§ MR. DODDS
*, in rising to call attention to the Probate, Legacy, and Succession Duties, and to move—That, in the opinion of this House, it is expedient that in lieu of Probate and Administration Duty, which is now payable according to unequal rates, upon the personal estate of deceased persons, and in lieu of Legacy Duty, which is now payable at various rates and various times in respect of each separate gift by will, and each separate share of an intestate's estate, one Duty only should be levied, at a uniform rate, upon the value of the personal estate of every deceased person,said: Mr. Speaker,—Sir, I have ventured to give Notice of the Resolution which it is my intention to move on the present occasion, because, during a somewhat lengthened professional experience, I have had constant opportunities of witnessing the absolute injustice in many cases, the great hardship, expense, and inconvenience in almost every case, occasioned by the present anomalous system of levying the probate, administration, and le- 888 gacy duties upon the estates of deceased persons. During last Session, my hon. Friend the Member for Forfarshire (Mr. J. "W. Barclay) submitted a Motion to the House, to the effect that the present system of taxing succession to property is partial and unjust, and, in the opinion of this House, ought to be re-adjusted. Sir, in much of what was then advanced by my hon. Friend I entirely concur; but he dealt with the subject on more general grounds than I propose to do on the present occasion. My wish is to point out the anomalies, intricacies, and difficulties of the existing system of taxing personal property under the Probate and Legacy Duty Acts, and to show how these may be entirely averted by a simple combined duty, with advantage alike to the public Exchequer and to the taxpayer. In many respects, the arguments of the hon. Member last Session resembled those used in 1853, when the late Mr. Williams, then Member for Southwark, proposed that real property should be made to pay the same probate and legacy duties as are now payable in respect of personal property. The Amendment of which my right hon. Friend the Member for the Montrose Burghs (Mr. W. E. Baxter) has given Notice tonight—namely,That Probate, Legacy, and Succession Duties upon real estate should be placed on the same footing as real estate,proceeds very much in the same direction. Now, Sir, I do not propose to touch the great question raised by my right hon. Friend's Amendment. The question whether or not real and personal property should be placed upon the same footing is one of great importance; but it is also one upon which there is great diversity of opinion in this House, and I will merely at the present time say with reference to it, that the scheme I am about to propound will apply equally to any charge it may hereafter be determined to levy upon real estate as to the probate and legacy duties which are now charged only upon personal estate. Nor do I, Sir, propose to discuss on this occasion the succession duties, or to deal with them further than as they affect leasehold property; but, of course, any argument relative to the duties on legacies would be equally applicable to duties on succession, should Parliament at any future time 889 determine to place them upon the same footing. And now, Sir, in the first place, I desire to call the attention of the House to the probate duty. The history of a tax is more or less important when the incidence of that tax is under consideration; and the history of the probate duty forms no exception to that rule; but, on the contrary, appears to afford an apt illustration of it. The stamp upon probates and letters of administration was first imposed in 1694 by an Act of 5 & 6 William and Mary, c. 21. By that Act a sum of 5s. was payable throughout England, Wales, and Berwick-on-Tweed upon every skin, or piece of vellum, or parchment, or sheet or piece of paper upon which any probate of will or letters of administration for any estate above the value of £20, should be engrossed. In 1698 this duty was increased to 10s., and was made perpetual by the Act of 9 & 10 Will. III. At that amount the tax remained until the year 1779—a period of 85 years from its first imposition. In this year the 19 Geo. III., c. 66, imposed throughout Great Britain an additional duty of 20s. for estates of or above the value of £100, and 40s. for estates of £300 and upwards, thus making the total duty in each case 30s. and 50s. respectively, and introducing for the first time an ascending scale. Further additional duties were imposed, and the limits of the ascending scale were extended by various subsequent Acts—one in 1783, by which the scale was increased to £1,000; another in 1789, whereby it was increased to £5,000; and a third in 1797, whereby it was increased to £10,000. In 1804, by the 44 Geo. III., an end was put to the existing system in England; the duties previously levied were repealed; and one uniform rate of duty, ascending by scale as high as to estates of £500,000, was imposed upon probates and letters of administration in England, and upon testament, testamentor, testament dative, or eik thereto, which I understand to mean probates or grants of administration respectively in Scotland. In 1774, a stamp duty of 5s. on any grant of probate or administration was imposed in Ireland by an Act of the Irish Parliament; and in 1844 the English rates of probate and administration duties were extended to Ireland, and were made permanent in that country in 890 1853. Up to 1815 no distinction was made in the duties payable in respect of grants of probate under will, or letters of administration of intestates' effects; but in that year the Act of 55 Geo. III., which may emphatically be termed the Probate and Legacy Duty Act, repealed all existing probate and administration duties as from the 31st August in that year, and imposed one complete scale of duty in respect of probates in England and inventories of testament testamentor in Scotland, and the duties were made to extend to estates of the value of £1,000,000 and upwards. It likewise imposed another scale of duty upon letters of administration, 50 per cent more in amount than upon probates, or in the proportion of three to two; and, in like manner, these additional duties were imposed upon confirmations of testament dative, practically grants of administration, in Scotland. These duties so imposed in 1815 still remain unchanged, except that, in cases where the whole value of the estate amounts to £1,000,000 or upwards, which was previously the limit of the ascending scale, an Act, passed in 1859, imposed for every additional £100,000, a further duty of £1,500 upon probates, and £2,250 letters of administration, and except, also, that in 1864 an Act was passed exempting altogether from these duties estates between £20—which was the previous limit—and £100. Now, Sir, it is not a little remarkable that when these duties were imposed in their present form, the then Chancellor of the Exchequer, Mr. Vansittart (afterwards Lord Bexley), proposed them as taxes which would soon undergo Parliamentary investigation with a view to their re-arrangement. The language then used was most remarkable, and with the permission of the House I should like to read the whole of Mr. Vansittart's observations, which, by the way, are very short. He said—The next subject was the duty on probates; and as it had been considered a hardship that it should operate on the whole of the effects of the deceased instead of on the balance after the debts were paid, he intended to propose a drawback to remedy this grievance for the present, although he felt that this subject was one which must soon undergo Parliamentary investigation with a view to a general arrangement of it.Hansard's Debates gives us no further information of the views of the Chancellor of the Exchequer than those I 891 have quoted. Now, Sir, it appears to me that the legacy duties imposed at the time, and under the circumstances I have mentioned, contain a great many very glaring anomalies; but there are three to which I desire especially to call the attention of the House. The first is that the duty is charged at a higher rate on small estates than on large estates; and, second, that it is levied on groups of estates between certain amounts, and not by an equal percentage; and the third is that intestate estates are charged at a higher rate by 50 per cent than testate estates. Now, as to the first of these anomalies, the fact is proved by a glance at the table of duties imposed by the Act of 1815. I will only trouble the House with one or two illustrations from that scale. An estate of £200, for instance, under a will, is charged with probate duty amounting to £5, and in the case of an intestacy, an administration duty of £8, being rates of 2½ per cent, and 4 per cent respectively. An estate of £1,000 under a will pays probate duty of £30, under an intestacy administration duty of £45, being respectively 3 per cent, and 4½ per cent, and these are the highest rates imposed by the scale. A testate estate of £2,000 pays £50, an intestate estate £75, or 2½ per cent and 3¾ per cent respectively; whilst an estate of £30,000 pays a probate duty of £450, or administration duty of £675, being 1½ per cent and 2½ per cent respectively, and all estates of a higher amount pay at these rates. The effect of this scale may be very briefly illustrated by reference to estates of the value of £1,000. Thirty estates of £1,000 each, making £30,000, pay, in the case of wills, probate duty amounting in the aggregate to £900; in the case of intestacies, administration duties amount to £1,350, or 3 and 4½per cent respectively; whilst a single estate of the same