HC Deb 26 February 1878 vol 238 cc379-406
MR. J. G. HUBBARD

rose to call the attention of the House to the Taxation of the Country, and to move— That, considering the successive and inevitable re-enactments since 1842 of 'The Property and Income Tax,' it is expedient that, without needless delay, the unequal incidence of the Tax be corrected, and that by the adjustment of its provisions the Income Tax be adapted for permanent use in the levy of Imperial Revenue. He observed that the £78,000,000 which appeared in the finance accounts as the receipts of revenue, did not represent the amount of taxation actually paid by the people. Of those £78,000,000, only £65,000,000 were raised by taxation. £3,000,000 arose from the services undertaken by the Crown in the Post Office, the Telegraph, and the Packet Services from the Crown rights over the coinage and the issues of paper money; and from the Crown Lands, the balance of £10,000,000 being entries made on both sides as matters of account. The whole of the sum which was obtained from the income tax was £6,000,000; and it was to these £6,000,000 that his observations would be confined. Since its introduction in 1842, the income-tax had been passed twice for three years and once for five years; but it had otherwise been an annual tax. It was a question whether a tax which involved such a large sum should be continued from year to year with its defects, under the plea that it was a temporary tax, when there was no fair presumption that it could possibly be abolished. This tax, though assessed under five Schedules, operated in three main divisions. First, as an annual tax on the products of real property; secondly, as a tax on the interest of money derived from various sources; and lastly, as a tax on the earnings from industrial occupations; and in each of these divisions the tax had erred against the first principles of sound finance, for it charged the outgoings included in rents, it charged capital included in terminable annuities, and it charged industrial earnings without allowance for the portion saved. Under these circumstances, the question had arisen—Was it not possible to dispense altogether with a tax which had become obnoxious on account of its inequality and injustice? That question must be answered in the negative, for in the absence of an income tax many persons would wholly escape taxation. And so, again, if Schedules D and E were exempted, then the tax would belie its name and would cease to have the cha- racter of a tax levied on the income of every person in the country. By his Amendment the hon. Member for Stoke (Dr. Kenealy) proposed to exempt all persons from liability to the tax who were not owners of estates in fee simple, or of leasehold, or persons of capital funded in public or private securities; but if that proposition were adopted, then many persons enjoying large incomes would escape the incidence of the tax altogether. It was quite possible for a merchant to have a large capital in a constant course of investment realization and re-investment. His property might be travelling all over the world, and he might carry on his large enterprizes and accumulate a fortune, without ever having to submit to a tax upon it. Further, he might even evade the succession charges and legacy duties by distributing his wealth among his children before his death. It was plain, therefore, that the income tax alone could reach a certain kind of property enjoyed by persons who, but for that, would never be taxed at all. Again, a reason for an income tax might be found in its being a tax upon absentees. Absentees might spend large sums derived from their estates in England, Ireland, or Scotland, and might be untouched by any taxation except through the income tax. For both these reasons, it was essential that the income tax should be maintained with a view to the general equity of taxation. Moreover, the income tax was a legitimate medium through which the prosperity arising from the improved morality of the people would contribute to the support of the State when they exercised that self-control which eventually, he hoped, would diminish the receipts on the spirit and malt duties. Well, if the tax were to be amended, how was it to be done? The process was exceedingly simple. At present the tax was on gross receipts; all that it was necessary to do was to tax net receipts—to tax not the nominal income, but the portion available for expenditure. In regard to real property, that amount should be taxed which actually went to the owner; and in the ease of industrial earnings, a deduction ought to be made which would put professional and trading incomes upon an equality with the products of real property. In the science of finance this was a perfectly simple process. It was possible to calculate to a pound what was the worth of a man's earnings year by year as compared with receipts from money in the funds or from mortgages on land. They had a precedent for the principle he advocated in the action of the Legislature, when in 1853 it exempted savings on certain conditions from taxation. The common measure of value for the purpose of taxation, when ascertained in the way he had suggested, had been ingeniously described by Mr. P. Hallett, an able Professor of political economy, as "interest value." It had been said that it would be impracticable to adjust the income tax in the way he suggested, and that classification would be impossible, and that relief, by average deductions, gave too much to one and too little to another. In reply, he might remark that classification and relief upon a scale of averages was a principle already embodied in the Valuation of Property Bill. That Bill provided for the levy of local rates upon the very principle he wished to apply to the Imperial taxation of this country. Income tax, as now charged, fell alike on idle incomes—by which he meant incomes arising from no effort on the part of the owner—and industrial incomes, or incomes which were altogether dependent on the owner's exertions; it charged alike rents subject to 5 per cent outgoings, and rents subject to 35 per cent. The Chancellor of the Exchequer last year made many alterations; but did he at all mitigate the evils complained of? Not at all; but quite the contrary Under Schedule D, there were 603,000 persons charged to income tax, of whom 365,000 received an abatement of £120; so that there remained only 237,000, or less than half, who were assessed to the full amount of their incomes. He was not surprised that the grievance, instead of being alleviated, was exaggerated by the concession made in the case of the small incomes. A retired tradesman with £360 a-year might receive an abatement of one-sixth on the whole of his income on account of life insurance, and an abatement of £120 because his income was under £400. That man received, therefore, an abatement of £180 in all—in other words, he was taxed only on half his actual income. Another man who, by his own exertions, was making £420 a-year in a trade or profession, was taxed on £420 to the full amount of his income. These two men could not be said to be dealt with on any principle of equality or justice. The matter of life insurance was comparatively small, but yet 20,000 persons received an abatement for it under Schedule D. Altogether, less than one-half of those who were assessed under Schedule D had to pay in full, but in their case the grievance led to a great deal of dishonesty. A sense of injustice was created, and men understated their incomes to escape the tax, their argument being—"The Government cheats us, and we will cheat the Government." He was sorry to say that the Government did cheat the the taxpayer, and on former occasions had cheated them deliberately. He did not, of course, mean that the Chancellor of the Exchequer or the eminent officials connected with the Inland Revenue cheated; but he meant that the dishonesty of the law so pervaded the administration of the income tax, that it extorted from the taxpayer that to which the State had no title. He had heard very recently that, independently of large sums recovered from persons who had been surcharged, arrears running over a series of years, and amounting, in some cases, to £6,000, £10,000, and in one instance to even £18,000, had been recovered and were actually paid as hush-money by persons who had defrauded the Government, and a considerable portion of the money went to the vigilant officers who had detected the defaulters. He did protest against a system being carried on which was so demoralizing in its effect. If this tax worked ill against traders under Schedue D, it worked still worse under Schedule A, as against the landowner whose estate was heavily encumbered. For instance, a man having nominally £2,000 a-year, but receiving only £1,800, might have his estate encumbered to the extent of £1,600, he would be taxed on £2,000; and, having recouped himself to the extent of £1,600 as against the mortgagee, would still pay on £400 a-year, whereas he had actually only £200. It could not be disputed that there was a grievance, and a remedy ought not to be denied in the simple process of charging not gross, but net rent. The proposition which he brought before the House had been carefully framed, and would in no degree provoke the reproach of being an interference with the financial proceedings of the year, or being an abstract proposition. It was a proposition bearing upon a most practical subject, and one which involved not only the welfare, but the honour and the character of this country. He asked the House to support the Motion in order that by the expression of their opinion the Government might find reason for again considering the condition and constitution of the tax. He should be quite satisfied if the Chancellor of the Exchequer referred the subject to the able Chiefs of the Inland Revenue and Local Government Departments, who might report upon a scheme which would place this tax on a scientific and a just basis, and thus tend to put an end to the discontent and dishonesty which had hitherto so largely and discreditable prevailed. The right hon. Gentleman concluded by moving his Resolution.

