U.K. FINANCE BILL Bid For Home Investment

Press, Volume CIV, Issue 30737, 29 April 1965, Page 26

U.K. FINANCE BILL Bid For Home Investment

(N.Z. Press Association —Copyriflhtl

LONDON, April 28

British investors in Australia. New Zealand and other overseas countries learned today how their return would be cut by the Labour Government’s new finance bill.

The weighty bill published today showed that the Chancellor of the Exchequer (Mr James Callaghan) had carried out his budget day promise to make home investment more attractive than overseas investment in a strong move to slow the drain of capital out of Britain.

Corporation Tax

The introduction of the new corporation tax would eliminate the combined profits and income tax paid at present by companies and substitute the new corporation tax of about 40 per cent. The rate had still to be fixed. For Britons with capital invested in Australia the principal difference in their return would be that they would get no tax relief at home on the difference between the tax taken by Australia and the tax fixed by Britain. How much that difference would be in pounds, shillings and pence could not be calculated until the new corporation rate was fixed. In the case of a United Kingdom company with subsidiaries in Australia, the parent company would pay the full tax on any dividends to shareholders but would not now receive relief for Australian tax.

Every British double tax agreement would have to be renegotiated something which would take some years to complete. There were more than 70 agreements at present.

British companies investing in Australia had previously been subject to Australian withholding tax and profits tax, both of which were offset against British tax. Under the new bill they would be unable to offset the tax on profits if it derived from an ordinary holding of shares.

The new corporation tax would not come into effect fully until 1966. As a transitional matter, a measure of relief would be given to companies which paid overseas tax on income from direct investment in excess of the corporation tax. Those payments would taper off after two years and end after five years. The relief would be a proportion of the net dividend divided by the net income.

Provisions for the present overseas trade corporations would cease at the end of the 1965-66 year. The bill's attack on overseas investment brought quick condemnation from British businessmen. The Institute of Directors said that immense and possibly permanent damage would result to those companies doing the lion’s share of Britain’s export trade. “Direct Contrast”

The proposed legislation was in direct contrast to the Government's declared policy of giving incentives to exporters, the statement said

The “Financial Times" described the terms of the bill as “far from generous,” and warned that dividend cuts might follow.

The newspaper described how hard hit would be the oil companies, the tin mines and rubber plantations run by British companies.

The Chancellor would face the full weight of the Opposition attack as the Commons settled down to dissect the bill in debate, the “Financial Times” said.

THERE are more than 66 000 families who daily read ‘ The Press" —and Classifieds work successfully In bringing to the notice of many people Your Message. When Buying or Selling. Dial 50-198. A direct line for Classifieds.