§ Order for Committee read.
MR. PIGOTTsaid, he had given notice of an Amendment to reduce the amount of increase in the tax from 4d. to 2d. in the pound, but he then rose to state that it was not his intention to bring forward the Motion. Having regard to the late period of the Session, and the advice of many of his friends, he should allow the Bill to pass through Committee, as it was certain that early next Session the whole of this important subject must be considered by Parliament. He hoped that there was no intention on the part of the Chancellor of the Exchequer to make this tax a permanent Source of revenue, and, remembering what that right hon. Gentleman had stated upon former occasions, such an intention could hardly be believed to exist. In 1853 the right hon. Gentleman, as a Member of the then existing Government, said:—
The general views of Her Majesty's Government with respect to the income tax are that it is an engine of gigantic power for great national purposes; but, at the same time, there are circumstances attending its operation which make it difficult, and perhaps impossible—at any rate, in our opinion, not desirable to maintain it as a portion of the permanent and ordinary finances of the country. The public feeling of its inequality is a fact most important in itself. The inquisition it 639 entails is a most serious disadvantage, and the frauds to which it leads are an evil which it is not possible to characterize in terms too strong.It was to be hoped the right hon. Gentleman still entertained the opinions which he then so strongly expressed. A tax which was essentially a war tax ought surely to cease in a time of profound peace. The dread of a French invasion, which gave a sort of quasi sanction to the continuance of the tax, he held to be most absurd. The tax ought to be considered purely on its own merits, and he did not think it ought to be continued at a time when this country was at peace.
§ SIR HENRY WILLOUGHBYsaid, as the House had passed the Resolution upon which the Bill was founded, he should not reopen the question of the propriety of the proposed increase. He was inclined to believe that if there had been greater care in the expenditure of public money in past years, there would have been no necessity for the proposed increase. The repeated changes of Government that had occurred of late years had rendered it impossible for them to act upon any fixed system. As soon as a good navy had been established the ships were paid off, and then immediately afterwards it became necessary to collect them together again. The only question which he intended to raise was whether in cases where there was no income there should nevertheless be taxation. In other words, he wished to ask whether in cases where there was only an income for one-half or three-quarters of the financial year, it was to be enacted that the full amount of tax for the whole year should be levied.
§ COLONEL SYKESsaid, he thought the hon. Gentleman exercised a sound discretion in not pressing his Motion on the present occasion. He hoped and trusted, however, that this tax would be reserved for time of war, and not be made a permanent source of the income of the country.
§ MR. SPOONERsaid, he wished to call the attention of the Chancellor of the Exchequer to one or two cases of hardships, which had come under his own notice as a Commissioner, in order that he might consider whether he could not frame some provision to deal with them in future. In one case a small tradesman returned his property at £80 per annum, which was not sufficient to render him liable to the income-tax; but his wife was possessed of a separate income of £40 a year, which was vested in trustees for her sole benefit. The 640 surveyor added the wife's income to that of the husband, and required payment of the tax upon the whole. The man appealed, and he (Mr. Spooner), as a commissioner, allowed the appeal, as he did not think the husband should be made liable upon an income over which he had no more control than a stranger. He had been however since informed by high financial authority that he was wrong, and that there was a clause in the existing Act which justified the surveyor in reckoning the two incomes as one for the purpose of taxation. In another class of cases injustice was done because there was inequality. There were certain men employed by railway companies called firemen, who required for the performance of their night duties a particular dress. Some companies furnished their firemen with those dresses, but others required their men to procure them, and then repaid the cost. In the latter cases the surveyors had considered the allowance for the dress, which was absolutely necessary for the performance of their duties, as a portion of their income, and levied the tax accordingly. That was a view in which he (Mr. Spooner) did not concur, and in calling the attention of the Chancellor of the Exchequer to the subject he suggested that clauses might be introduced into the present Bill which would remedy the injustice.
