HC Deb 09 May 1842 vol 63 cc309-14

The Order of the Day for bringing up the report on the Income-tax Bill having been read, the report was brought up and further considered.

Mr. B. Wood

begged to move the clause of which he had given notice. His object was, to protect persons from a charge of Income-tax upon a larger sum than the net amount of their real income. His objection to the bill in its present shape was, that persons would be taxed for incomes which they did not, in fact, enjoy. No objection could be urged to his proposition except one, that frauds might be committed. As far as he could judge, it would be impossible under his proposal that any frauds could be effected. He threw the whole responsibility on the commissioners, and if there was an alleged loss, it would be for them to ascertain the loss. It surely would not be the object of the Government to tax a man's losses instead of his income. He did hope, then, that the Government would take up this clause, and do something with it, as he was himself no lawyer, and confessed himself unable to do justice to so important a part of the subject as that before the House. He wished to provide that the account of all income shall be made out and ascertained on the following plan, as the case may apply, viz.: —

Income derived under Schedule A. on lands, &c, ascertained and confirmed by commissioners £l00
— B. on occupation of lands, &c, ascertained and confirmed by commissioners 100
— C. on annuities, &c, ascertained and confirmed by commissioners 100
— E. on public office, &c, ascertained and confirmed by commissioners 100
Deduct loss sustained under Schedule D. on trade, &c., ascertained and confirmed by commissioners 100
Real income £300
He moved— That nothing in this act contained shall be construed to restrain any person carrying on a concern in the nature of trade, the profits whereof are chargeable under Schedule (D). from deducting any loss sustained therein from the aggregate income for which he shall be charged in other schedules of this act.

Clause read a first time. On the question, that the clause be read a second time,

The Chancellor of the Exchequer

said, that if he opposed its adoption it was not from any objection to the wording of it, because, if so, he would have been happy to have lent his assistance to amend it in that respect. But he was opposed to it because he apprehended its adoption in the bill would, in the first place, make necessary a total alteration of its provisions; and, in the next, because if the bill were so altered the object of the measure, which was to raise a certain amount of revenue, would be altogether defeated. If the clause were adopted fraud would be impossible. As to that being its effect, there could be no doubt whatever. The hon. Member said that every man should contribute according to the amount of his joint income, and not according to the income he might possess under the different schedules of the bill. Now such a provision was adopted under the first Income-tax, in 1798, for a limited time, but, in 1803, it was abandoned. The object of the bill in its present shape was, as far as was possible, to tax property in the first hands to which it belonged, and to keep out of sight the real available income of the party, and, that being the case, it would be impossible, without an entire alteration of the form of the bill, to adopt the proposed provision. It was abandoned in 1803, because, under the Income-tax under which the power the proposed clause contained was given, it was found that it led to an evasion of the tax to a degree almost beyond belief. For instance, in 1801, three years after the original Income-tax had been in operation, which contained the principle of the hon. Member's proposal, though the rate of the tax was at 10 per cent., the revenue produced by it was only 4,600,000l., and the frauds committed under it, and the openings for evasion that existed, were so great as to form the subject of very general complaint, both on the part of the press and the public. In 1803, the Income-tax was proposed, on the principle of the present measure, when, each class of income being called on to furnish its quota, the revenue produced, in the very first year of the change from the former system, and under a rate of taxation of only 5 per cent., was 3,600,000. The hon. Member had spoken of one case of great hardship caused by this principle, but he (the Chancellor of the Exchequer), after having made many inquiries upon the subject, had not been able to find that there was any such general complaints with reference to the losses which it was alleged it would cause, as to induce him to run the risk of adopting that of the hon. Member, or, which was the same thing, to revert to the tax of 1798. It was an essential object of the tax, as at present proposed, that it should produce the requisite amount to meet the exigencies of the country, and, as he was convinced that that object would be defeated by the proposition of the hon. Gentleman, he should feel it to be his duty to resist it.

Mr. Ward

supported the clause. It would not affect the structure of the bill at all, and its only effect would be to enable an individual to claim exemption in the case of that which was only a nominal income, and from which he did not derive any profit whatever.

The Chancellor of the Exchequer

repeated his objections to the proposition on the ground of the fraud and evasion to which it would give rise.

