said: The changes in taxation policy announced by the Government are a matter of urgent consideration by this Association. Our members are unable to understand why the Chancellor’s proposals on corporation tax did not include an explanation of how he proposes to deal with Overseas Trade Corporations under the new system. It will be recalled that these corporations were granted a special tax status in 1957 because the whole of their trading operations are carried on outside the United Kingdom. They were encouraged to retain their central management and control in this country, thus ensuring the continuance of the United Kingdom link, so that industrial raw materials continue to be available to this country, and so that plant and machinery continues to be exported from this country, to the overseas mines and smelters. . . . We can see no advantage to this country in destroying O.T.C. status. The Royal Commission on Taxation said in 1955 that overseas profits are no longer earned under the protection of the guns of the British Navy, and the British tax system at present recognises that oversets profits earned by Overseas Trade Corporations whose shareholders are often non-resident cannot be taxed on the same basis as if they were profits made in England... . After examining the effect of the Chancellor’s proposals on the corporation tax this Association finds that the effect of the tax in the form announced to Parliament will be very severe,
This effect arises mainly from the fact that the high rates of overseas tax which most members of the Association have to pay cannot be dovetailed into the original proposals made for the corporation tax. As a result of this, overseas mining companies will no longer be in a position to obtain relief from double taxation. to the same extent as they can at present.... It is clear from the Chancellor’s announcement that it is not the intention of Her Majesty’s Government to subject company profits to a higher level of taxation than is found in the present system, . .
. We trust that our representations on this subject to the Chancellor and his advisers will result in the original proposals being suitably modified or postponed pending further consideration. The companies which form this Association are currently engaged in opening up the mineral resources of many of the developing nations, . . . Their activities result in the acquisiton of considerable hard-currency earnings and also ensure that the supply of vital raw materials is available to this country and to the Commonwealth. Britain has been so accustomed over several generations to a free flow of raw materials to meet its industrial needs that it may be hard for many people to realise the difficulties and emergencies which arise in other industrial countries. For them, when metals are in short supply, industry has to go without its essential requirements. . . . It is sometimes argued that the vast investments in overseas mining projects sponsored by British-based mining companies are something which this country cannot afford, and that these projects compete for capital which is required for investment inside Britain. There are, however, three essential ingredients in these large overseas projects. The first is British managerial know-how. The second is loans raised outside this country; these loans are increasingly the source of new capital for British overseas mining. The third is contributions of equity from the mining companies themselves. Overseas lenders look to the viability of new mining projects, which need to give a good return in order to be able to provide adequate cover for the servicing and the repayment of the large borrowings.
(Our emphasis)
London Labour