§ MR. BENTINCKremarked that he had not been at all surprised to find that the Chancellor of the Exchequer, who had always been a strong opponent of the income tax, should have had recourse to an increase of that tax as a means of meeting a deficiency. The right hon. Gentleman had been equally unfortunate on former occasions. A few years since the right hon. Gentleman was a member of a Government which attempted to carry on a great war with a peace establishment. Every one was aware of the unhappy consequences that ensued from that attempt, for the subsequent great amount of blood shed and lost was attributable to the want of energetic measures at the commencement of the war. The right hon. Gentleman now in a time of assumed peace came forward to impose a war tax. If, however, the country was to be called upon to pay a war tax he hoped the national defences would be placed in such a condition as to justify the expenditure.
§ THE CHANCELLOR OF THE EXCHEQUERsaid, he agreed that it was the right—nay, even the duty and obligation 641 of hon. Members of that House to ascertain when money was granted for the public service that it was applied properly to that end. It was true that this was a war tax; that the proposition was to increase largely for a time the income tax, but the hon. Gentleman who spoke last should have availed himself of the proper opportunity when the Estimates were before the House to ascertain whether the public money had been properly applied. It was hardly a subject to be discussed upon the question of going into Committee upon the Income-tax Bill. He also begged to correct the hon. Gentleman's recollection upon a point which, being merely a matter of opinion, the hon. Gentleman had stated as decidedly as though it were a mathematical proposition incapable of contradiction. That proposition was that the Government of 1853 carried on the Russian war with a peace establishment, the consequence of which was great loss of life and the necessity for greater subsequent exertions in the prosecution of the war. He did not know how the hon. Gentleman had been able to recollect such a state of things, but he (the Chancellor of the Exchequer) did not remember it; he denied it, and challenged proof. The charge was an attempt to carry on war with a peace establishment, but he would confute the hon. Gentleman out of his own mouth. The hon. Member said the income tax was a war tax, and surely he would admit that doubling that tax was something like a war measure. That course was recommended by the Government of the day on account of the Russian war, and was to be found recorded among the proceedings of the House—a more trustworthy source of information than the hon. Gentleman's recollection. So far was it from being a fact that the Government of that day were remiss in the early stages of military operations, that their real fault was attempting too much and attempting it too rapidly. Passing, however, from that subject, and addressing himself to the remarks of the hon. Member for North Warwickshire, he must say that in the case of a man having £80 a year income, and his wife receiving a separate income of £40, the husband was properly charged with the tax, as whenever that money came into the hands of the wife he and she in common had a beneficial interest in it. He could not undertake to frame any clause to relieve a husband in such a case, as it was impossible for the law to draw a distinction be- 642 tween husband and wife. The other matter referred to by the hon. Member—the case of the railway firemen who were allowed certain sums to procure clothing absolutely necessary for them in their occupation—was of a different character. One of the objections to and difficulties attendant upon an income tax was that it introduced inequalities in its operation, and particularly when it came to deal with a certain class of persons. The law took no cogizance of payments in kind, so that in the case of a highly paid servant receiving £60 or £70 a year wages, and also board and lodging equivalent to another £60 or £70, he was not liable to the tax. That was an unavoidable inequality, but he might remind the hon. Member that in 1853 there was for the first time a clause introduced into the Income-tax Act to provide for extreme cases, and to take into account outgoings which were absolutely necessary to enable a person to carry on his business. He would, therefore, recommend the hon. Member to examine this clause and to bring the case of this fireman under the consideration of the Board of Inland Revenue. With respect to the Amendment, of which notice had been given by the hon. Member for Reading (Mr. Pigott) he was glad to find that it was not to be pressed. No practical advantage could result from so doing, as it was impossible at present to enter fully upon a discussion of the vast subject of the income tax. The subject had assumed a new position since 1853, partly through new legislation by that House, and partly from the very great change in our expenditure, a great portion of which was doubtless referable to the real necessities of the country, but a portion of which was undoubtedly due to the difference of views which had prevailed in the public mind, and which had affected public opinion as to the scale of the national expenditure. The hon. Member for Reading had appealed to him as to his present opinions upon the subject of this tax. It was not in his power, either as an individual or a Minister, to determine the scale of expenditure of the country; but if the hon. Gentleman wished to know whether he (the Chancellor of the Exchequer) retained his former opinion that it was undesirable to keep the income tax as a permanent source of revenue, presuming that it could at anytime be dispensed with, he begged to say that he adhered to his former opinion.