Motion made and Question proposed, That, considering the successive and inevitable re-enactments since 1842 of 'The Property and Income Tax,' it is expedient that, without needless delay, the unequal incidence of the Tax be corrected, and that by the adjustment of its provisions the Income Tax be adapted for permanent use in the levy of Imperial Revenue."—(Mr. Hubbard.)

DR. KENEALY

, in rising to move the following Amendment:— That no adjustment of the Property and Income Tax will be satisfactory which does not relieve all persons from liability to the Tax who are not owners of estates in fee simple, or of leasehold, or persons of capital funded in public or private securities, said, that it was from no feeling of conceit that he could cope with the right hon. Gentleman the Member for the City of London (Mr. J. G. Hubbard) on matters of taxation and finance, on which he was so great an authority, that he moved the Amendment; but because he had heard of no other hon. Gentleman on the Liberal benches who was prepared to combat the notion, now for the first time broached, namely—that an Income Tax was "inevitable," and must be "permanent," and he feared that this was only preliminary to a Ministerial announcement of the same kind. This was a proposition which he could not allow to pass in silence, and if no other hon. Member would combat it, he was resolved to do so. The present was a period especially inopportune to proclaim such an idea. Population and poverty were alike increasing. It became every day more difficult to get bread. Our imports increased annually in an immense quantity; our exports were rapidly on the decline. There was no prospect, as far as he could perceive, of a revival of trade, though many sanguine persons thought they could see it. In the meanwhile, the wealth of private persons was great. It was in the hands of a few; money was not diffused among the general masses of the people, as it should be in a well-regulated State. Wages were almost at starvation point; and, what was worse, they were being lowered every day, notwithstanding the enormous fortunes and profits that were realized by capitalists—the employers of labour. Land and money were likewise increasing in value, and the workers who toiled with brain or hand found it difficult to pay their way. Under these circumstances, he contemplated with dismay the very idea of this tax being made permanent. It was a tax of a most abominable and inquisitorial kind; one which he regarded with horror. The right hon. Gentleman who moved the Resolution had himself almost confessed this; and yet, strange to say, while he had so condemned it, he wanted to make it permanent. Now, the income tax was a war tax, and could only be justified by a state of war. Every politician hitherto had so viewed it, and its imposition was defended only on the principle that when we were fighting for national honour or existence, we were all of us called upon to make every sacrifice for the public weal. We had now been saddled with it since 1842, yet from that period until now we had had no long-continued wars which could justify its retention. The Crimean War was carried on by Loans, and by an addition to the National Debt; the same might be said of the Abyssinian, and the equally foolish Ashantee Expeditions; and it was not even pretended that the income tax had been kept on because of these. Thus, though a war tax, it had been resorted to as a peace tax, which no statesman had ever said it was. We had all looked forward with hope to the period when it would cease, as had been so often promised; but now the right hon. Gentleman stood up and dashed the cup from our lips. The working classes of this country—by which he meant the bulk of the middle class, professional men, shopkeepers, clerks, small traders, and. artizans of a superior kind—had been long ground down by rates and taxes which were almost unendurable, and which had only been tolerable at all by the hope of our finally getting rid of this most odious impost. But there seemed now the prospect of its being saddled upon us for ever. Many persons had defended the tax by asserting that it fell only upon the middle class, who, it was pretended, were well able to bear it. But this was not so. It pressed upon the poorer class, who were obliged to purchase in every shop or store, articles of prime necessity—articles in daily use—and who were charged higher prices for those articles because the shopkeeper was obliged to repay himself for his income tax. Thus, this tax was really paid by the millions, who were already as poor as they well could be; and in their interest he spoke. The balance of trade was fearfully against us; and he confessed that he looked forward to a time, not very remote, when we should be unable to meet the public liabilities of the Empire. The real cure for our evils, and the real remedy, was a diminution of expenditure. In the very height of our war with Napoleon, when we were subsidizing soldiers wherever we could hire them, when we had large military forces of our own, and a powerful Navy, the whole of our charge was only £67,000,000 in the most lavish year—and this for all purposes; while, at the present time, after long years of peace and pretended retrenchment, we were expending nearly £80,000,000 a-year. Indeed, he doubted not, that it would soon advance beyond even this. Could anybody say that we were now as powerful or as much considered as we were then? If England was able to carry on that terrible and devastating war at the greatest cost of £67,000,000, why should our expenditure be so lavish in times of peace? The fact was, that the £6,000,000 which we got so easily by the income tax, encouraged us to waste and extravagance; and he was anxious to cut off this source of profusion. Where money came in easily it flowed forth freely; and he would gladly deprive the Chancellor of the Exchequer of any temptation to be waste- ful. The first proposition of his Amendment referred to land; and he contended that, according to our old Constitutional system, the land and the land alone, should he liable for this war tax. In ancient times, or in the period of conquest, the land was given by the monarch, or the conqueror, to his generals, courtiers, and officers, on condition that they would, out of its produce, support him in his state, or supply him with men or munition of war if war arose. This was the express condition on which land—the national property—was bestowed. And this continued for a considerable period, until it was finally commuted for a land tax of 4s. in the pound, to which all landowners were subject. In those days no one ever thought of taxing labour, either mental or physical, for the support of the Throne or the maintenance of war. The whole burden fell upon the owners of land, and so it ought to be now. The land of England, if again brought under its natural and Constitutional tax, was quite sufficient to pay the whole National Expenditure. Labour, as in the olden time, had quite enough to do, and ought to go absolutely untaxed. Were our Financial Reformers equal to the occasion? Were