amount, £30,000, pays only £450 probate duty, or £675 administration duty, or 1½ per cent and 2¼ per cent respectively, or exactly half the rates which the smaller estates pay. Now, Sir, I submit that a principle which leads to such results is altogether radically wrong, and opposed to every principle of common justice and sound legislation. Inequality in either direction would be objectionable; but when it happens that the higher rate is charged on the smaller and poorer estate, 892 and the lower on the larger and richer estate, instead of levying a uniform rate upon all, it becomes additionally objectionable. I come next, Sir, to the second anomaly—namely, that the tax is levied in groups, and not by an equal percentage. I will again illustrate the effect of this by a few references to the tables of duties attached to the Act of 1815. The first amount in that scale is charged upon estates of £100 and under £200. Go a little higher in the scale, and we find the step is from £2,000 to £3,000. Again ascending a little higher, it passes from £100,000 to £120,000, then from £400,000 to £500,000, and so on, the steps in each case on large estates being steps of £100,000. Now, what is the result of this? Why, simply that whilst an estate of £100, which, where there is a will, pays probate duty of £2, and where there is no will, administration duty of £3, very considerable portions of every large estate, it may be to nearly 1.000 times the amount of the small estate of £100, altogether escape taxation. Take, for instance, the various sums I have mentioned. Thus, an estate under £3,000 pays duty upon £2,000 only, and £990 may altogether escape; an estate under £35,000 pays duty upon £30,000 only, and £4,990 may possibly escape; an estate under £120,000 only pays duty on £100,000, and thus £19,990 may escape; whilst an estate under £500,000 in value only pays upon £400,000, and so £99,999 19s. lid. may entirely escape payment of duty; or, as I have already said, nearly 1,000 times more than the smallest estate upon which duty is payable. The same remark applies to every estate exceeding £400,000 in value. Can this system, Sir, I ask, be defended for a single moment? Will any hon. Gentleman in this House venture to stand up in his place and endeavour to justify it? Will the House desire that a system which produces such results as these should be perpetuated, especially when, as I hope to be able to show conclusively, it can be so easily avoided? I venture to think not. I now come, Sir, to the third anomaly to which I have referred—namely, that intestate estates are charged a higher duty by 50 per cent than testate estates. Now, Sir, for more than 120 years, from the first imposition of this tax in 1694—namely, down to 1815—no such distinction existed. It seems 893 to have been drawn at that time without the least reason, so far as I have been able to discover, being assigned for the imposition of the increased tax by Mr. Vansittart. At all events, no record of any reason is to be found in the pages of Hansard. The distinction simply means that if a man makes no will his estate is subject to a tax of 50 per cent in excess of what it would have been subject to had he so made a will. Why, I venture to ask, is such a state of things allowed at the present time? Some persons entertain a very strong objection to making a will at all, and in my own experience it has often happened that persons have been induced to make a will solely on account of its being represented to them that if they did not do so their estates would be subjected to the payment of increased duty, and with no other object whatever. Very frequently no harm at all arises from the omission to make a will where the estate consists merely of personal property. The Statutes for the distribution of the estates of intestates effect a very reasonable and fair distribution, and one which I have seldom heard complained of; and if there were any just ground of complaint, the law might easily make any needful alterations. The mischief of intestacy arises where there is real property, and where, as not unfrequently happens, an infant succeeds to the entire property, to the exclusion of brothers and sisters, who, sharing only in the personalty, have to bear the increased taxation; whereas this penal tax, as I venture to designate the administration duty, does not touch real estate at all, inasmuch as the tax only applies to personal property. An eminent professional friend of mine, whose opinions I hope we shall hear before the close of this debate, said to me a few clays ago—"A man who neglects to make a will should be made to pay for it." Why, Sir, this is exactly what does not occur. The man who neglects to make a will has gone to heaven, and, so far from his being made to pay the additional tax, it not unfrequently falls upon innocent persons, and, worst of all, on those who suffer most by intestacy—namely, the younger children who by it have lost any real property, and have thus increased burthens cast upon the personal estate, in which 894 alone they participate. Now, Sir, my contention is that the power to make a will is a privilege conferred by the laws of this country, wherein our laws differ from those of many foreign countries; and, in my opinion, if a higher duty is to be imposed in one case or the other, it would be more reasonable to charge the higher duty upon probates where the testator has exercised the power the law has given him than in the case of intestacy, where he has not so availed himself of the privilege. Another reason I have heard assigned for this increased duty is that the Court of Probate appoints the administrator, whilst the executor is appointed by the testator himself. But, Sir, this makes no practical difference whatever. The Court assumes no additional duty in the case of an intestacy, except that it requires the person who is entitled to and obtains the grant of administration to enter into an administration bond, with two sufficient sureties; besides which it is to be remarked that when executors die in the lifetime of the testator, or, as occasionally happens, when they refuse to act, and the Court is called upon to grant administration with the will annexed, probate duty only is imposed, and not the higher duty, which, according to some, is imposed in consequence of the appointment of an administrator being made by the Court. This reason, therefore, cannot for a moment be maintained. Now, Sir, another great objection to this tax is that the higher duty on letters of administration presses very heavily upon the poorer classes, for it is amongst these, for the most part, that intestacies occur. The statistics of Somerset House show that, in estates under £300, about one-third are cases of intestacies, and two-thirds of wills; whilst in estates of upwards of £1,000 only one-twelfth are intestacies. Now, Sir, neither in the Parliamentary History of the Records of this House, nor in Hansard, have I been able to find any single reason why this distinction was originally made, and I shall be very curious to hear whether any reason whatever can be advanced for a state of things which I consider is anomalous, and which, in my opinion, ought not to be longer continued. Now, on account of these great and, as I venture to think, indefensible anomalies, and for very many other reasons which I could adduce did 895 time permit, I submit that the probate and administration duties demand and ought to be reformed. But, Sir, I am able to cite some very high authorities in support of the opinion I have thus ventured to express. I have already quoted the opinion of Lord Bexley, expressed when the Act of 1815 was passed, and I now beg to refer to an authority which I am sure will command the respect of hon. Members on the other side—that of the noble Lord the present Prime Minister. In December, 1852, when the noble Lord introduced his annual Financial Statement in this House, he is reported to have made the following observations:—The late Government had not neglected carefully to examine the question of the Stamp and Probate Duties, and they thought it not impossible to bring forward, on the right occasion, a duty that would reconcile contending interests, and terminate the system so much complained of.I would also beg leave to refer to an authority which I venture to think is the highest authority in the land on financial matters, an authority which will be generally admitted, I think, on both sides of the House—I mean that of the right hon. Gentleman the Member for Greenwich. When he introduced his Budget in the month of April, 1853, he made the following remarks on this subject:—With respect to the probate duty, at the present moment we do not venture to deal with it. The probate duty itself, I grant you, calls for reform; and if the Government had the means of carrying into effect that reform in the present year, it would have been satisfactory to have done so. As it is, we are obliged at present to postpone it; but we hope that in a future and early year it will come under consideration."