§ Order for Committee read.
§ Motion made, and Question proposed, "That Mr. Speaker do now leave the Chair."
§ CAPTAIN NOLAN,in rising to move—
That in levying Income Tax a certain portion of each income should be exempted from this tax, and that this sum should be the same for all incomes,said, he considered that the incidence of the tax as at present levied was grossly unjust and unfair as regarded certain classes. He maintained that in order to place the matter on a proper footing a certain sum ought to be deducted from every income before it was subjected to this tax, and that the tax should be made on the over-plus. The principle on which the income tax was supposed to rest was that every person should pay according to his income, but the existing system entirely violated that principle; because one was made to pay not only according to his income, but also on articles of consumption to the Excise and Customs. If the matter was taken ad valorem it would be found that in this way the poor paid more on articles of consumption than did the rich. He trusted the Government would take the matter into consideration, with a view to placing the tax on a more satisfactory footing. The tax was a varying one, and no one could tell how high it would be in a short time if the country were to have a war tax. A man with a limited income of £160 a-year paid more in proportion on his spirits and beer in duty to the Excise than the rich man paid on his wine. Suppose a man spent 6d. a-day in spirits and beer—and that was not very much—he would pay to the Revenue £7 a-year; and thus it was that the poor man with a family paid twice over—first to the Income Tax, and next to the Excise. Therefore, on the principle that the necessaries of life ought not to be taxed, there ought to be exempted from the Income Tax an amount of income upon which the tax would amount to £7. This would be £840, with a minimum tax of 2d. in the pound, and £105 with the maximum as yet reached of 1s. 4d. in the pound. That, however, was imposed in time of war, when some indirect duties would 1238 be also raised; so that, perhaps, £120 might be reasonably taken as the lowest amount of the necessary expenditure of a family that ought to escape taxation. It might be thought the Chancellor of the Exchequer would lose a great deal of revenue if he permitted a uniform deduction to be made from very large incomes. He had, however, looked over the figures, and he found that if at the present rate of Income Tax it was in no case charged upon the first £150, the rich would gain very little, and that the great gain would accrue to persons of moderate income. He contended that people with incomes of from £400 to £600 deserved to be exempted from payment on the first £120 or £150, because at present they were paying double—first on the Income Tax and then by their expenditure on the Customs and Excise. With the tax at 3d. in the pound, the total loss to the Exchequer by this universal exemption would be only £3,750. Of course in the case of a war, if the Income Tax rose to 1s. in the pound, an additional 1d. in the pound would have to be put on to cover the cost of these exemptions, which would be quite fair and reasonable. He did not propose any change in the Budget this year; but he wished the House to agree to his Resolution, in order to justify the Chancellor of the Exchequer on some future day in placing these exemptions on a just and more equitable footing. He begged to move the Resolution of which he had given Notice.
§
Amendment proposed,
To leave out from the word "That" to the end of the Question, in order to add the words "in levying Income Tax, a certain portion of each income should be exempted from this tax, and that this sum should be the same for all incomes,"—(captain Nolan,)
§ —instead thereof.
§ Question proposed, "That the words proposed to be left out stand part of the Question."
§ THE CHANCELLOR OF THE EXCHEQUERwished to acknowledge the pains which the hon. and gallant Member opposite (Captain Nolan) had taken; but it was the same subject that was discussed on the Budget Resolutions of last year, and one which had been brought before successive Houses of Commons ever since the Income Tax was revived 1239 by Sir Robert Peel. There was undoubtedly at first sight some plausibility in the proposal which the hon. and gallant Member now made; but at the same time he (the Chancellor of the Exchequer) was not very clear as to the nature of the hon. and gallant Member's argument in regard to the payment which he said a man made from his income through Excise and Customs. The sums a man contributed to Customs and Excise duties were governed by other circumstances than the mere amount of his income, and were, in fact, no more than he found it right or convenient to spend. The systems of taxation upon income and of taxation by Customs and Excise duties to a certain extent balancing and supplementing one another seemed to him (the Chancellor of the Exchequer) more nearly a fair system of taxation than one resting solely upon the one or the other. He felt that in all these attempts to re-adjust the Income Tax they were pursuing something which was very much in the nature of a phantom—a shadow; they were trying to catch that which could not be caught; endeavouring to balance an egg upon its end; because, whatever might be done in order to get the tax perfectly fair, they would find that it lurched to one side or the other. What they had to do was to get a system which was tolerably and fairly workable, and which upon the whole exhibited as little as might be of gross inequality. Any attempt to get any adjustment with precise and absolute accuracy would, he thought, be found a failure. In regard to exemptions, he did not at all see the fairness of what the hon. and gallant Gentleman proposed. He did not see why they should take off from a rich man an arbitrary sum and say they would tax him upon his income, minus that particular and arbitrary sum. If incomes up to £150 were exempt, it was hardly fair that a man having an income of £151 should be taxed to the full amount. It was for this reason that the exemptions were introduced; but, in the cases of large incomes, it could not be said that it was necessary to give them the £150 exemption. In fact, to admit the principle would land them in an untenable, and sometimes an absurd, position. It was a very different thing when they were at the bottom of the scale; what they had then to consider 1240 was not to tax a man upon income if he had not more than enough to support life. On that ground it had always been considered desirable to take a certain sum as the minimum taxable amount, and it was fair that from incomes somewhat above the minimum a deduction should be made, in order that there might not be a sudden difference between the taxation of an amount immediately below and that of an amount immediately above the minimum. That was done partly for convenience; but, in the case of a man with £1,000 a-year, it would be absurd to allow him £150 to live upon, and to treat the rest as surplusage. Ho would not discuss the figures which had been submitted to the House, further than to say that the adoption of the hon. and gallant Member's proposal would undoubtedly entail a considerable loss upon the Exchequer, the effect of which would be to render an increase in the tax necessary. He maintained, as a question of principle, that it would be a mistake to introduce this new complication into the Income Tax, for it was not so simple a thing as the hon. and gallant Member seemed to suppose to exempt the first £150 of incomes. Exemptions gave a great deal of trouble, and if they were extended to all incomes, much additional labour would be thrown upon the Inland Revenue officers, and inconvenience caused to the taxpayers themselves. Therefore, while fully acknowledging the spirit in which the hon. and gallant Member had brought forward the subject, he trusted the proposal would not be accepted by the House.