they prepared to support him in thus seeking to bring back the old law and custom of England? The only real property in the world was the land. Other sources of income came and went; but the land remained for ever. Hence it was called real property. From the earliest period of our history down to the time of Charles II. the land bore all this burden of taxation; the great bulk of the people might be said to have been exempt from all taxation. They paid little or nothing. But it was in the reign of that unprincipled Monarch, and by an equally unprincipled Parliament, that the owners of great estates first began to shift from their own shoulders on to the backs of the people the fiscal burdens imposed upon them by law, by right, by justice, and by antiquity. It was the same Parliament that first imposed a corn law, and thus doubly scourged the people—first, by taxing broad; secondly, by making them pay taxes which theretofore were unknown, and would not be endured. The price of provisions of all kinds rose at once, but the great landowners did not heed this. He wished, therefore, that the in- come tax should be so re-adjusted, that the owners of great estates should be again compelled to bear their proper burden, and that Schedule D should absolutely disappear from the Statute Book. A tax on land at 4s. in the pound would produce £50,000,000 or £60,000,000 a-year, if so much was really needed; but we ought not to expend more than £50,000,000 a-year for all Imperial purposes. Turning from the great lords of lands, he came to those whose capital was realized or funded; and he said that those persons ought to be joined with the large proprietors in paying off the national burdens caused by wars which had been undertaken for their benefit. Wars benefited only a few; they were seldom of Advantage to the great body of the people. Large shareholders in banks, in railways, in public companies, were those, therefore, whom he proposed to bring under this Amendment, if he could abolish Schedule D—the portion of the Act which pressed most and so hardly upon those whose interests he espoused. The right hon. Gentleman (Mr. J. G. Hubbard) found fault with his Amendment, because he said it would exempt great merchants. He should not be sorry to exempt great merchants, and, indeed, all persons who had precarious incomes. A great merchant might be worth £1,000,000 today, and be a pauper this day twelvemonth. How unjust, therefore, it was to tax him upon that £1,000,000 which might so suddenly vanish! But the merchant was not exempt. He contributed to the State in a hundred ways—by his ships, his machines, his engines, his luxury. And if he was prepared to make this concession in the case of such a man, the more willingly he would claim it for the vast proportion of the middle and the poorer classes who came under Schedule D. The tax operated cruelly upon those persons; it prevented many from giving that education to their children which the welfare of the nation demanded. They had the will to do so, but the income tax deprived them of the means. Another ground on which he claimed support for his Amendment was that it was conceded by the right hon. Gentleman—"that the Government cheated the taxpayer, and was cheated by the taxpayer in return." The right hon. Gentleman, to make his assertion the stronger, used the word "delibe- rately" in reference to this mutual swindling. And it came to this—that for a miserable sum of £6,000,000 a-year this Empire, which professed to be at the head of civilization, intelligence, and Christianity, was a guilty party to an annual fraud upon the taxpayer. This was a terrible state of things. Could anyone feel surprised that the Government which thus swindled got swindled in return? Of course, when he used the word "Government," he did not mean the Chancellor of the Exchequer, or persons like him—he alluded to those who collected this horrible tax. Nobody who had any knowledge of things as they were, doubted that only a very few persons returned a true account of their income—in the first place, they were incapacitated from doing so, for an income tax paper was as difficult to understand as a railway guide; and, secondly, they thought that the tax was inquisitorial and unjust, and that the money was ill-spent; these things they supposed justified them in concealing their true income. He himself had experienced the greatest difficulty in making out an income tax return. He did not profess to be an arithmetician, but he supposed he had some knowledge, and yet he had puzzled himself for hours over this incomprehensible document. Everyone knew his gross income, but hardly anybody understood his net profits, or what deduction he was entitled to make under the law. Hence, he answered haphazard, and as often cheated himself as he cheated the Government. The income tax paper was the one, of all others, that was calculated to lead people astray; hence they dealt with it in the way they did; hence their laxity in making their returns. The right hon. Gentleman had mentioned an instance where £18,000 had been accepted by the Government as "hush money" from a person who had deliberately made false returns. This was one of those facts which were known not only to the right hon. Gentleman, but to bankers, merchants, and the like. What an inducement to fraud was thus held out when these capitalists found that the Government, instead of prosecuting, exposing, and punishing the offenders, actually played the part of Jonathan Wild, and took "hush money" as a bribe to conceal the fraud! He feared that if the income tax was made per- petual, the character of the English people for commercial morality and high truthfulness would deteriorate, as it was said that of the House of Commons itself had deteriorated. Formerly, an Englishman's word all over the world was regarded as his bond. Could it be said so now? He feared that the time would come when the Englishman would be looked upon as being as great a rogue as the repudiating New Yorker, or the drab-coloured American. He claimed support for his Amendment from the Liberal Party on the ground that they were the professed champions of retrenchment and economy. They were especially bound to be active upon this question, for it was owing to the wasteful expenditure under the Liberal Administration of Lord Melbourne, that Sir Robert Peel found himself with a deficit of £6,000,000; hence he resorted to the income tax as a necessity, though only a temporary one, as he promised. If the Liberals were sincere, they would help him, and if they supported his Amendment, as he thought they should, he would take a division upon it. The old rotten-borough Parliament had been charged by them, in the days before Reform, when they were working for place, and power, and pay, with being the source of public extravagance. But the Duke of Wellington's expenditure in 1830, was only £52,000,000, when we were the foremost people in the world; and the Liberals had raised it since to £76,000,000, when we were anything but foremost. He therefore demanded their support, as some atonement for their conduct.

