I move:
That provision be made, for income tax (including sur-tax) purposes, for cases in which, securities, stocks or shares having been purchased after the 22nd day of April, 1959, so as to make interest or dividends receivable by the purchaser, the purchaser resells the securities, stocks or shares or sells similar ones.
This is a transaction which has been spoken of in the newspapers and referred to as "bond washing". It is a form of avoidance of income tax. If the House agrees to this, it is intended to put the necessary provisions in the Finance Act that will try to stop this form of evasion or avoidance of tax.
The term "bond washing" is used to describe operations under which a dealer in securities purchases securities "cum dividend" and sells them shortly afterwards "ex dividend", at a price which is less than the purchase price by the net amount of the dividend. On these two transactions the dealer breaks even. But he can then make a profit at the expense of the Exchequer by claiming repayment of Income Tax against other taxed income in respect of the loss represented by the difference between the purchase price and the sale price of the securities. The device could also be used by exempt institutions to reap a quick profit from the Exchequer.
Bond washing is a form of tax avoidance which could be readily availed of and might prove costly to the Exchequer. I am sure that Deputies will agree that the necessary steps should be taken to prevent this happening. There will be safeguards for legitimate business, naturally, and I am certain that I will have the full co-operation of the Stock Exchanges in this country in dealing with this matter.