—[3 hansard, cxxv. 1395.]Now, Sir, notwithstanding Lord Bexley's opinion in 1815, and notwithstanding these authoritative opinions expressed upwards of 25 years ago, not one single step has been taken in the direction of reforming this tax. It is true, I referred in a somewhat perfunctory way to the subject when the right hon. Gentleman the Chancellor of the Exchequer introduced his Financial Statement last year, and again during the present year, and the subject was introduced by my hon. Friend the Member for Forfarshire, as I have already mentioned, but nothing else has been done. I think my hon. Friend proved, on that occasion, the necessity for a reform of this tax. The 896 hon. Baronet the Secretary to the Treasury replied for the Government; and after referring to the question of the relative taxation upon real and personal estates, which, as I have already explained, I do not on the present occasion propose to touch, he said—"With respect to the duties on small estates compared with large ones, it was worthy of consideration how far they might be equalized. If any inducement could be wanted, it would be the bait thrown out that a re-adjustment would produce an increase of £4,000,000 to the Revenue. The question as to the difference made between properties of large amount and others of small amount really did require consideration. The subject ought not, however, to be dealt with hurriedly, or by a Resolution of that kind, which he could not support." Well, Sir, I do not wish the subject to be dealt with hurriedly; but if I am right in saying that the existing system is, as I contend and as I think I have shown it is, unequal and unjust; and if it exempts, as I think I have shown it does, large estates to a considerable extent, and taxes small ones much more heavily; and if this state of things now exists, as I have endeavoured to show it has since 1815, long before most hon. Gentlemen in this House were born; if the necessity for reform has been admitted by the Leaders on both sides of the House since the year 1853; then I think the time has arrived when reform should be no longer delayed, and I hope the House will, by adopting my Resolution to-night, emphatically assert this, and declare that for the purpose of remedying injustice no time can be more opportune than the present. I now pass to the other branch of my subject—namely, the question of legacy duties. Legacy duty was first imposed in 1780 by the the 20 Geo. III. c. 28. This was at first nothing more than a stamp duty upon a receipt given by a beneficiary in respect of personal estate under a will or intestacy. It had not been long in operation before it was discovered by one of the Judges that it was not a tax upon the legacy, but merely upon the receipt, and that where no receipt was given no duty was payable. In 1783 and in 1789 respectively, the amount of duty was increased; but the interest of a wife, children, and grandchildren was exempted from the additional duties 897 imposed in these years, and the principle of taxation remained other wise unaltered. The rate of duty was regulated by the amount of legacy. For legacies not exceeding £20 two stamps of 2s. 6d. each were required; for legacies above £20 and under £100 two stamps of 5s. each; and so on. In 1796, however, the liability to duty was transferred from the receipts to the benefit itself. This Act is an important one, because it introduced, for the first time in the history of the tax, rates of duty varying according to the degree of consanguinity existing between the deceased and the legatee or next of kin. It does not contain any provision for taxing lineal ancestors or lineal descendants, and it expressly exempts the husband and wife of the deceased from payment of any duty. In the first Act—that of 1780—there were no exemptions on account of relationship. The second and third Acts of 1783 and 1789 exempted the wife, children, and grandchildren from the increased duty, but not from the duty originally imposed in 1780. In the Act of 1789 lineal ancestors and the husband wore added to the privileged classes, and they were exempted as well as the wife and the lineal descendants from duty. In 1805, children, or descendants of children, were again brought under the tax; and in 1815, by the Act to which I have already referred in connection with the probate duties, the duty was extended to the father or mother or any lineal ancestor, the wife or husband, as before, being exempted from the duty. When those various rates were first introduced they were upon a much smaller scale than at present. Brothers or sisters were charged 2 per cent, brothers or sisters of the father or mother of the deceased or their descendants 3 per cent, brothers or sisters of the grandfather or grandmother and their descendants 4 per cent, other relatives or strangers 6 per cent. In 1804, when lineal descendants were subjected to a tax of 1 per cent, the other rates were increased to 2½, 4, 5, and 8 per cent respectively; and in 1815, the tax upon lineal descendants and lineal ancestors being then fixed at 1 per cent, the other rates were increased to 3, 5, 6, and 10 per cent respectively, husband and wife remaining exempt. At these rates, and 898 subject to the same exemptions, the duties have ever since been, and still are levied. I would here remark, Sir, that these were essentially war taxes, having been first imposed in 1796 by Mr. Pitt at a time when this country was engaged in that costly war with Prance which rendered it necessary for Mr. Pitt to treble the assessed taxes, and to increase the burdens of the people in various directions; but it is not a little remarkable that, whilst every other tax has since been repealed or reduced, and in many instances entirely abolished, these legacy duties, imposed in 1815, have remained unchanged. The incidence of this tax contains many anomalies. In the first place, the duty is payable when the benefit is paid to or retained for the legatee or beneficiary; it attaches to all personal estate of any deceased person domiciled here, where-over the property may be situate. Thus, personal property situate in Australia is subject to duty here; but, on the other hand, personal estate in this country, belonging to a foreigner domiciled abroad, entirely escapes the duty. Simple as this tax would appear to be from the description I have given of it, I hope by a very few remarks to show that it is in reality quite the contrary. In its present incidence I submit that it altogether falls short of what may be termed a good tax—that is, a tax levied upon sound principles, and principles that are generally accepted. I do not profess to be an authority upon the principles of taxation; but I venture to submit that there are a few general principles which ought to distinguish all taxes, and amongst these I may mention the following:—First, that they shall fall equally on all according to their means; second, that all taxes ought to be certain and not arbitrary; third, that they shall be levied in the most convenient way; and fourthly, and lastly, that they shall take out of the pockets of the people as little as possible beyond what they bring into the coffers of the State. I think, Sir, it will be generally admitted that that system of taxation is best which most nearly conforms to the principles I have mentioned. In its inception very little fault could be found with the legacy duty when tested by these principles—it was, as nearly as possible, a money payment over the counter, and nothing more; it was a stamp upon the receipt levied 899 upon every subject without distinction according to his means. All this is now totally changed—the rates of duty regulated by consanguinity have destroyed the equality of the tax, and have imposed a grievous expense upon the taxpayer. To satisfy the tax as it now stands, the taxpayer has, in a great majority of cases, to resort to legal advice in the preparation of his accounts and receipts. Most hon. Members have probably received those printed instructions from Somerset House which are addressed to executors, and comprised in three closely-printed pages of minature type, and have, I dare say, very often endeavoured in vain to comprehend all the details of them. In scarcely any case can the duty be satisfied by one payment; in innumerable cases it becomes payable many years after the death of the testator, and has to be levied from the representatives of the persons who were originally responsible. There is no limit of time within which the duty need be claimed, and the liability exists whether application be made for payment or not. The variety of circumstances under which payments are to be made are almost infinite—there is a payment to be made on a determinable interest, such as an annuity; there is a payment to be paid, year by year, on an interest not capable of being accurately measured; payment on the capital of a fund now, and another payment on the same account hereafter. There may be bequests—and these are very common cases indeed—of furniture, more or less ancient in its character, to a young widow, say of 20, for her life. Legacy duty becomes payable upon these at her death, which may be when she has attained the venerable age of 90. In like manner, there may be a bequest of income, say upon £1,000, to the widow for life. It is exempt from duty during her life; then, possibly, the interest passes to a son of the testator for his life, duty is now to be assessed and paid at the rate of 1 per cent. At the son's death, the interest goes, probably, to a nephew for his life; the process of assessment and payment of duty, now at 3 per cent, is again to be gone through. Then, at the death of the nephew, the interest may again pass to a more distant relative, when the duty is again to be assessed, and paid, this time, at the rate of 6 per cent. Finally, the surplus of the fund, it may be 50 or 60 years afterwards, 900 passes to a stranger, or more distant relative, when duty becomes payable upon it absolutely. Now, Sir, this lastmentioned case is a very common one, and I would point out to the House that there may be many such under one and the same will; indeed, I have known many such under one will in my own experience. Now, let the House consider the cost of all this. I have no hesitation whatever in saying that in small bequests of this kind the aggregate cost to the State of the clerks employed in