[The Amendment not being seconded, was not put.]

SIR WALTER B. BARTTELOT

said, he cordially agreed with much that had been said by his right hon. Friend who had introduced the Motion (Mr. Hubbard); but, at the same time, he was of opinion that the present was scarcely an opportune moment—when men's minds were wholly occupied with those great events taking place in the East—for such a Motion as that which his right hon. Friend had submitted to the House. No man in the House had taken so much trouble to make himself acquainted with this question of taxation, and he thought the House was indebted to him for the clear and lucid way in which he had placed the question before it. He hoped, however, that his right hon. Friend would not divide the House upon the Motion, and that he would be content with the discussion which would take place, and with the attention which the Chancellor of the Exchequer would be sure to give it, especially with reference to the new Bills being brought forward by the President of the Local Government Board. He (Sir Walter B. Barttelot) ventured to think that the whole question of taxation for local and Imperial purposes was one deserving of the serious consideration of the Chancellor of the Exchequer. No doubt it would be said that, looking at existing circumstances, this was not a time to interfere with the taxation; but he thought there were reasons why something in the direction suggested should be done. Anyone looking at income derived from funds and income derived from landed property, would at once see the great inequality which existed, and at once admit that something should be done. The great distinction between income derived from capital in the funds and income from land was, that while the former was handed over intact after payment of the income tax, to keep landed property in a condition to realize what it was worth, a large sum had to be annually laid out upon it—10 or 20 per cent—in buildings, repairs, and improvements. When, therefore, they come to deal with the Valuation Bill and the other Bills which would follow it, he hoped the Chancellor of the Exchequer would see his way towards doing something, so that for Imperial as well as local purposes those deductions which were absolutely necessary should be allowed. The hon. Member who spoke last (Dr. Kenealy) could hardly have thought he was addressing the English House of Commons. Did he suppose that in the 19th century he could again tax land at 3s. or 4s. in the pound, and exempt all those persons whom he (Dr. Kenealy) for one was so anxious to entrust with the privilege of choosing Members of Parliament? Were they—the landowners—to pay all the taxation of the country, and leave the political power in the hands of a class who would contribute nothing at all to it? For his own part, he thought it was a question deserving of the serious consideration of the House, whether all those who were entitled to vote for Members of Parliament should not contribute in some way or another to the direct taxation of the country; and, if the suffrage were extended any further, direct taxes ought also to be paid; but, at any rate, personal payment of rates should be compulsory on those on whom it was conferred. The present anomalies in the matter of taxation had been carried a great deal too far, especially in the exemptions from the income tax. If there were to be an income tax, it ought to be levied upon everyone except those from whom it would not be worth collecting, for exemptions made the tax odious; and, in the event of any question arising about involving the country in war, the people who might be most clamorous for it would be the people who would not contribute a single farthing to carrying it on.