§ MR. CHARLES LEWISagreed with the right hon. Gentleman the Chancellor of the Exchequer that in attempting to adjust the Income Tax they were trying to catch a shadow, and believed that to be one of the reasons why the Income Tax had been so unpopular; and so long as it existed in its present form it would be the source at different periods of continual agitation. The proposition of the hon. and gallant Gentleman (Captain Nolan) would exempt no less than £25,000,000 of income—taking into account only incomes of over £400 a-year—from the Income Tax, and, although at present the tax was but lightly felt, the House ought to consider what the effect would be if war were to break out, and that 1241 large sum were relieved of a tax at the rate of 1s. to 1s. 4d. in the pound. Such an exemption was utterly worthless and unnecessary so far as the higher class of incomes was concerned, and could only have been introduced from a respect for abstract symmetry. For his own part, he thought that instead of extending exemptions, we ought to limit them or abolish them altogether. They were fully discussed last year, and he could not help thinking still that the system was of a pernicious character. They ought to bear in mind that the tax had now passed from an occasional impost for war or other extraordinary circumstances to a part of the financial system of the country.
§ MR. MORGAN LLOYD,after adverting to the different modes that had been suggested for adapting the Income Tax to the capabilities of the different classes that had to pay it, said, it did not seem to him to be at all right that a man with an income of £400 should pay nothing, while a man with £500 should pay the full amount. He thought the fair thing would be a graduated scale, extending from the highest to the lowest, without the inequalities and exemptions which existed in the present system. It was right that all incomes—except, perhaps, those below £100—should be liable to the tax; but ho thought the percentage of the charge should increase at a uniform ratio proportionate to the amount of the income, so that the incidence of the tax should fall heaviest upon the wealthy. He could not approve of the proposal of the hon. and gallant Member for Galway.
§ MR. CHILDERSsaid, he desired to bear witness to the fair and moderate manner in which the Motion had been brought forward by the hon. and gallant Member for Galway; but the present moment, when the Chancellor of the Exchequer had nothing to spare, was a somewhat inconvenient time for discussing a difficult proposition. If the same amount of revenue was to be raised by means of the tax as at present, he asked his hon. and gallant Friend whether he proposed to relieve the higher incomes at the cost of the lower, or the lower incomes at the cost of the higher? So far as he could follow his hon. and gallant Friend, they would really be left in the same position they were in at present, if the system he advocated were carried 1242 out, as the first result of it would be that the rate of the tax should be increased if the exemptions of which he spoke were made. That would be necessary to secure the same return from that source of Revenue. He would not go into the question as to other results of the change, but it was necessary in the first instance that they should have a clear understanding as to whether the higher incomes were to be relieved at the cost of the lower or the lower at the cost of the higher.