recording these bequests, and in assessing and collecting the duty, and the cost incurred by the taxpayer in obtaining the assessment and paying the duty, amounts to a sum larger in the aggregate than the whole of the duty paid to the State. I am sure every gentleman of the legal Profession, and, indeed, probably almost every Gentleman in this House, must know from experience that there is an almost infinite variety of circumstances under which an infinite variety of assesments and payments of duty are to be made, and an almost endless variety of cases where a man avails himself of the power which the law confers upon him, of making a settlement by his will, and thereby escapes the higher administration duty, and does not leave the law to make his will for him. How few men are there who have not, at some time, been surprised to find, through an application from the Legacy Duty Department of the Inland Revenue Office, that they are liable for duties which ought to have been paid long years before. A claim may be now first brought under their notice which has been entered in the Inland Revenue Register so long ago as 1815; the duty claimed may have become due in 1855, and thus may be demanded 25 years after; the liable party may be the executor of some representative of the deceased, and not unfrequently it occurs that the unfortunate recipient of this notice, having no funds of the trust, has to pay the duty out of his own pocket. These cases are well known in my own professional experience, and were the risk the executors run in this respect generally known, few persons would be found willing to undertake the duties of a trustee. The legacy duty, I contend, as now levied, is a most costly one to the taxpayer, and it is equally costly to the State 901 to collect. A large and increasing staff is kept in the Legacy Duty Department—it appears from the Civil Service Estimates for the present year, that there are nearly 150 officials in that Department, and that the cost to the nation is from £40,000 to £50,000 a-year. I was for some years in the habit of attending personally at Somerset House for the purpose of passing difficult and intricate accounts, and I am able to speak with experience of the character of the staff in the Legacy Duty Department; and I have no hesitation in saying that from Mr. Hanson, the intelligent, efficient, and courteous Controller downwards, and especially amongst the gentlemen immediately under him, there is an amount of intelligence, attention, and courtesy which justifies me in saying that the Crown does not possess a more trustworthy and valuable set of civil servants than those in the Legacy Duty Department. The examination of accounts of a most complicated and difficult character, the determining of intricate and important legal questions devolves upon them; and, besides, they have to cope with the constant attempts that are made to evade payment of the higher duties. Opportunities for this evasion frequently occur, and are only prevented by the intelligence of those to whom this duty is assigned. Then the unfortunate taxpayer has to render residuary accounts, frequently of very complicated character, as well as legacy and other receipts, which are, in fact, now almost accounts in themselves. Then this large and complicated system has to be controlled; and if hon. Gentlemen have ever been to Somerset House, they will be able to form some conception of the magnitude of the Department and complexity of the system. In my own case, in moving for a Return for the purposes of the present Motion, a communication was sent to me by the hon. Baronet the Secretary to the Treasury from the Chairman of Inland Revenue, wherein he stated that to supply the information for which I had asked would entail a search through every register from 1805 to 1879, and that there were 04 registers for every year—in short, there were something like 5,000 volumes to be searched. Now, let the House consider the fruitful source of complaint and vexation and annoyance to the taxpayer which must result from such state of 902 things. These, as years roll on, must be ever increasing in volume and magnitude, and the difficulty of dealing with them must daily increase. Letters are constantly appearing in the newspapers complaining of the system, and, with the permission of the House, I should like to read a short extract from the Report of the Commissioners of Inland Revenue, presented to the House in 1870—With respect to the reversionary and contingent legacies, it appeared to have teen the custom to send out notices to executors and other accountable persons at the end of 10 years, and it was suggested that this should be done in future at the end of five years after the first inquiry, and so on continuously every five years until the cases were exhausted.The Report proceeds to say—But another very important work has been going on. Apart from the review of the books at periods of five years which has been adopted, a number of experienced clerks have been employed in reviewing the old books, commencing with 1812, for the purpose of clearing the registers. We may give, as an example of this work, the year 1814, which has been worked through. There were in the books of this year 242 open accounts; of these some have been cleared by payment of duty, others have been discharged as altogether irrecoverable, and the result is, that there remains 21 cases, and no more, which, being still reversionary, will require further operations. In all the other cases, the executors or their representatives will be set free from the often-repeated but fruitless applications with which they were being periodically disturbed under the old system, and it is hoped that all reasonable ground of complaint will be removed.I think, Sir, I need not say more in condemnation of the system which necessitates such a state of things as that just described. Then, Sir, another great objection I have to the legacy duty as now levied is that it is inquisitorial in its character, and that in the very worst sense. It is absolutely necessary to make frequent inquiries, or the duty would be forgotten or altogether lost, as it nevertheless very often is. Is it a rational thing that a husband should be receiving letters continually, asking if his wife is alive, and if not, when she died? Is it a rational thing that a child should be inquired of in a similar manner about his father, or a father about his child? And yet all these are evils necessarily attendant upon the existing system, or the Revenue would be defrauded to a much greater extent than it is at present, 903 and the question of duty overlooked. Is this a tax, I would ask the House, which ought to be maintained in its present form on any other ground than necessity, or unless that necessity cannot by some means be averted? Then, another objection to the legacy duty is that it is so nearly allied to the probate duty. Probate duty is barely paid before the taxpayer is reminded by the missives from Somerset House, to which I have already referred, that legacy duty is also to be paid. The taxpayer, in many cases, not unnaturally thinks that a double tax is being imposed upon him, and that, having paid probate duty, legacy duty should not be demanded. Both should, in my opinion, be reformed out of existence, and one simple amalgamated tax levied in substitution for them. There are two obstacles, and only two at present, in the way of this amalgamation, and these are the difference between the probate and administration duties, to which I have fully referred, and the consanguinity rates, to which I have also just called attention. Neither of these anomalies are indigenous to the respective taxes—in each case the tax was imposed without these anomalies. The varying rates were first imposed, as I have shown, at a recent period; and in the absence of any information as to the grounds upon which they were imposed, I think it may be fairly assumed that the necessities of the Chancellor of the Exchequer of that day—Mr. Pitt—influenced him. The tax seemed capable of increasing to meet the requirements of the times without offending anyone. The principle upon which it seems to have been imposed was that of expediency. No one objected probably then, and probably no one would object now, to receive a heavy legacy, perhaps unexpectedly, from a distant relative or from a stranger, merely saddled with the responsibility of paying 10 per cent duty on it. A close examination, I think, Sir, of the various changes that have been made in the legacy duties clearly shows the spirit in which these varying rates have been imposed; but I think the House will agree with me that an unsound principle cannot be rendered sound, or an unjust tax made a just one, because it was found expedient during the time of our Continental 904 Wars to levy it. The consanguinity rates occasion many anomalies. The child of the millionaire pays 1 per cent—the orphan nephew of a struggling mechanic is called upon to pay 3 per cent; aunts and uncles are charged 10 per cent upon bequests from nephews and nieces—nephews and nieces pay 3 per cent upon what they receive from uncles. An adopted child, or aged dependent, pays 10 per cent, whilst a wealthy father succeeds to a son, or vice versâ, and pays 1 per cent. A man leaves property to his wife's relatives, and they pay 10 per cent—another man takes a bequest from his wife's relatives, and pays at the rate of 1 per cent. A man's wife's sister is his sister-in-law, and, as we know from frequent debates in this House, he cannot legally marry her. Notwithstanding this, we know that the law^ is frequently disregarded, and when the husband dies, the widow, his second wife is charged 10 per cent upon the property she