MR. DODSON

said, the hon. and gallant Gentleman (Sir Walter B. Barttelot) appeared to assume that the manner of levying Imperial taxes ought to be the same as that of levying local rates. He would, however, point out that, in the case of local rates, the House was dealing with real property only, in reference to which there could be a fair approximation as to the deductions which ought to be granted, made by persons acquainted with the circumstances; whereas, in the case of the income tax, it became necessary to deal with four or five times that amount of property, in connection with which it was much more difficult to ascertain the particulars. If they taxed land upon the net instead of upon the gross, they must be prepared to deal in the same way with income arising from other realized property, and that, he thought, would be found a very difficult task. He felt some diffidence in expressing his disagreement with the right hon. Gentleman the Member for the City of London, who had brought forward the Motion—the more so when he knew that the views which the right hon. Gentleman held had been held by distinguished financiers and economists; by Mr. James Wilson and Mr. John Stuart Mill—but he was not prepared to give his support to so general a Resolution as his right hon. Friend had submitted to the notice of the House. He was prepared to admit that the continuance of the income tax, like that of any other tax, must depend upon circum- stances; that its duration must be held to be indeterminate; and that, as a branch of taxation, it was the duty of the House to render its incidence as fair as possible. He did not, however, quite go along with his right hon. Friend in some of the arguments which he had used. He presumed it was not proposed to give deductions in the case of land and houses and to pass by property like mines. Nor could his right hon. Friend intend, for instance, to overlook terminable annuities. In fact, everyone would make out a claim to deductions except the fundholder. Did that House think it was desirable to place fundholders in the exceptional position of being, however much they might disclaim it, more highly taxed than the man who derived his income from any other source? Then there was another question which would inevitably arise. They would undoubtedly have an appeal ad misericordiam from the great majority of the fundholders. They would say—"We are among the poorest and most helpless of the community. We are the widows and orphans and spinsters. We have the bare pittance on which we live, and you are going to give a reduction to the landowner and the owner of house property, to the banker and the professional man with his strong brains, and to the artizan with his strong arms, to all who can lay up savings or ensure their lives." Then, as to the second grievance, he did not understand when his right hon. Friend spoke of industrial income, that he made any distinction between the earnings derived solely from brain or muscle and the commercial income which was derived partly from capital and partly from personal exertion. Without making such a distinction, his proposal if carried into effect would give rise to great difficulty. He did not get rid of fraud because he maintained self-assessment. Again, in the proposal which his right hon. Friend made, did he mean to deal with individual cases. If he did, there would have to be an amount of investigation into private affairs, which would make the scheme perfectly unworkable and intolerable. But he did not. He proposed to deal with large classes by averages. But they could not do justice by averages, because an average might be true of a class and false of every individual in it. It appeared to him that the proposal of his right hon. Friend was either too little or too much. It was too little, if they were to proceed on the assumption that the income tax was to be made a complete system of taxation, just and fair in itself. It would be impossible to do that without dealing with the cases of individuals. If they were to proceed by a system of averages, it would be necessary to have a large number of classes, and a great number of distinctions and subdivisions. It would be necessary to have a scheme worked out by official persons, which could be recommended as one calculated to work properly and fairly with regard to different classes of the community. The proposal of the right hon. Gentleman was too much in this sense—that if such a Resolution were to be adopted, expectations would be raised which must result in disappointment, and would produce more dissatisfaction than it would allay, placing the tax on a less firm footing than that on which it stood at present. They now taxed income wherever they found it, without investigating its source or tracing its application. The only case, indeed, where they traced its application was in the matter of premiums for life assurances. In this case they allowed deductions. Perhaps it was a dangerous or an invidious thing to say, but he was not sure that that was a wise concession to make. But it was a concession very different from any of those which his right hon. Friend suggested they should make. In the case of premiums for life assurances no assumption was made of what a class did save or ought to save, but an allowance was given in respect of an ascertained payment by the individual. He did not want to pronounce conclusively that it was impossible to place the income tax on a fairer footing than that which it now occupied; but he thought it would be very imprudent for the House to commit itself to any general Resolution that it was prepared to do so, or even to attempt to do so, without having a definite scheme laid before it, and being able to see how such a scheme could be carried out, and what was likely to be its effect. Holding these views, he could not support the Resolution.

MR. CHADWICK

wished to com-mend the moderation and perspicuity with which the right hon. Gentleman the Member for the City of London (Mr. Hubbard) had brought forward his Motion, and he trusted that it would be accepted by the right hon. Gentleman the Chancellor of the Exchequer, seeing that much had occurred recently to justify an examination into irregularities which everyone acknowledged. In the case of the Income Tax Office, for instance, he could not concur in the opinion that it was a model of efficiency; but, on the contrary, he wished to see it completely reformed. He would state a single case in point. For the last three years he had been appealing to the Special Commissioners of Income Tax, who were, indeed, men of the highest respectability, though, considering the smallness of their salaries and the magnitude of the sums with which they had to deal, the Chancellor of the Exchequer might find it convenient to have officials of a higher class. He said nothing individually against the Commissioners, who were good and faithful servants, and did just as they pleased; but they were neither accountants by profession nor lawyers of reputation. The present system had been allowed to go on for 25 years. In the appeal case to which he alluded of "Andrew Knowles & Sons, Limited," and reported in The Times of Dec. 6th, 1877, he represented a company which claimed a deduction of £10,000 for what was called depreciation—not depreciation of machinery, but a depreciation on the value of the coal. The company returned a profit of £200,000, on which they were willing to pay. But the Commissioners refused to allow the deduction which was claimed by the company. The appeal made by the company was sustained by the Court of Exchequer, the Judges of which decided unanimously that the Commissioners were wrong—that they had been acting illegally for 25 years, and costs were given against the Crown. Cases had been known in which the Government had enforced payment of the tax omitted in previous years; but he did not know how he was to recover money which had thus been wrongfully obtained from him. No doubt there were scores of such cases in which the Special Commissioners had been wrong, but no appeal had been provided until a few years ago. On the other hand, there were, of course, innumerable cases of fraud in the returns made, and he believed that if the right hon. Gentleman the Chancellor of the Exchequer were to consult the highest authorities, they would tell him that such general dishonesty could only be accounted for by a sense of gross injustice, and he hoped that the Government would attempt some reform. The Government would do a great act of justice to the commercial community if they would show that they were inclined to take some steps to remedy what was really encouraging commercial immorality to a most dangerous extent, by the appointment of a Committee of the House, or a Royal Commission, or a Committee of Experts from the Government Offices. He believed it would be found that nine-tenths of the existing anomalies were capable of being remedied without delay. Certainly, the mode of administration was capable of great improvement, and the Commissioners might be strengthened by the addition of men of higher rank and with better salaries than £600 or £700 a-year. And, as the falsification of returns could be easily prevented by requiring verification, professional accountants might be employed to examine them with a view to the detection of fraud, in the same way as professional surveyors and engineers were by the Board of Trade. Amongst other anomalies was the different assessment of farms in England, Ireland, and Scotland—an anomaly for which he could hardly account. Some common measure of value was necessary, by which people should pay only on the real income, or for that which they enjoyed, leaving the principal intact. Again, there was an evident hardship in making the tradesman and the professional man pay at the same rate as the owner of real estate. Then, with respect to allowance, the system was very anomalous. An allowance was made on the depreciation of a ship for the wear and tear, and for the depreciation on railways, which were assessed only on their dividends. An allowance was also made for depreciation on rolling stock. But no allowance was made for depreciation of machinery used in certain works. These anomalies were capable of rectification. When the right hon. Gentleman the Member for the City of London was unfortunately out of the House he took up the question, and brought in an annual Motion to keep the question alive. It had, therefore, been discussed over and over again, and he could not see any reason why the Government should longer refuse its assent to this Motion.