MR. HENLEYsaid, one provision of the Bill would act very hard on the class 643 of tenant farmers leaving their farms at Michaelmas. He hoped the right hon. Gentleman would make some provision that the tax should be paid, in part at least, by his successor.
§ House in Committee.
§ Clause 1,
§ THE CHANCELLOR OF THE EXCHEQUERsaid, that in reply to the right hon. Member for Oxfordshire (Mr. Henley) he had to state that he did not intend to introduce any Amendment to meet the case of persons quitting their farms at Michaelmas. As he had before stated, the Government was practically and substantially asking Parliament to tax people at the rate of 4d. in the pound on their annual incomes for the first half of the year, and the man who had been in possession of the farm during the first six months of the year was the person who, according to the principle of the Bill, should pay the additional tax about to be imposed.
§ MR. BENTINCKsaid, that to put himself right he wished to explain that what he had stated was that the Government of which the Chancellor of the Exchequer was formerly a member had attempted to carry on war not with peace taxation, but with a peace establishment—quite a different thing. The observations of the right hon. Gentleman, therefore, were without weight upon that subject.
MR. HENLEYsaid, that in order to record his opinion upon the point he had raised, he would move as an Amendment that after the word "respectively" in the first clause the words "except schedule B" be added. He should not divide upon it, as he knew the Government would carry their view.
§ SIR HENRY WILLOUGHBYsaid, he wished to know whether the increased tax was to apply to Long Annuities ceasing next January. Did the Chancellor of the Exchequer mean to make the tax retrospective; that the dividends paid in April and July should be retrospectively taxed?
§ Amendment put, and negatived.
§ Clause agreed to.
§ Clause 2.
§ THE CHANCELLOR OF THE EXCHEQUER, in reply to the question of the hon. Member for Evesham (Sir Henry Willoughby) said, he could not imagine what there was in the Bill or the statement which he had made to lead to the idea that the tax was to have a retrospective effect. It had nothing to do with past income, except in the circuitous and equivocal sense 644 that, as the income tax took cognizance of an average of former years under schedule B, it might be said to refer back to past income. The House was not now discussing the general principle whether annuitants should be taxed alike, whether terminable or in perpetuity. It was asked whether he did not seek to tax the Long Annuities ceasing in January next for a whole year. His answer was simple. The tax had nothing to do with the whole year—absolutely nothing. In Schedule C it had nothing to do with any period, but the half-year which yielded the profit to the annuitant on the 10th of October, and the dividend would be taxed at 8d. in the pound, corresponding with 4d. in the pound for the whole year. No doubt, it was a heavy tax upon the long annuitant, because the dividend represented in some degree a repayment of capital, but there were annuitants for shorter periods, life annuitants who might die the day after the Bill passed, and whose representatives would have to pay the 8d. upon the next dividends received by them.
§ SIR HENRY WILLOUGHBYsaid, it appeared to him that the proposal in time of peace to tax an annuitant for a whole year, although his interest would expire in January, was so unjust that he must take the sense of the Committee upon it.
§
Amendment proposed,—
At the end of the Clause, to add the words 'except always that where any dividend or interest expires on the tenth day of October, one thousand eight hundred and fifty-nine, the additional rate of four pence only on every pound of such dividend or interest shall be charged, collected, and paid upon the first assessment or charge which shall be hereafter made; and that where any dividend or interest expires on the fifth day of January, one thousand eight hundred and sixty, the additional rate of four pence only on every pound of dividend or interest on the first assessment on the tenth of October one thousand eight hundred and fifty-nine, and the additional rate of two pence only on every pound of dividend or interest on the second assessment on January fifth, one thousand eight hundred and sixty.'