acquires from him. On the other hand, the wife—the sister-in-law dies, and the husband pays duty on her property at 3 per cent only. A man gives to his father's widow—his stepmother—a legacy, and she is subjected to 1 per cent duty—a stepmother gives a legacy to her stepson, and he is subjected to a duty of 10 per cent. Two sisters may take legacies out of the same fund, and payable at the same time, and one becomes subjected to 3 per cent, and the other to 10 per cent legacy duty. Thus, a testator gives his personal estate to his widow for life, and, at her death, one-half to one of his nieces, and the other half as his widow may appoint. The widow appoints accordingly to the other niece of the testator, the sister of the legatee—the one sister pays 10 per cent, the other 3 per cent. Can any good reason be assigned for any one of these anomalies? Is it rational that such an anomalous system should be permitted to continue? And these, Sir, are but a few examples. I could multiply them almost indefinitely; but these are sufficient to illustrate the absurdities and vagaries of the existing law, and the desirability of its being radically reformed. There is another and more painful aspect in which the consanguinity rates of legacy duty must be noticed. I refer to that connected with illegitimacy. How many are there of both sexes, who have attained man- 905 hood and womanhood, and probably would have descended to the grave in that happy ignorance which in such cases may surely be said to be bliss, but for this inquisitorial tax? Nearly everyone knows in his own experience of at least one such case. In my experience, I regret to say, I have known several. Many years ago, two ladies, who had attained womanhood, the daughters of a leading retired surgeon, were told by their professional adviser that they must pay 10 per cent legacy duty upon their father's estate. They were, in the first place, incredulous; afterwards, indignant. Of course, the duty was paid eventually, but they ceased to employ their old and trusted professonial adviser; and the knowledge that they had just acquired embittered their remaining days and hastened their deaths, which occurred soon afterwards. Another case, was that of a married woman, who was supposed to be the legitimate child of her father, but who, upon his death, had the unwelcome truth forced upon herself and her husband, and the result did not contribute to their future happiness. Since my Notice appeared upon the Order Book of the House, I have received a short communication from a sufferer, which I will take the liberty of reading. It is in these terms:—Sir,—I am glad to find from the newspapers that you are going to bring forward the legacy and probate duty question. I was, I consider, unjustly charged with 10 per cent duty, when my father died, whilst my brothers and sisters were charged 1 per cent only. I have been discarded and insulted by them ever since they became aware of my illegitimacy, which only became known to them since my father's death. I hope some good change will be done by you as to this unjust duty.—Yours, &c, A SUFFERER. P.S.—I hear the law of Scotland is different after the parents are married.Now, Sir, I could multiply cases of this kind; but I will content myself with this general observation, that the unfortunate results to which I have referred are attributable, solely and entirely, to the consanguinity rates upon legacies, and that these cases afford, in my opinion, a strong additional reason for their total and entire abolition. One peculiar feature of the consanguinity rates is, that they exist only with respect to the legacy duties, and their sister rate, the tax upon successions. If the principle involved in these rates is right it ought to be extended. A man upon the marriage 906 of two children—one legitimate and the other illegitimate—makes a settlement upon both. Each is subject to the same rate of stamp duty; if he dies, both are subject to the same rate of probate or administration duty; but when a stage further is reached, and the legacy duty is payable, then one pays 1 per cent, and the other 10 per cent. Conveyances are dealt with in the same way precisely. Everything, in short, that is subject to stamp duty is assessed upon equal rates, regardless of consanguinity, except the legacy and succession duties, and these, I submit, ought to follow the general rule, and ought to be charged upon all persons alike. One objection has been advanced to my proposal as to levying a combined duty, and that is, that widows would be brought into the tax; but I would point out to the House that widows are not now exempt as widows, but merely as the widows of donors, and I can see no reason why this exemption should exist even under such circumstances. A widow pays the same probate or administration duty as other persons; she pays the same income tax upon the income of any fund that maybe left to her by her husband or anyone else, and why should she not pay the same rate of legacy duty? Moreover, if my suggestion of a combined duty be adopted, it would really not impose any very substantial burden oven upon the widow. If the estate be a small one—say £ 100 in the case of an intestacy—the administration duty is 4½ per cent. The combined duty I propose should be levied is 4 per cent only, and in such a case the widow would be a gainer. In the case of a will she would pay a little additional tax. In the event of a life interest, the additional duty would be very inconsiderable, and the children who succeeded her would, in fact, be gainers. Legacies coming to a widow from any other source than from her own husband are now liable to the ordinary duty; and I would only say, in reference to the exemptions now extended to widows, that exemptions of every kind are, as a rule, bad and indefensible. Looking then, Sir, at all the circumstances of the case, I think the objection as to widows being taxed in future fails equally with the other objections to which I have referred, and I think the legacy duties should be reformed in this as in the other respects to which I have called attention. Well, 907 Sir, if I have established my premises—namely, that in lieu of probate or administration duty, one uniform charge should be imposed upon the estate of every deceased person, and if the House agrees with me that the differential rates of duty upon benefits under wills or intestacies should be abolished, then I am brought to my third proposition—namely, that these duties should be amalgamated, and that there should be levied one duty only at one uniform rate upon the personal estate of every deceased person. Proposing, as I do, to abolish all the existing probate, administration, and legacy duties, it occurs to me that many modes of supplying their place are practicable and simple. I will, however, sketch one, in order to show how comparatively easy it is to supply the place of what I propose to abolish. In Scotland and in Ireland an inventory is now recorded at the time of taking out probate or administration. I would make such an inventory the basis for the new tax throughout the United Kingdom. Let the inventory be first tendered as an account, either at Somerset House or to an officer appointed by the Commissioners of Inland Revenue at each district registry of the Court of Probate, and let him examine it or compare it with the proper valuations of furniture and other like effects, and with the proper certificates of the value of shares, stocks, &c.; and having satisfied himself of the accuracy of the inventory, let him then certify the amount of duty. Such inventory should, in my opinion, form an integral portion of the probate or letters of administration, and any persons owing moneys to or holding moneys or effects of the deceased should only pay over or deliver the same upon ascertaining that it is included at its proper amount in the certified inventory. A precedent for this principle is to be found in the 47th section of the 48th Geo. III., and it would, in a slightly extended form, apply to a case of this kind. Then the situation of the property ought alone to regulate its liability to duty, and accordingly an estate should not be taxed, as it often is now, both in Australia, for instance, and in this country, upon the same item. In the event of any item being omitted, an eik, or additional inventory, might be recorded, and further stamp duty paid. A slight mistake in the original inven- 908 tory might be corrected by a certificate of the Commissioners of Inland Revenue upon their being satisfied that the error arose from a mistake. I do not wish, Sir, that by my proposal the amount derived from the probate and legacy duties should either be increased or diminished. My Resolution does not contemplate any direct increase or remission of taxation; but I am satisfied that there would be a great individual gain by reducing the cost necessarily incurred, not merely by the taxpayer, but also by the Exchequer. The cost of collecting the duty would be very much diminished, and the official staff at Somerset House reduced. It appears, as I have already mentioned, that there are nearly 150 officials, at a cost of from £40,000 to £50,000, employed in the Legacy Duty Department at Somerset House. I have no accurate or precise information as to the number of those who are engaged upon the old accounts, and in assessing and collecting the old duties; but I have reason to believe that at least three-fourths of the whole is to be attributed to the old accounts, the whole of which would in time be got rid of. If the present system continues, the expense now being incurred must be perpetually increasing; but, on the other hand, if my system be adopted, the present staff would be required for