SIR GEORGE CAMPBELL

also expressed a hope that the right hon. Gentleman the Chancellor of the Exchequer would promise some kind of a systematic and exhaustive inquiry into the admitted inequalities and anomalies connected with the income tax. He thought that that impost must be a permanent one, and that therefore an earnest endeavour ought to be made to remove the injustices incident to it. At the same time, some of the blots in that tax, as the right hon. Member for the City of London (Mr. Hubbard) thought them, were in his view among the germs of future improvement in it. It was, in his opinion, absolutely necessary to have a tax of that sort, as a means of equalizing taxation as between the rich and the poor; for, under our fiscal system, if we had no income tax, the poor would pay in much greater proportion to the Exchequer than the rich. Two-thirds of the revenue came from indirect taxation, which was certainly paid much more by the poor than by the rich. The simplification of our tariff had a great effect in that direction, the duties being confined to articles used by the masses, and levied on a uniform scale, and it was the same in the Excise. In the taxation of spirits the poor man paid much more than the rich. The whiskey or gin of the poor man was taxed more heavily than the fine claret of the rich man. The common tea of the poor man was taxed as heavily as the fine tea of the rich, and the tobacco tax was, also, mainly paid by the poor. Therefore it could not be denied that the great mass of our indirect taxation was paid much more by the poor than by the rich. What were we to do to remedy this? There were the post office, house tax, and other taxes paid equally by the poor and by the rich; and as the assessed taxes on horses, and hair powder, and other luxuries, were now abolished, the only small imposts apart from the income tax which fell specially on the rich were the taxes on men servants and carriages. In order, therefore, to secure equality of taxation, it was necessary that the income tax or an impost of a similar character should be maintained; and, that being so, it was necessary to inquire into the details and anomalies which had been discussed. As to the alleged practical difficulty of doing substantial justice in levying the income tax, they should not only consult the Departmental authorities, but insist that men of the very highest capacity, free from the Departmental prejudices, should deal with the subject. The abatements introduced by the right hon. Gentleman the Chancellor of the Exchequer last year in favour of small incomes he looked upon, not as—what some were inclined to call them—confiscations, but as a scientific and equitable adjustment, warranted by the fact that persons having small incomes in the lower middle class paid more in proportion than the rich to our indirect taxation. This was one of the so-called "blots," which, as he had said, were germs of improvement. The principle of a graduated income tax had been admitted to a certain extent, and it was a subject well worthy of investigation whether they should have a uniform system as regarded the upper class, or adopt a graduated system such as had prevailed in America. Then came the question whether they should distinguish between incomes derived from property and precarious incomes. No doubt there was great difficulty in drawing such distinctions, but it was equally felt that there was a great injustice in not making a distinction of that kind; and the consideration of the Departmental difficulties attending that operation ought not to be allowed to stand in the way of an earnest effort to effect it in an equitable manner. If they conceded, as they had done, the justice of excluding a man's savings from taxation by not taxing the sum he devoted to a life annuity, they ought to go further and, in assessing the income tax, carry out that principle to its logical conclusion. The probate and succession duties were the only other taxes on property; they were not heavy, and were paid only once in a generation, while the burthen on small properties was heavier in proportion than on large properties. That, also, should be inquired into. In conclusion, he supported the Motion of the right hon. Gentleman, in the hope that a system might be derived by which all classes would contribute to the public service on an equal ratio in proportion to their means.

