(1) That notwithstanding anything in Section 5 of the Income Tax Act, 1918, the total income from all sources of any individual who, if legislation is not passed to the same effect as this resolution, would have been entitled for the year beginning on the 6th day of April, 1926, to relief from double taxation in respect of income tax including super-tax exceeding in amount one-half of the total amount of income tax [before deduction of any relief in respect of life assurance premiums or any relief from double taxation in respect of income tax including super-tax granted under the Finance Act, 1926 (No. 35 of 1926)] and super-tax payable by him for that year shall for the purpose of super-tax for the year beginning on the 6th day of April, 1926, be estimated as if the modifications of the Income Tax Acts contained in paragraph 1 of Part II. of the First Schedule to the Finance Act, 1926, had had effect for the year beginning on the 6th day of April, 1925.
(2) That if an individual has been assessed to super-tax for the year beginning on the 6th day of April, 1926, for an amount less than that which he would have been liable to pay if legislation had been in force to the same effect as this resolution, the Special Commissioners shall have power to make an additional assessment for the purpose of adjusting his liability in accordance with the provisions of this resolution.
This motion, as I have already indicated, is to remedy a defect which crept into the legislation of last year. In consequence of the provisions that were passed last year a super-tax payer who was resident both in this country and in Great Britain would be liable to receive a relief that would leave him substantially better off than if, instead of being doubly resident, he lived either in England or in this country. The matter arises in this way, that to give effect in the provisions that were passed last year to the new relief arrangements it was provided that relief from double tax should be given by the two countries at half the combined income tax or super-tax rate, whichever was the lower of the two. This difficulty that has arisen relates only to the transition year. In this I am speaking always of people who are doubly resident. We charge all the incomes of persons who were resident here to income tax and to super-tax. Before the new arrangement they were charged, if they were not domiciled here, only on what was remitted. So that before last year those people who were resident in England and who also had residences here paid income tax and super-tax only on what was remitted to this country. This year they will pay income tax on the whole of their income, but they will, of course, get the relief. The super-tax is charged on the basis of the preceding year, and of course the preceding year to the year 1926-7 was a year in which we got very little. But as the arrangements are drawn, we must give the relief on the basis of the rates of this year. The result of that would be that in several cases we would have to give people more relief in respect of super-tax than we actually got in super-tax from them.
At first we thought of introducing a provision that would leave the Revenue Commissioners free not to make a super-tax assessment if they thought that the revenue would lose by it, but finally it was decided to make this arrangement, which enables them to deal with super-tax as if the arrangement which came into effect last year had come into effect the previous year. I will mention a hypothetical case to show how the present arrangement would work out if this defect were not remedied. If there was a taxpayer whose income was £250,000 and who previously had only £50,000 of it remitted here the position under the law as it stands would be that he would pay British income tax and super-tax on this £250,000 at a combined rate of 9/9, and the amount he would pay would be £122,500. He would pay Saorstát income tax on the £250,000, which would be £50,000, but because only £50,000 was remitted last year he would not pay super-tax on the whole of the £250,000, but only on the £50,000 which was remitted last year, because the basis of super-tax is the year before. So that we would only get from him £10,000 in super-tax, and consequently the total amount of tax that he would pay would be £182,000 odd. He would get relief from the British, who would allow him double taxation relief on the whole of the £250,000 at 4/-. Our combined rate of super-tax and income tax would be 8/-, and relief would be allowed at half the rate, because under the arrangement that was entered into the super-tax rate and the income tax rate are determined separately and then they are added together to get the combined rates. The man would get British relief at the rate of 4/-, that is, £50,000. He would get the same relief from us, a total of £100,000 relief, leaving him to pay only £82,000 odd, whereas, but for this flaw, he would eventually have had to pay £122,000 odd. We are proposing to remedy that to give him income tax relief, so that each country will pay him £52,000 odd and he will pay exactly the net amount of tax that he would pay if he had been resident in only one of the two countries.
The arrangement entered into last year was very complicated. Some of the details were worked out hurriedly at the end, and this is a flaw which crept in. In a sense it is retrospective legislation—we are legislating for the year that is past, but we are legislating in order that the man who happens to be doubly resident does not pay less tax than the man who is singly resident.