a time to collect the old duties, and as the present officials retire upon their pensions or superannuated allowances, it would be unnecessary to fill up their vacancies. In this way a considerable saving would eventually be effected. One objection has been alleged to my proposal, and that is, that the change might throw all the duty upon the residuary legatee; but I contend this would not necessarily follow—the testator might either give his own directions, as he now gives directions whether the legacy is to be paid free from duty or not, or the law might itself enact that, as in cases of intestacy, there is a distribution of the intestate estate, so under wills each beneficiary should bear an aliquot share of the original stamp duty. With regard to the mode of collection, my hon. Friend the Member for Forfarshire suggested that the tax should be collected as the legacy duty now is, but that, I submit, would only remove one of the present inconveniences, and would perpetuate delay in collection. Indeed, as regards the probate duty, it would in many cases 909 cause that to be deferred which is now generally paid almost immediately after the testator's death. The objects I have in view are very plain and precise. In the first place, I desire to simplify the present complex system; secondly, to have one equal charge upon all personal property alike; thirdly, to make the payment fixed and certain; and, fourthly, to encourage the payment at an early date and in one sum by an equitable and liberal scale of discount or rebate. Facilities might be given to executors and administrators, who frequently experience difficulty in obtaining the means for paying probate or administration duty. Indeed, it not unfrequently is necessary for the solicitor to advance the amount himself for a time. Now, if the Legacy Duty Department wore empowered to issue, with a certificate of the amount of duty payable, an authority for payment of it, either by the Bank of England, where the deceased was possessed of Government Stock or Funds, or by any bank holding money belonging to deceased, or any insurance company, or to anyone in possession of the personal estate of the deceased, the payment would be very greatly facilitated, and an inconvenience now very frequently experienced in practice would be entirely removed. My proposal involves no change of the law other than the repeal of the existing probate and legacy duty rates except one or two trifling ones. First, an alteration of the Succession Duty Act as regards leaseholds, which are now in an anomalous position, being subject to probate duty in the first instance, and to succession duty afterwards. I think these should be made either one or the other, and I would let them revert to the position in which they stood before the Succession Duty Act of 1853, and treat them altogether as personalty and subject to my proposed combined duty. In the next place, it would be necessary to repeal so much of the Act 45 Geo. III. cap. 28, section 4, and thereupon real estate directed to be sold, and legacies charged upon real estate, would fall under the Succession Duty Acts. These two changes would simplify the existing system, and I believe in no other way would my Resolution affect the laws relating to real estate. I do not, as I have already said, advance any plea for remission of taxation. I propose, in 910 fact, that the Chancellor of the Exchequer should realize as much under my proposed system as he would do under the existing system. Now, the probate and legacy duties, taking 1877–8 as a basis—for I have not been able to procure precisely accurate returns for the last year—may, for 1878–9, be estimated at £4,789,724. The capital upon which probate or administration duty was paid in 1878–09 was, roundly, £138,000,000, and duty at 4 per cent upon this sum would produce £5,520,000, showing a surplus over the probate and legacy duties upon the last year of £720,000. "Under the existing system the legacy duty upon wills proved during the current year may become payable at any time over the next 50 or 60 years. Should my proposed system be adopted, every tax would be paid once for all; and hence there would be no doubt or suspense, as there is at the present time. I have been unable to procure details of payments of legacy duty during the last two years, distinguishing the amounts paid under old and under recent wills, owing to the cost and delay that would have been occasioned by making such a Return. During the first collection of the combined duty, large sums would still be coming in in respect of legacy duties under old wills, and at a low estimate, in the absence of precise data, I estimate that that would realize at least half the annual sum paid during the preceding year—namely, £1,500,000, and this would continue, although of a gradually diminishing amount, which would form no despicable item in the Budget of Ways and Means for many years to come. Now, Sir, a surplus of £750,000 from the proposed direct tax of 4 per cent, together with £1,500,000 for duties under old wills, would make £2,250,000—a sum which, I venture to think, ought to have some considerable attraction for the right hon. Gentleman the Chancellor of the Exchequer, especially in these times. There would be no actual addition to the taxation upon the people, but merely a rearrangement of duties, and making immediate instead of deferred payments, for which the taxpayer would have an equivalent in an immense saving of cost and vexation and risk and loss. These 5,000 voluminous registers, of which we have heard as being at Somerset House, 911 would not be increased, as they necessarily would under the existing system; the staff, also, instead of increasing, would be gradually diminished, and great saving would be effected, economy of collection would be combined with an increased Revenue; and all this would be attended by a certainty of assessment and saving of great expense by the sweeping away of vexatious regulations. There would be no very great increase in the taxation of any class, and even the class paying 1 per cent would not find the amount payable by them very much increased. At present the probate duty varies from 1½ to 3 per cent, and the average may be taken at 2 per cent. Administration duty varies from 2¼ to 4 per cent, and the average may be taken at about 3 per cent; so that even the most privileged class, who are now subject to legacy duty at 1 per cent only, pay, including probate duty, 3 per cent, and, including administration duty, about 4 per cent. All other payers of higher rates, as a rule, would gain by what I suggest; and, generally speaking, I cannot doubt that the change would be of the greatest possible advantage alike to the taxpayer and the nation. Another advantage, and it is the only other one I shall venture to mention, is the elasticity of the system I propose, as compared with the existing system. Since 1815 the probate and legacy duties have practically been incapable of expansion or contraction. Under my system they would be capable of increase to meet the exigencies of the State, and I can conceive no reason why, whilst the Income Tax is being increased, some increase should not be made upon the probate and legacy duties. On the other hand, should the good time coming ever arrive when we shall again witness a remission of taxation, then the probate and legacy duties could be diminished in their due proportion. On every ground, I feel that I may safely urge the adoption of my Resolution upon the House, satisfied as I am that it will be to the benefit of all parties. Before I sit down, Sir, I must refer to the Amendments that have been placed upon the Paper. The first is that of my hon. Friend the Member for East Sussex (Mr. Gregory), who proposes to re-consider and revise the progressive rates of probate and administration duty, and to give greater facilities for assessment and 912 settlement of legacy and succession duties upon future or contingent events, and for the relief of executors, administrators, and trustees, in respect of the same. Now, Sir, I venture to think that my hon. Friend will find it impossible so to deal with future or contingent events; and if he goes into the matter fully, I believe he will arrive at the same conclusion that I have, and will find that his object cannot be better effected than by the adoption of the system suggested in my Resolution. Under these circumstances, I confidently hope that I may rely upon having my hon. Friend's support. There only remains the Amendment of my right hon. Friend the Member for Montrose (Mr. Baxter), which he proposes to make to my Resolution. This proposition involves a new principle, upon which, as I have already said, there would be a great diversity of opinion on both sides of the House. My proposition involves no new principle, and, therefore, I am reluctantly compelled to ask my right hon. Friend not to press the addition of which he has given Notice. I merely propose to combine certain existing duties, and I do not think this at all warrants the introduction of the larger question as to the taxation to be imposed upon real estate. I now beg to move, Sir, the Resolution of which I have given Notice.
Motion made, and Question proposed,
That, in the opinion of this House, it is expedient that in lieu of Probate and Administration Duty, which is now payable according to unequal rates, upon the personal estate of deceased persons, and in lieu of Legacy Duty, which is now payable at various rates and various times in respect of each separate gift by will, and each separate share of an intestate's estate, one Duty only should be levied, at a uniform rate, upon the value of the personal estate of every deceased person."—(Mr. Dodds.)