MR. PIGOTTsaid, he quite agreed with the hon. Baronet that the pressure imposed by the Bill upon the annuitant would be unfair.
§ MR. HOWESremarked that, as there were many unjust points connected with the income tax, it would he better not to attempt on the present occasion to remove merely one.
§ COLONEL SYKESsaid, that though the income tax bore hardly in some cases, yet, as the money was wanted, it must be ob- 645 tained, and the House must submit for the present to the income tax as it stood.
§ Question put, "That those words he there added."
§ The Committee divided:—Ayes 37; Noes 72: Majority 35.
§ Clause agreed to.
§ Clause 3.
§ MR. W. WILLIAMSsaid, he wished to ask how much additional would have to be paid by persons having less than £150 a year.
§ THE CHANCELLOR OF THE EXCHEQUERsaid that persons having incomes of £100 to £150 a year would only be liable to pay 3d. in lieu of 4d., and 1½d. in lieu of 2d. The proportion paid by this class would be something smaller than it had ever yet been. Hitherto it had been about two-thirds of the rate paid by those having £150 a year; in future it would be something less than two-thirds.
§ Clause agreed to.
§ Clause 4.
§ MR. WALPOLEsaid, that with reference to one of the cases put by the hon. Member for North Warwickshire, the matter turned on a point of law, involving an important principle. The husband received £80 a year, and his wife £40; but if the husband had no control whatever over the wife's income, he ought not to be assessed to the income-tax at all.
§ THE CHANCELLOR OF THE EXCHEQUERobserved, that he had not ventured to give an opinion on the point of law, and had only spoken of the principle which ought to be adopted in legislation. He confessed that, with respect to legislation and liability to the tax, nothing seemed more reasonable than to contemplate the incomes of husband and wife as one income.
§ MR. SPOONERsaid, that, as a local Commissioner, he should continue to act on the view he had taken—that the husband had no control over the wife's separate income. As there was no appeal from the decision of the Commissioners, it was desirable that the law should be made clear.
§ MR. EDWIN JAMESobserved, that if the husband having £80 a year, and the wife having £40 a year, lived together and enjoyed the joint income together as husband and wife, then the husband would be properly assessed. If, however, the husband and wife were living entirely apart, and maintaining different establishments, then the husband would not be assessable on account of the wife's income.
§ Clause agreed to, as was also Clause 5.
646§ Clause 6 (Limiting the Payment of Malt duties from Eighteen to Twelve weeks).
§ MR. BEALEsaid, he would suggest that that this duty should be made payable as soon as levied, the same as other duties. He would reduce the existing arrears by requiring payment of them by instalments of one-eighth every three months, so as to let them die out in two years.
§ THE CHANCELLOR OF THE EXCHEQUERsaid, he would thank the hon. Gentleman for his suggestion. The Government having had to submit their financial proposals immediately after coming into office, and at a period when the financial year was considerably advanced, had not thought it desirable to make any sudden alteration in the malt credit. This credit was equivalent to a loan of 2½ millions of public money to those engaged in the trade; and no precipitate alteration could be made without seriously affecting the trade. The mode in which this credit could best be dealt with would be matter of future consideration for the Government.
§ Clause agreed to, as was also Clause 7.
§ THE CHANCELLOR OF THE EXCHEQUERsaid, he wished to move the insertion of a clause extending to deferred annuities purchased from the Government, the allowances made, under the Act of 1853, in respect of deferred annuities purchased from insurance companies. It was only by an oversight the provision he now proposed had been omitted from the Act of 1853.
§ Clause added to the Bill.
§ House resumed.
§ Bill reported, as amended.