MR. WHEELHOUSE

said, he was of opinion that the income tax in its original inception was, practically, a "war tax," and ought to be looked upon as such; and that, in some way or other, those who lived in the country ought to bear their fair share in its burthens and imposts. Much as he should have liked to support the Resolution proposed by the right hon. Gentleman the Member for the City of London (Mr. Hubbard), he could not do so, when one part of the Motion, at all events, was diametrically opposed to the view he entertained—namely, That by the due adjustment of its provisions the Income Tax be adapted for permanent use in the levy of Imperial Revenue. "Whatever he might think of the former part of the proposition embodied in this Resolution, the second part of it precluded him absolutely from doing anything otherwise than voting against the proposal as it stood. If the matter rested upon the first few words of the Motion— That, considering the successive and inevitable re-enactments since 1842 of 'The Property and Income Tax,' it is expedient that, without needless delay, the unequal incidence of the tax he corrected, he should certainly—with the exception of one word—not only have agreed with it, but should have had great pleasure in most cordially supporting it. That one word from which he differed was "inevitable"—why inevitable? Surely something might be devised to take its place. He was one of those who could not understand, and he had never been able to comprehend, the provision on which—as he supposed—the theory and practice of the income tax was founded. Something like £53,000,000 of the £78,000,000 which we required for national purposes, was derived from what might justly be considered the legitimate method of taxing our people—in other words, to that sum all, more or less, directly contributed; but, in order to raise the additional £25,000,000, the rest of the impost was placed solely and exclusively on the shoulders of the rich. These latter paid their fair share of taxation up to that point, but the residue was obtained by a most unequal levy upon the upper classes alone. It mattered very little whether this part of the contribution came from sources of real property, or from the funds, or, indeed, in any other way; but what he complained of, and what he thought they had a right to complain of, was that the income tax was never intended to be a permanent charge; that there was a constant half-promise of its speedy abolition, and yet Government after Government, merely because it had been easy of collection, merely because it had been ready at hand, had, in its turn, said—"Oh! we won't abolish this tax; we think we can get a large sum of money, especially from the upper classes of the country; and therefore, considering it the easiest way, we won't go to the trouble, even, of revising the order of things." Practically that was the real state of the matter. But if they came to look at it, was it either reasonable or just, that that which was not a permanent income, that which was precarious, that which came from trade profits, or was the result of professional exertion, should be taxed in the same way—that was, to the same extent and on the same scale, as that which rested on the permanent basis of actual realized investment? It had been said by some hon. Gentleman opposite that trade profits were but fleeting. For his part, he wished that th6 income tax was so too, and that they might never hear of it again. He had never disguised the objection he felt—namely, that people did not now, as they once did, most reasonably pay in reference to their incomes. There could be no doubt that for the last 25 years the incidence of this particular tax had been not only onerous, but inequitable; and it was high time that there should be some revision with the view of providing for a more equitable adjustment in order to make all bear their fair proportion of the burthens of the State, either through direct or indirect taxation. Much had been said about "a free breakfast table," an idea which was intended to captivate the people; those who adopted arguments of that kind—those who insisted on a so-called free breakfast table, knew perfectly well that they were merely re-moving taxation from one set of shoulders to another. He should be as anxious as anyone that there should be just relief given either to the upper, the middle, or the wage classes; but what he was anxious, above all things, to secure was, strict justice all round. He, however, knew of nothing that would militate more strongly against that justice than the idea that seemed to permeate the minds of certainhon. Gentlemen—that if a given amount was raised by general taxation, they could fall back upon the income tax for the remainder. According to his view, that was unjust, unreasonable, and unfair; and, in order to its proper and safe re-adjustment, one of the remedies he should propose would be that wherever a man chose to afford sumptuary living, he must be made to pay accordingly. He ought not, perhaps, to be made to pay the full, but to contribute relatively, to his apparent or ostensible means—a matter that, surely, might be easily arranged or assessed. Such were the views he had always entertained, and he was glad to have had this opportunity of placing them on record.

MR. MUNTZ

said, he thought the right hon. Member for Chester (Mr. Dodson) had scarcely done justice to his right hon. Friend the Member for the City of London (Mr. Hubbard) in the remarks he made. The right hon. Member for Chester attempted to prove that if the proposition of his right hon. Friend were carried out we should have to fall back entirely upon an income tax derived from the funds and land. That was altogether fallacious. There was not only income from the funds, but income from large companies, and income from capital invested in commerce. He had always maintained that, in order to do justice in the matter of incomes derived from trade or professions, the tax ought to be on a certain number of years' purchase. We ought not to say that a man who, by his industry, obtained a precarious livelihood should be treated in the same way as a person who had income from land or an investment. There was also another anomaly which ought to be redressed. The tax was assessed on the rateable value of property, and not on the rent. Thus, if premises were worth £1,000 a-year, the tax was levied on that amount; but the tenant only received back from his landlord the 3d. per pound, or whatever it might be, on the rent actually paid, which probably would not be more than £800. The only way to meet that was to assess the landlord, and not the tenant, or levy the tax on the amount of rent paid. He congratulated his right hon. Friend upon the assiduity with which he brought forward this subject. He thought enough had been said to explain to the right hon. Gentleman the Chancellor of the Exchequer the views and desires of the community. There was a great deal of discontent on this subject, and he hoped that if an opportunity should offer itself, the Treasury would carefully consider the matter.

SIR JOHN LUBBOCK

strongly objected to the doctrine broached by the hon. Baronet (Sir George Campbell) that the income tax either was or ought to be a graduated tax. He feared that the alterations made by the present Chancellor of the Exchequer had done something to encourage such theories. He hoped the right hon. Gentleman the Member for the City of London would be satisfied with the discussion, and not press his Resolution to a division. He feared that the changes he proposed presented great practical difficulties. Directly we attempted to make any exemption at all from the operation of this tax, we should be bound to make it in favour of the fund holders. No doubt there were many anomalies in this tax which were well worthy of consideration, but he hoped the right hon. Gentleman would not divide the House upon the question.