§ MR. J. W. BARCLAY
Sir, my hon. Friend has dealt so exhaustively and so ably with the matter before the House in the speech which he has just delivered, that I shall not detain the House but for a few minutes in supporting the Resolution. I wish especially to call the attention of the right hon. Gentleman the Chancellor of the Exchequer to how hardly these probate duties fall upon small estates, not only in respect of the large amount of duty charged on these estates, but in the form of legal expenses caused by this duty. A Return 913 placed before this House at the beginning of last Session showed that the total number of estates dealt with during the year 1877–8 was 40,906. Of that number 13,749, or one-third, were estates under £300 each, and the total amount of duty levied on them was £48,831. Now, the average amount of duty paid by these small estates, I find, was almost 2 per cent on the whole. The same Return shows that estates of £30,000 each and upwards paid only something less than 1½ per cent. But to these per centages must be added the charge on the estates caused by the duty. I find that the average sum paid by the estates under £300 was no more than £3 10s. each; but anyone who has any experience of the expenses in such matters, will be of opinion that the legal expenses involved by the payment of this £3 10s. were very likely nearly twice that amount. Therefore, it will be seen that these small estates had to pay 2 per cent probate duty, and further legal expenses of between 2 and 4 per cent in making up the statements required with the payment of the duty. The hon. Member who has just addressed the House has referred to the large expenditure which might be saved at Somerset House if these duties were simplified. I venture to suggest to the Chancellor of the Exchequer, in dealing with this subject, that estates under £300 might be altogether exempted from duty. I venture to think that in so doing the Revenue would suffer very little loss, because, as I have already mentioned, one-third of the whole of the estates consists of the smaller estates under £300, and these must necessarily involve a very large proportion of the work at Somerset House. I think that estates of deceased persons of less than £300 per annum might fairly be considered to correspond with an income of £150 a-year, and ought to be exempted from probate duty, as the small incomes are exempted from Income Tax. For reasons of economy as well as of equality, I hope that the right hon. Gentleman will consider the propriety of exempting estates under £300. I hope that the very able and lucid speech which my hon. Friend has addressed to the House will be productive of a very satisfactory division, should one be necessary, and that the House will, by a large majority, strengthen the hands 914 of the Chancellor of the Exchequer in dealing with this subject in his next year's Budget.
§ MR. GREGORY
, in rising to move, as an Amendment, to leave out from the word "expedient" to the end of the Motion, in order to insert the words—To reconsider and revise the progressive rates of Probate and Administration Duty, and to afford greater facilities for the assessment and settlement of Legacy and Sucession Duties upon future or contingent events, and for the relief of executors, administrators, and trustees in respect of the same;said, he concurred with the hon. Member for Stockton (Mr. Dodds) so far as progressive rates were concerned; they were unequal in their operation, and objectionable in their assessment, large estates paying less in proportion than small ones; but his hon. Friend went further than this, and proposed to assimilate the duties on probates and administrations. He, on the other hand, thought there should be some difference between the two. The making of a will was an imperative duty; and if a man choose to leave his property to the disposition of the law, he did not see why those who benefited by the administration of the law should not pay something for it. With regard to legacies, the proposal of his hon. Friend amounted to this—he would equalize the duties on all legacies, and charge the whole duty on the general estate. All parties were to be assessed to the same duty in respect of the bounties they took under a will, but he thought it was a natural and just principle to regulate the duty according to the consanguinity of the beneficiary. His hon. Friend was driven to this dilemma, either to charge the whole duty on the residuary estate, or to apportion it among the legatees. As to the proposition that a testator himself should regulate the portion of duty to be paid by each legatee, it would impose a duty on a testator which would very seldom be performed; but he thought that further facilities should be afforded for the payment of legacy duties and for discharging executors and trustees in all eases in which one party was entitled for life and another in remainder. It might be said that in cases where the duties would be assessed at different rates, some hardship would accrue to the remainder man in the duty being levied on the whole legacy in the first 915 instance, but he believed that this would be so small in effect as to be inappreciable. Again, he thought, executors or trustees should have the power of giving notice to the Inland Revenue Office that they were about to distribute the funds in their hands, and require the Office if they had any claim upon such funds, to make it within a limited time, and if the Office did not make such claim, that the trustees or executors should be discharged. Again, with regard to succession duties, a case had occurred in which the trustees had elected to pay the succession duties by instalments, but, unfortunately, one of them forgot to pay the last instalment. The thing was undiscovered for years; but when the owner came into succession, he was called upon to pay all the instalments with interest at 4 per cent for 14 years. In a case of that kind, he thought that the principal alone ought to be recoverable. If the changes he had suggested were made, he did not think any more was required. He begged to move the Amendment of which he had given Notice.
§ MR. GOLDNEY
, in seconding the Amendment, said, he agreed with his hon. Friend that; on the whole, the present law worked very well, and was a just law. It was a law which prevailed in all civilized States, and was first adopted in this country under William III., when it was brought from Holland. In 1780, the tax was simply 1 per cent upon legacies above £100; in 1783, it was increased to 2 per cent; and in 1789, to 3 per cent. In 1796, a proposition was brought before the House to increase the duties; and a very long debate followed. On a division, as to whether real estate should be brought under the same rule as personal estate, the numbers were equal, and the Speaker gave his casting-vote against the proposition, so that there might be further time for consideration, and the subject dropped. In 1805, differential duties were introduced; and in 1815, it was established that children who had a natural claim should pay a smaller amount than those who had not the same natural claim. It was manifestly unjust, that those who had a natural right to be maintained should pay the same duty as those who had no such right. The argument in the case of the probate and succession duties were similar. Again, it might be argued, that if too 916 large a duty were imposed on children, who were the immediate objects of the testator's bounty and care, parents would be induced to make provision for them be-fore death, and would thereby evade payment of the percentage to the State. As a matter of fact, that happened rather frequently, even with the existing low duties. He believed that the legacy duty could not be increased without detriment to the State, and that, as it stood, it was based on fair principles, of which the advantages outweighed those of the fixed duty which had been suggested. No doubt, the present system caused considerable expense; but he had never heard of any injustice done in the whole great establishment of Somerset House. He believed the differential duty was better for the public than a fixed duty would be, inasmuch as it did not offer any temptations to the Chancellor of the Exchequer to levy those increases which the hon. Member seemed to think desirable. The total value of personal property had largely increased of late years, till it now amounted to 80 per cent of the whole. That was a circumstance which seemed to have escaped the attention of the hon. Member for Stockton (Mr. Dodds). It was surprising that only the remaining 20 per cent was liable to contribute to local taxation. That fact was an answer to many of the arguments they had heard; and, taking it together with other facts, he had no difficulty in giving his vote against the Resolution.
To leave out from the word "expedient" to the end of the Question, in order to add the words "to reconsider and revise the progressive rates of Probate and Administration Duty, and to afford greater facilities for the assessment and settlement of Legacy and Succession Duties upon future or contingent events, and for the relief of executors, administrators, and trustees in respect of the same."—(Mr. Gregory.)
§ Question proposed, "That the words proposed to be left out stand part of the Question."
