongst them that they are not being justly treated.
§ The CHAIRMAN
There is nothing about people doing business abroad in this Clause. It seems to be a general provision.
Yes, it is, but it particularly affects companies which carry on business abroad, because they are not getting what they consider is a full allowance for depreciation, and it is particularly on their account that I press my right hon. Friend to allow an appeal in these matters to the Commissioners. He is on very difficult ground, because there is every evidence that many of these firms are thinking of transferring their registration, and they are suffering from a sense of grievance, because here we have a higher taxation than in any other country in the world, and they think they are not getting the full allowance which they would get in any other country. I therefore appeal to my right hon. Friend to make things a little easier for them and not to drive them too hard.
I hope I shall be able to satisfy my hon. and learned Friend, although I am not prepared to accept his Clause. He attaches particular importance to the allowances for wear and tear.
That is one of the difficulties of dealing with my hon. and learned Friend. The moment you approach him on one point he diverges on to another.
The two things are distinctly stated in my Clause, and I am not withdrawing any part of the request which is made in this Clause. One part is depreciation for wear and tear and the other is for contingent losses, and the two things in substance go together.
What I was referring to was the fact that my hon. and learned Friend in the course of his speech said he hoped I should be able to meet him, especially in respect of wear and tear, and from that I inferred that it was the wear and tear allowances to which he attached special importance. There is full provision for allowances for wear and tear already, and if the taxpayer is dissatisfied he has the right of appeal to general or special Commissioners. Therefore, in respect of the first part of his proposal, the law as it stands provides all that he requires. The subject of these allowances was investigated by the Royal Commission on Income Tax, and they reported as follows:Suggestions were made to us for further safeguarding the rights of the taxpayer in regard to depreciation allowances, but we believe that if in any trade the allowances are insufficient, complete provision already exists for their rectification by the tribunals to which appeals may now be made. The individual trader can appeal either to the General Commissioners or to the Special Commissioners; and an industry as a whole may either agree rates with the Board of Inland Revenue or may carry their case to an entirely independent body, the Board of Referees.I do not think much more satisfaction could be devised to show that these allowances are adequate. When my hon. and learned Friend goes further and asks that we should allow for contingent losses, that is a one-sided application with which I cannot for a moment comply. We do not claim to tax contingent profits, and we cannot allow for contingent and unrealised losses. The second Dart of his Clause, therefore, strikes at the root of our system of taxation and cannot be accepted.
The individual trader can appeal to the General Commissioners or the Special Commissioners, and an industry as a whole may either agree rates with the Board of Inland Revenue or carry their case to the Board of Referees. The individual, therefore, has an appeal as an individual.
§ Mr. REMER
I am grateful for the explanation, of which I was not aware, and I am sure it is very valuable to the Committee. There is the question of the British companies which are trading abroad and which are faced, as my hon. Friend has pointed out, with very considerable possible losses. They may be paying Excess Profits Duty this year when they know there is a possible loss next year, or the year after, for which they cannot provide. I have in my mind a company which is situated in Rio de Janeiro, which has the work of attending to the sanitation of that city. It is a British company registered in the United Kingdom. That company is faced with very considerable loss, and is liable to Excess Profits Duty, and unless some wider provision is made they are going to be very badly hit. I submit there is a real ground for companies registered in the United Kingdom who do their business abroad for some clause of this kind. I hope the right hon. Gentleman will reconsider the question.
§ Question, "That the Clause be read a Second time," put, and negatived.