THE CHANCELLOR OF THE EXCHEQUER

Sir, there can be no more legitimate subject for discussion in this House than the question of an important tax such as the income tax, and I think we all acknowledge that the right hon. Gentleman, who has for so many years paid so much attention to this question, deserves the thanks of the House for the manner in which he has brought it before us on this occasion. At the same time, however, I cannot help remarking that the very great difference of opinion which this Motion has evoked seems to show that, if we were to go to a division upon it, we should probably place many hon. Gentlemen in considerable difficulty, and should probably find we were raising several false issues. In listening to the various speakers who have taken part in this not very prolonged debate, I have been scarcely able to count the number of wholly different opinions which have been expressed by them. The right hon. Gentleman the Member for the City of London comes forward and says that this income tax is or ought to be a very good tax, and that it should be looked upon as a permanent portion of the taxation of the country, and he proposes to amend it in certain particulars, in order to make it a proper element of our financial system. Then the hon. Member for Stoke (Dr. Kenealy) expressed Ms opinion that it is impossible to impose a worse tax, and although he would have certain taxes in its place which would bear an analogy to some portions of the income tax, he denounced the tax itself as utterly unjustifiable and bad, and only to be regarded as a war tax, or as one to be imposed in the case of urgent necessity. And, indeed, the hon. Member's indignation led him to say that no statesman had ever justified this tax, except as a war tax. It is clear, however, that the particular tax under which we are now labouring was introduced some 35 or 36 years ago, not as a war tax, but for the sake of improving our general system of taxation. It was then imposed as a direct tax to relieve the country from a certain amount—a heavy amount—of indirect taxation. And, for that purpose, the public generally paid large sums into the coffers of the State through its operation without much inquiry whether the tax was paid upon fixed, funded, or precarious incomes. The hon. Member for Stoke undoubtedly is entitled to express his opinion upon the matter. It is, however, not the opinion of the general body of the House, inasmuch as the hon. Member could not obtain even a Seconder for his Amendment. Then we have the opinion of the hon. Member for the Kirkcaldy Burghs (Sir George Campbell). He was in favour of an income tax. He thought it was a most excellent system, because it would, if properly arranged, equalize the pressure of taxation upon the rich and poor; but, as he considered the poor were overtaxed, he thought the rich ought to be chiefly hit by the income tax to set matters straight. He then went on to say he should like to see the' income tax a graduated tax, falling more upon the rich than upon the poor. Next there was my hon. and learned Friend the Member for Leeds (Mr. Wheelhouse). He has not such an admiration for the tax, for he thinks that the rich pay too much already towards the income of the country. The hon. Baronet opposite (Sir John Lubbock) answered exceedingly well the objections which are made to a graduated income tax. Then we had the hon. Member for Birmingham (Mr. Muntz), who has spoken with regard to particular corrections that might be made in the mode of assessing one kind of income and another, and indicating it would be possible to find means to so alter the incidence of the tax as to make it fair, whereas it is now unfair. I may refer very briefly to the admirable speech of the right hon. Member for Chester (Mr. Dodson), who went through the whole of the question with regard to the theory and the incidence of the tax, and in my judgment he irrefutably demonstrated that it would be impossible to amend the income tax in the way indicated by the hon. Member for Birmingham without introducing into the matter more difficulties and heartburning and inequality than we have at present to contend with. The hon. Member for Macclesfield (Mr. Chadwick), who has paid great attention to this subject, spoke upon it with intelligence and with authority; and, undoubtedly, there were some points in his speech which were deserving of attention. The hon. Gentleman referred to a recent decision in an important case with reference to a coal mine in which he was personally interested, which certainly appears to have shaken some of the views formerly held upon an important part of the law; and, moreover, he made some remarks upon the general manner in which the tax is administered. I will not enter now into the question of the effect of the decision with regard to the coal mine; but, undoubtedly, if the principle of that decision is maintained, it will give rise to most serious considerations, because it would go very much beyond the case to which it was applied. I should be sorry, however off-hand, to express any opinion with regard to it. With regard to the question of administration, I must say that some reflections have been cast upon those officials who are employed in the administration of this part of our financial system which I was sorry to hear; and I think that hon. Members, on reflection, will feel that they ought not to be thrown broadcast upon gentlemen who are engaged in so difficult, delicate, and invidious a duty as that of collecting the income tax. There is no doubt that the duty of a tax-gatherer is an invidious one, and those who discharge those duties are liable to considerable misrepresentation, and therefore it is the duty of Parliament, as well as of all their official superiors, to support and to stand up for those who are employed in discharging those functions. Of course, in saying that, I do not mean to say there may not be cases for complaint, or that hon. Members are not at full liberty to bring cases of individual misconduct under the notice of this House; but, in all such cases, the charges should be specific, so that they might be fully investigated, and, if possible, answered. We ought to abstain from the cheap and easy way of throwing out general imputations against officials who are not here to defend themselves, and whom we do not know how to defend because we do not know the exact objects of the attack. I will, however, undertake to communicate on the subject with the Board of Inland Revenue, in order to see whether the existing system of collection cannot be improved, and the natural complaints obviated or met. I am sure that the feeling of the Chairman of that Board will be the same as mine—to make the application of this tax, as long as it remains, as little oppressive and as fair as can be. The hon. Gentleman spoke just now of a mode in which he thought some check might be put upon fraudulent returns, and it is said if you were to do away with some of the irregularities in the assessment of the tax you would practically do away with, or diminish, fraud. That is a view, however, which we can hardly accept. The hon. Member for Macclesfield suggests we might employ a more stringent mode of investigation. He says we might employ accountants; and he referred to the excellent services which gentlemen of that profession render in investigating the concerns of mercantile houses which are winding up, and other concerns which are submitted to them. I have no doubt that is the case where there is a voluntary submission to these gentlemen to examine and verify these accounts; but here you have to proceed in cases where you will have no such voluntary submission, and any investigation would be of a highly inquisitorial character. This plan could only be rendered effective by arming the gentlemen in question with very stringent powers, and that, at any rate, would not increase the popularity of the tax. I cannot, therefore, accept the view of the hon. Member who made the proposal. I do not think it necessary I should enter more fully into this question. The subject generally is one most reasonable to be discussed, and I think the discussion of this evening has been a useful one; but I do not think any practical advantage would be gained by dividing upon the Motion of my right hon. Friend, and I would therefore suggest that the Motion should be withdrawn.

Motion, by leave, withdrawn.