Mr. B. Wood

said, he really did not see how his proposal could interfere with any part of the bill. The course which would be taken would be simply this: supposing a man to have three sorts of property; one in land, another in the funds, and a third in trade. His property in the funds would be taxed in one way, the land in another, and then he would say to the commissioners that he had losses by his trade. They would investigate this matter, if they disbelieved his statement; and, having satisfied them that he had stated the truth, and that he had had losses under his trade, he would naturally say that as he had already paid the Income-tax upon his landed and upon his funded property, he required some of that money back again to set against that loss in trade. What possible fraud could there be in that? Was a man to be taxed upon a mere nominal income? Was he to be taxed when, upon a comparison of the different kinds of property from which his income was said to be derivable, he showed that he derived no income at all?

Sir R. Peel

said, it had been found necessary, in the course of the former Income-tax, after trying a different course, which failed, to divide property into different heads, and to make each description contribute to the exigencies of the State. No doubt an exception had been made in favour of persons carrying on two trades, in which case the individual was entitled to set off the loss upon one year against the profit of the other; but to carry out the hon. Gentleman's principle he ought to contend that every man should be taxed according to his income, and if he proposed that he would make a more extensive change in the act than he imagined the hon. Gentleman meant. Suppose the case of a man deriving 10,000l. a year from land, but choosing to employ 1,000l. a-year upon a farm of his own. If he lost that 1,000l. that would be a clear deduction from the rents paid by his tenants; but would it be contended that an allowance should be made on account of his entering into a commercial speculation for which he was ill qualified. If the hon. Gentleman's principle were adopted, the inquisition would be ten times more severe than under the present bill, for the inquisition under schedule D must be extended to schedules A and B. The Legislature had been formerly obliged to substitute for the course originally proposed a different course, on account of the fraud and evasion to which the first had given rise, and the result of the change had been, that with one-half the tax under the new system they derived nearly an equal amount of revenue. He hoped, therefore, the House would pause before it adopted a course which would break down the whole efficiency of the measure.

Viscount Howick

said, that all the hon. Member for Southwark wished was, to extend a principle contained in this bill a little further, and he must say, that he considered the demand perfectly reasonable and just. The right hon. Baronet said, that it would be difficult for the commissioners, under such a clause as was proposed by the hon. Member for Southwark, to ascertain profit and loss in any case where the income was derived from different sources; but was not the prinple of this bill to ascertain profit and loss in all cases, so as to strike the balance on which the tax was to be paid. By this bill, if a party had two mines or two manufactories, he would be at liberty to set off the loss of one mine or one manufactory against the gains of the other; but where he had one mine and one manufactory a different principle was applied. In the case of a mine and manufactory there could be no set off, that is, the loss of the one could not be set off against the gain of the other, with a view to ascertain the real income, and for no better reason than because the one stood in schedule E, and the other in schedule D. They should recollect that the placing the two subjects in different schedules was a matter of mere convenience to the Government, and he could not help thinking that the refusal to allow a set off in such a case was not only contrary to common sense, but in the highest degree unreasonable. As to the case of the farmer, to which the right hon. Baronet had referred, the rule laid down there was arbitrary, and adopted merely because it was said, that keeping no books, farmers would be unable to return any account of their income. He (Viscount Howick) had protested against this rule, and his belief was, that in the parts of the country with which he was acquainted, it would operate unfairly. They had, however, laid down the rule, but in the present instance all that was wanted was an extension of the principle applicable to two pursuits falling within the same schedule. The proposition was, in his judgment, perfectly just, and he should therefore vote for it.

The Chancellor of the Exchequer

contended, that there was no injustice in the case, and to show this he had only to refer to the fact, that this measure went to charge every person in this country who derived their incomes from foreign possessions. Now, take the case of a man working gold mines in Mexico, or cultivating plantations in the West Indies, would it be right to allow such a party to deduct from his income derived from the funds losses occasioned by his speculations in either Mexico or the West Indies? If such a principle were admitted, the result would be evasions of the law, which would go, if not to defeat it altogether, at least to render its pressure unfair and partial.

Viscount Howick,

in explanation, said, that although it might not be right to allow deductions on account of foreign losses, still that was a different case from the present.