§ MR. CHADWICKsaid, that all the most eminent financial authorities of the country—Mr. Farr, Mr. Newmarch, the principal bankers, and the right hon. Gentleman the Member for the City of London's (Mr. Hubbard's) Committee—had concurred in holding that a graduated Income Tax, approximating to an equitable Income Tax, was a thing perfectly possible and attainable. With a war before us, it would be deceiving ourselves to suppose that a tax which Sir Robert Peel meant to last for only a year or two would be removed in our time, and hence the great necessity there was for placing it on a more just foundation. He believed that if the Chancellor of the Exchequer would refer the question to the heads of the financial Departments, he would receive a Report on the subject to which he might well give effect. He (Mr. Chadwick) regarded the tax as a permanent impost, and it was therefore all the more necessary that it should be justly assessed. He had come to look upon it as a very good and very honest tax; but as one most unjustly and inequitably levied. The incidence of the tax was full of injustice at every point. They could not point to a single Schedule that was not full of glaring anomalies; and, that being so, why should the Chancellor of the Exchequer continue to shut his eyes, instead of grappling with and endeavouring to remove the injustice? There had been no legal definition of income, and he believed no better definition would be made than was put forward by Adam Smith in his time. There was no doubt some difficulty in the way of re-adjustment on equitable principles, but it was high time that the difficulty should be faced. Was it just that the owner of freehold property should be assessed at the same rate as the owner of property held for 19, or, perhaps, nine years? 1243 Take trades. The mine owner had to pay on his capital as well as his income. So also had the cotton-spinner, neither being allowed anything whatever for the annual depreciation of their property. He charged the Chancellor of the Exchequer and all who were in office in that Department in allowing these anomalies to exist, when it was proved that they were inducements to the making of false returns. There was no doubt that a great number of fraudulent returns were made, as less than 1,000 persons returned their income above £10,000 a-year under Schedule D, whereas London alone should return a greater number, and the entire country at least 10,000, and perhaps 20,000 such incomes. Resident farmers, again, were assessed on totally different bases in the three Kingdoms. In short, the whole system of the present Income Tax was a piece of patchwork, and fragments, and there was no justice in the mode in which it was levied. If the tax were honestly levied and collected, and proper deductions made in the case of precarious incomes, short leases, and depreciation, he believed it would produce 33 per cent more than it did now.
§ SIR GEORGE CAMPBELLwished, as a Liberal Member, to say one word on behalf of Her Majesty's Government. Fault had been found with the right hon. Gentleman the Chancellor of the Exchequer for the course he had taken last year with reference to the Income Tax. But, so far from blaming the right hon. Gentleman, he thought that, on that occasion, the right hon. Gentleman had taken a step in the right direction, and had remedied a great blot in its incidence. At the same time, he agreed with those who thought that the Income Tax required still further re-adjustment, and thought that it should be still farther graduated so as to fall heavier on large incomes which paid less in other ways, and lighter on small incomes which paid more in other ways.
§ CAPTAIN NOLANintimated his readiness to withdraw his Amendment.
§ Amendment, by leave, withdrawn.
§ Question again proposed, "That Mr. Speaker do now leave the Chair."
§ MR. PEASEmoved the Adjournment of the Debate, as it would be useless to go into Committee at so late an hour 1244 (midnight). He further wished to give the hon. Member for Paisley (Mr. W. Holms) an opportunity of bringing forward a Resolution of which he had given Notice on the incidence of Imperial Taxation, and its pressure on the poorer classes.
§ Motion made, and Question proposed, "That the Debate be now adjourned." —(Mr. Pease.)
§ THE CHANCELLOR OF THE EXCHEQUERsaid, he was always reluctant to take important Business at a late hour; but he must remind the House of the position in which matters stood. On Thursday last he made his Financial Statement; and the propositions in that Statement were in fact nil. He had not suggested any new tax; he had not proposed any alteration in taxation, and he thought it would not be an unreasonable thing if, in these circumstances, the Government should have been allowed on Thursday last either to have a short debate and then go on with other Business, or else be permitted to pass the Resolutions. But the Members of the Committee raised a discussion in which the Estimates he had submitted were challenged by some right hon. Gentlemen of authority in the House, and they were left in the present position. It was desirable there should be an opportunity of vindicating the Estimates, which he was prepared to do, and, at the same time, of having any discussion which might be necessary in order to satisfy hon. Members of the soundness of the financial position. The unexpectedly long discussion upon the Mutiny Bill had made it impossible to get into Committee of Ways and Means until late in the evening, and now it was proposed to adjourn the Committee in order, as he understood, to give the hon. Member for Paisley an opportunity of raising a discussion on the general incidence of taxation. That was a very large question, and one which might be raised at almost any time in the course of their financial discussions; but it was hardly reasonable to ask that the whole of the Business should be suspended in order that it might be brought forward.
§ MR. GOSCHENsaid, he must demur entirely to the views of the Chancellor of the Exchequer. Although there was to be no change in the taxation of the 1245 country, yet the state of the finances of the country was then as deserving of the serious examination and consideration of the House as at any other time. They would not be disharging their duty, if they allowed the unambitious and modest Budget of the Chancellor of the Exchequer to pass without subjecting the Estimates and the whole financial policy of the Government to such criticism as hon. Members thought necessary. He sympathized with the Government at the great length of time that had been occupied in discussing the Mutiny Bills. They had taken a much longer time than had ever been the case before; and no doubt the Government had been somewhat embarrassed by it; but still that was not sufficient to ask the House to refrain from discussing the Budget. He thought the Resolutions ought to be postponed in order that the hon. Member for Paisley might have an opportunity of bringing forward his Motion.
§ MR. W. H. SMITHsuggested that the hon. Member for Paisley might make his speech at once.
§ MR. CHILDERSsaid, it would be impossible at that late hour (12 o'clock) to proceed with a discussion on so important a question.
§ THE CHANCELLOR OF THE EXCHEQUERsaid, it was obviously impossible to resist the wish for an Adjournment.
§ Question put, and agreed to.
§ Debate adjourned till Wednesday.