I move Recommendation No. 1:—
New Section. Before Section 2 to insert a new section as follows:
"(2) Bank interest paid in any year shall be allowed, in assessing income tax, as a deduction from the income received in the same year."
I put down this Recommendation in order to obtain from the Minister for Finance some statement as to the present position. I understand that the procedure or rules with regard to bank interest is somewhat obscure. In practice, I believe it is rather different to the actual strict law in the matter. I understand that legally bank interest can only be set-off by way of repayment, but in practice I believe it is taken as a set-off in sending in returns. There are two points which I wish to bring to the notice of the House and of the Minister: one is that bank interest is not allowed as a set-off to the previous year. In fact, the method with regard to the return of income does not apply to bank interest. The taxpayer in making out his return, say, for this year, sets out the total of his previous year's income, but he cannot set-off against that, even by concession, the bank interest of the previous year. He has to make an estimate of what the bank interest for the current year will be. If that estimate is not correct, he has to send in an amending return when the actual amount can be ascertained. I ask the Minister, if possible by legislation in next year's Finance Bill, to ensure that the set-off of bank interest shall follow the same procedure as that of income: that is to say, that it should be made on the basis of the previous year's actual paid interest. If that were done, it would seem to me to simplify the matter very much.
Under the present arrangement considerable injustice can be done. I can give an actual case without mentioning names. A certain individual had, say, last year some investments and paid a considerable sum in bank interest. This year those investments were sold, but on this year's income tax assessment the charge would remain on last year's income, though the income has now gone. While no bank interest is payable this year the taxpayer is liable for tax on the whole of last year's interest, although he did not get any interest at all. That is an example of how the present method is liable to work. It can, I believe, to a certain extent be alleviated by concessions, but that method is not really satisfactory, and it would be far better if the whole thing were taken into account when considering the simplification of the income tax law which, I believe, is being done at present.