Alderman Humphery

said, that the principle contended for by his hon. Friend was admitted on a small scale, and he could not understand why it should not be on a larger. Where a party engaged in trade had 150l. a-year from the funds, he was allowed a deduction for losses in trade, and he thought the same principle should be followed where a trader had 1,000l. a-year from the funds, and sustained a loss of 1,000l. by his business. In such a case he could have no income, and therefore it would be unjust to impose the tax.

Mr. A. Chapman

could not support the right hon. Gentleman, the Chancellor of the Exchequer, on this occasion. If losses occurred under any of the schedules, they ought to be allowed to be set off; and if this were not permitted, the result would be great hardship on the parties whom he represented.

Mr. James

contended, that parties should be allowed to deduct premiums paid on life and fire insurances, and said, that if this were not done, trustees more especially would be placed in a situation of great difficulty. He should support the clause of the hon. Member for Southwark.

Mr. Hume

said, that where a party relied for income on a variety of sources, he ought to be allowed to balance profits and loss of the aggregate to show the amount liable to the tax.

Mr. G. W. Wood

supported the clause on the ground, that the tax should only be imposed on the actual income, no matter how derived.

Mr. Hawes

supported the motion; he was of opinion that nothing could be more just than what was required by the hon. Member, for it was only fair that the loss which an individual might sustain in trade should be allowed for in the way in which it was proposed to be done by the clause which had been moved by the hon. Gentleman (Mr. B. Wood.) He hoped, at all events, that the clause would not be decided upon without full consideration.

The House divided on the question, that the clause be read a second time:— Ayes 66; Noes 110:—Majority 44.

List of the AYES.
Aldam, W. Crawford, W. S.
Barclay, D. Dalrymple, Capt.
Barnard, E. G. Drax, J. S. W. E.
Bell, J. Duncan, Visct.
Bernal, R. Duncan, G.
Bowring, Dr. Ferguson, Sir R. A.
Brotherton, J. Forster, M.
Browne, R. D. Gill, T.
Buller, E. Grey, right hon. Sir G.
Busfield, W. Guest, Sir J.
Cayley, E. S. Hall, Sir B.
Chapman, A. Hawes, B.
Childers, J. W. Hay, Sir A. L.
Cobden, R. Hill, Lord M.
Howick, Visct. Scott, R.
Hume, J. Scrope, G. P.
Humphery, Ald. Smith, B.
Hutt, W. Somers, J.P.
James, W. Staunton, Sir G. T.
Johnston, A. Tancred, H. W.
Kemble, H. Thornely, T.
M'Taggart, Sir J. Trotter, J.
Mitchell, T. A. Tufnell, H.
Morris, D. Turner, E.
Muntz, G. F. Vyvyan, Sir R. R.
Norreys, Sir D. J. Wakley, T.
O'Brien, W. S. Walker, R.
Pechell, Capt. Wawn, J. T.
Philips, G. R. Williams, W.
Pryse, P. Wood, C.
Rice, E. R. Wood, G. W. R
Ricardo, J. L.
Rundle, J. TELLERS.
Russell, Lord J. Ward, H. G.
Scholefield, J. Wood, B.
List of the NOES.
Arbuthnott, lion. H. Gladstone. rt. h. W.E.
Arkwright, G. Godson, R.
Bailey, J. Gordon, hon. Capt.
Bailey, J. jun. Gore, M.
Baird, W. Goulburn, rt. hon. H.
Baldwin, B. Graham, rt. h. Sir J.
Baring, hon. W. B. Greenal, P.
Bentinck, Lord G. Greene, T.
Bernard, Visct. Gregory, W. H.
Blackburne, J. I. Grimsditch, T.
Bodkin, W. H. Grogan, E.
Boldero, H. G. Harcourt, G. G.
Bramston, T. W. Hardinge, rt. h. Sir H.
Campbell, Sir H. Heneage, G. H. W.
Campbell, A. Hepburn, Sir T. B.
Cardwell, E. Herbert, hon. S.
Chetwode, Sir J. Hogg, J. W.
Christopher, R. A. Hope, hon. C.
Chute, W. L. W. Inglis, Sir R. H.
Clerk, Sir G. Irton, S.
Clive, hon. R. H. Jackson, J. D.
Cockburn, rt. h. Sir G. James, Sir W. C.
Collett, W. R. Jermyn, Earl
Conolly, Col. Johnson, W. G.
Coote, Sir C. H. Knatchbull, rt. hn. Sir E.
Copeland, Mr. Ald. Knight, H. G.
Corry, rt hon. H. Law, hon. C. E.
Cripps, W. Lawson, A.
Damer, hon. Col. Lefroy, A.
Denison, E. B. Leicester, Earl of
D'Israeli, B. Lyall, G.
Dodd, G. Lygon, hon. General
Douglas, Sir H. Mackenzie, T.
Drummond, H. H. Mackenzie, W. F.
Duffield, T. Maclean, D.
Eliot, Lord Mainwaring, T.
Escott, B. Manners, Lord C. S.
Filmer, Sir E. Martin, C. W.
Fitzroy, Capt. Master, T. W. C.
Flower, Sir J. Mundy, E. M.
Ffolliott, J. Packe, C. W.
Forbes, W. Patten, J.W.
Fuller, A. E. Peel, right hon. Sir R.
Gaskell, J. Milnes Peel, J.
Praed, W. T. Sutton, hon. H. M.
Pringle, A. Thesiger, F.
Rolleston, Col. Tollemache, J.
Round, C, G. Trollope, Sir J.
Round, J. Vesey, hon. T.
Rushbrooke, Col. Wilbraham, hn. R. B.
Sanderson, R. Wood, Col. T.
Shaw, rt. hn. F. Wortley, hon. J. S.
Smith, A. Young, J.
Somerset, Lord G.
Stanley, Lord TELLERS.
Stewart, J. Freemantle, Sir T.
Sturt, H. C. Baring, Mr. H.
Mr. Gill

moved a series of amendments. His object was to capitalise all incomes not derived from landed or funded property, and to charge 5 per cent, on such capital, as the ground-work of the property-tax. He would take the sense of the House upon his amendment. Schedule (A), Rule 2. page 33, line 17, after the word "limited," to insert, "Provided always, that in every case where the party to be assessed has a life interest only in such profits, the value of such life interest shall be ascertained, and the amount thereof be deemed to be so much capital; and for the purposes of this Act the profits to be assessed shall be computed at the rate of five pounds for every hundred pounds of such capital.

The Chancellor of the Exchequer

opposed the amendment as at variance with the principle of the bill.

The House divided on the question that the proposed words be inserted.—Ayes 36: Noes 183;—Majority 147.

List of the AYES.
Bell, J. Murray, A.
Bowring, Dr. O'Brien, W. S.
Brotherton, J. Pechell, Capt.
Cavendish, hon. C. C. Pryse, P.
Craig, W. G. Rundle, J.
Crawford, W. S. Scholefield, J.
Dalrymple, Capt. Smith, B.
Dennistoun, J. Stansfield, W. R. C.
Duncombe, T. Strutt, E.
Ebrington, Visct. Tufnell, H.
Forster, M. Wakley, T.
Gore, hon. R. Watson, W. H.
Granger, T. C. Wawn, J. T.
Hill, Lord M. Williams, W.
Hutt, W. Wood, B.
James, W. Wood, G. W.
Marshall, W.
Mitcalfe, H. TELLERS.
Mitchell, T. A. Gill, T.
Morris, D. Hume, J.
List of the NOES.
A'Court, Capt. Allix, J.P.
Acton, Col. Arbuthnott, hon. H.
Adderley, C. B. Arkwright, G.
Alford, Vise. Baillie, j.
Bailey, J., jun. Godson, R.
Balfour, J. M. Gordon, hon. Capt.
Baring, hon. W. B. Gore, M.
Barrington, Vise. Gore, W.R, O.
Bateson, Sir R. Gore, W. O.
Bell, M. Goring, C.
Bentinck, Lord G. Goulburn, rt. hon. H.
Beresford, Capt. Graham, rt. hn. Sir J.
Bernard, Visct. Greenall, P.
Blackburne J. I. Greene, T.
Boldero, H. G. Gregory, W. H.
Bradshaw, J. Grimsditch, T.
Bramston, T. W. Grimston, Visct.
Broadley, H. Grogan, E.
Brooke, Sir A. B. Halford, H.
Bunbury, T. Hamilton, J. H.
Campbell, A. Hamilton, W. J.
Cardwell, E. Hatton, Capt. V.
Chapman, B. Heneage, G. H. W.
Charteris, hon. F. Henley, J. W.
Chelsea, Vict. Hepburn, Sir T. B.
Chetwode, Sir J. Herbert, hon. S.
Clements, H. J. Hill, Sir R.
Clerk, Sir G. Hillsborough, Earl of
Clive, hon. R. H. Hodgson, R.
Cochrane, A. Holmes, hon. W. A'Ct.
Cockburn, rt. hn. Sir G. Hope, hon. C.
Codrington, C. W. Hornby, J.
Collett, W. R. Humphery, Ald.
Colvile, C. R. Inglis, Sir R. H.
Compton, H. C. Irton, S.
Conolly, Col. Jackson, J. D.
Coote, Sir C. H. Johnson, W. G.
Copeland, Ald. Johnstone, Sir J.
Corry, rt. hon. H. Johnstone, H.
Cowper, hon. W. F. Kemble, H.
Cresswell, B. Knatchbull, rt. hn. Sir E.
Cripps, W. Lawson, A.
Curteis, H. B. Layard, Capt.
Darner, hon. Col. Lefroy, A.
Denison, E. B. Legh, G. C.
D'Israeli. B. Leicester, Earl of
Dodd, G.' Liddell, hon. H. T.
Douglas, Sir H. Lindsay, H. H.
Douglas, Sir C. E. Lygon, hon. General
Douglas, J. D. S. Mackenzie, T.
Drummond, H. H. Mackenzie, W. F.
Duffield, T. Maclean, D.
Duncombe, hon. A. M'Geachy, F. A.
Duncombe, hon. O. Maher, V.
East, J. B. Mainwaring, T.
Eaton, R. J. Manners, Lord C. S.
Egerton, W. T. Marsham, Visct.
Eliot, Lord Martin, C. W.
Escott, B. Master, T. W. C.
Estcourt, T. G. B. Masterman, J.
Fellowes, E. Meynell, Capt.
Filmer, Sir E. Miles, P. S. W.
Fitzroy, Capt. Mordaunt, Sir J.
Flower, Sir J. Morgan, C.
Ffolliott, J. Munday, E. M.
Forbes, W. Neeld, J.
Forester, hon. G.C.W. Neville, R.
French, F. Nicholl, rt. hon. J.
Fuller, A. E. Norreys, Lord
Gaskell, J. Milnes Norreys, Sir D. J.
Gladstone, rt. hn. W. E. Packe, C. W.
Pakington, J. S. Smyth, Sir H.
Palmer, R. Somerset, Lord G.
Patten, J. W. Stanley, Lord
Peel, rt. hon. Sir. R. Stewart, J.
Peel, J. Sturt, H. C.
Plumptre, J. P. Sutton, hon. H. M.
Pollington, Visct. Talbot, C. R. M.
Pollock, Sir F. Tennent, J. E.
Praed, W. T. Thesiger, F.
Pringle, A. Tollemache, J.
Rashleigh, W. Trolloppe, Sir J.
Reade, W. M. Trotter, J.
Reid, Sir J. R. Turnor, C.
Rose, rt. hn. Sir G. Vere, Sir C. B.
Rushbrooke, Col. Verner, Col.
Russell, J. D. W. Vesey, hon. T.
Saunderson, R. Waddington, H, S.
Shaw, rt. hon. F. Young, J.
Sheppard, T.
Shirley, E.T. TELLERS.
Sibthorp, Col. Fremantle, Sir T.
Smith, A Baring, H.
Sir R. Inglis

called the attention of the Mouse to the proposition which he had already brought before its notice; namely, that the Income-tax should only be reckoned on every pound of income above 150l. He would not press the proposal as a motion, but trusted that the right hon. Gentleman, the Chancellor of the Exchequer, would direct his attention to the suggestion.

Sir R. Peel

wished any discussion which might take place upon the proposition to be taken upon the third reading of the bill.—Subject postponed.

Remaining clauses agreed to, with amendments.