§ MR. BAXTER
said, he wished to say a very few words with regard to the Notice which he had placed on the Paper, and which was as follows:—To move to add to Mr. Dodd's Motion—'and that with respect to the Probate, Legacy and Succession Duties real estate should be placed on the same footing as personal estate.917 The first remark he would make was to to express his surprise at the total inconsistency between our practice in regard to these duties and our practice with regard to other taxation. With regard to other taxation there was a practice, which he very much regretted to see, of exempting the lower portion of the middle classes from taxation. This practice was, he considered, carried very much farther than the benefit of the State justified. The principle adopted in the case of the Income Tax was directly opposite to the principle which they were now discussing with regard to the duties touched upon in the Motion. There was another singularity with regard to the succession duties, and that was that no defence of any kind, good, bad, or indifferent, had ever been made from the Treasury Bench by any Chancellor of the Exchequer of the anomalies or inequalities so ably pointed out by his hon. Friend the Member for Stockton (Mr. Dodds). There had been some defences made from time to time by some independent Gentlemen; but it was a remarkable thing that the Chancellor of the Exchequer, speaking with authority, had never been able to defend these duties. It appeared to him that it was utterly impossible to justify the taxing of small successions at a higher rate than large ones, and the taxing of testate and intestate estates at different charges, and the taxing of real estate where it was used for the purposes of trade, whilst, where it was not used for the purposes of trade it got off scot free. These anomalies and inequalities in the present system had not only been frequently pointed out, but they had been proved to demonstration time and again in that House. To his mind, it was most surprising that no Chancellor of the Exchequer had ever had the courage to grapple with this matter; and the more especially so because it was perfectly evident that any-honest, logical attempt to remove these anomalies and put on a uniform duty, as proposed by his hon. Friend the Member for Stockton, would add, he believed, something like £1,000,000 sterling to the Revenue of the country. The present system appeared to him to be radically defective, and he thought it was no use attempting to patch it up in the manner proposed by the hon. Member for East Sussex (Mr. Gregory). He 918 should, therefore, give his support to the Motion of his hon. Friend the Member for Stockton. But he was most desirous of saying that he did not think the House of Commons would be satisfied with stopping here. He claimed, in the interests of justice, that real heritable property should be placed on precisely the same footing, with regard to these duties, as property which was moveable. He was afraid that the country—the electors—were not sufficiently aware of the gross inequality of the law in this respect. He had an abstract of the Parliamentary Return, issued in February, 1878, for the year 1876–7, from which he found that on personal or moveable estates the probate or inventory duty was £2,260,176, and legacy duty £2,846,054, making together £5,107,130; whilst the succession duty on real or heritable estates was only £849,340, making a difference of £4,257,700. The right hon. Gentleman the Member for Greenwich calculated, some years ago, that if the real property were taxed it would add £2,000,000 to the Exchequer; but the Conservative Party insisted that it would involve a tax of a much greater extent, and Lord Cairns said that the landed property of the country, if that alteration were made, would pay £8,000,000 a-year. He had gone into a calculation himself, but, at that late hour of the night, would not trouble the House with it. It would be sufficient for him to say that he thought any person who had studied this subject thoroughly must come to the conclusion that the exemption of landed property from these duties cost the country not less than £4,000,000 a-year. He had never been able to see why they should not be placed on the same footing, and every great financial authority, who had written and spoken on this subject, took the same view. Many years ago, Mr. Gwynne, the Comptroller of the Duties, addressing the Commissioners of Stamps and Taxes, said—It is a matter of surprise that the legacy and probate duties have not yet been extended to real as well as personal estate. Clearly, there is no distinction between them which on any sound principle of finance should exempt one description of property and not the other.In Mr. M'Culloch's article on taxation in The Edinburgh Review for 1860, he read as follows:— 919We cannot but think that the mode of charging the duty (meaning the three duties before specified), as well as the duty itself, should be identical on all parts of property; and that if an individual succeed to an estate or other real property which would sell for a certain sum, the duty should be imposed on that amount. This would be a plain and, apparently, an equitable proceeding; for it is not easy to see why one variety of property should be dealt with in one way, and another in a different way.…. The result of the present system of assessing the tax on real property is such that it is not supposed to yield a third part of what it would yield were it assessed in the same way that it is assessed on money and other personal property. It would require very conclusive reasons to justify a distinction of this sort, and, as we have seen, none such really exist. The sooner, therefore, that this discrepancy is terminated, and the duty assessed in the same way on all descriptions of property, the better it will be for all parties. Anything like even the appearance of favouritism in taxation should be carefully guarded against. It is uniformly productive of the worst results, and is especially objectionable when, as in the present case, it is manifested on the side of the richer and more powerful classes.Now, the only argument he had heard against the taxation of real and personal property was the old theory of peculiar burdens on the land of the country. As a landowner himself, he denied that theory, and he felt persuaded the time would come when the House would have to free itself from the charge that the landowners took very good care of themselves in the matter of the succession duties. ["Oh, oh!"] Hon. Gentlemen cried "Oh, oh!" but he wished to remind them that the Land Tax was based on a valuation made some 200 years ago which now was merely nominal. He entirely agreed with his hon. Friend who had just sat down (Mr. Goldney) in what he said about Corporations. He could see no reason why Corporations should be exempted. This subject was occupying more attention than many hon. Gentlemen believed, and he himself had presented several Petitions, very much to his surprise, in favour of this Motion. He thought that the Government had now an excellent opportunity, before the Budget of next year, of allaying the feeling of discontent which existed, and, at the same time, adding a very considerable amount to the national Exchequer.
§ THE CHANCELLOR OF THE EXCHEQUER
said, the Amendment, or rather rider, which the right hon. Gentleman the Member for Montrose (Mr. Baxter) had placed upon the Paper was not 920 before the House, and the few observations which the right hon. Gentleman had made showed that they were not to be called upon on that occasion to discuss that Amendment. He thought the right hon. Gentleman had exercised a wise discretion in not inviting them to enter upon so large and difficult a discussion as that which would have been raised if the House had been asked to consider the Amendment. He protested against some of the assumptions which the right hon. Gentleman had made, and he thought that if the question were argued out, it would be easy to adduce very good arguments against the doctrine of the right hon. Gentleman, that real estate should be taxed as regarded legacy duty upon the same footing as personal estate. The right hon. Gentleman had given an inadequate view of the difference between the burdens which fell upon real estate and upon personal estate. He thought that if the right hon. Gentleman would analyze his estimate of the value of real property, and correct it by deducting charges in the nature of mortgages and other charges, he would find that that value was not as large when compared with the wealth of the country as he would have the House believe. He, however, proposed to confine his observations to the question raised by his hon. Friend the Member for Stockton (Mr. Dodds), and to treat his Motion from a purely practical point of view. He understood that the object of his hon. Friend was to bring to the cognizance of the House the anomalies which undoubtedly existed in the present system under which probate and legacy duty upon personal property was levied. The charges which the hon. Gentleman brought against that system were three—namely, that the smaller estates were charged with the highest rate of duty, that the scale of assessment proceeded by jumps, instead of by regular percentage, and that an objectionable difference was made between the charges on testate and intestate estates. In the justice of the first of these complaints he entirely concurred, it being perfectly clear that the scale as it stood at present bore more heavily upon the smaller estates than upon the larger. This was a matter which called for attention, and, at the proper time, for remedy. As to his hon. Friend's second charge, he thought it would be far more 921 convenient that the scale should be in the nature of a scale by steps, than in the nature of a percentage duty, because of the great difficulty that there would be in assessing the duty by percentage if stamps were to be used for the purpose. It would be extremely inconvenient to keep stamps of every variety necessary to meet the peculiar incidence of a strict and accurate percentage duty. The hon. Gentleman might say, "Why should you use stamps? Why should you not adopt my principle of having an uniform tax to take the place both of the probate duty, which is raised by stamps, and the legacy duty, which is raised by percentage? Why not substitute for these two an uniform percentage duty? "But if this suggestion were adopted, if the same amount of revenue was to be raised, and he assumed that that was intended, it would be necessary to substitute for a tax which was levied partially by stamp upon probate, and subsequently by percentage upon legacy duty, an uniform amount which would cover both those charges. This would be to place a very heavy charge upon successors to property, who probably in many cases would not find it very convenient to bear it. The hon. Gentleman had referred to the fact that it often happened that persons coming into property were unable to pay probate duty without inconvenience. How great, then, would be the inconvenience to which they would be subjected supposing they were compelled to find the full amount, as would be the case if the hon. Gentleman's suggestions were adopted. And for this reason, that it provided a self-acting machinery by which the amount of the property was ascertained by the probate stamp which the person who was entitled to the property was anxious to obtain, and who would, therefore, not attempt to evade the duty. He thought that it was more convenient and more secure for the Revenue, and certainly more convenient for the person who had to pay the duty, that the duty should be levied partly in the form of probate duty, and partly in the form of legacy duty. He fully admitted, however, that the scale on which the duty was levied should be re-considered. But, in re-adjusting the duty, he did not think that the proposal of the hon. Member would be advantageous, either to the Exchequer or to those who 922 had to pay it. The third complaint which had been made was that a difference was made between the duty on intestate estates, and those which were bequeathed by will. Upon that subject, however, he should wish to reserve his opinion. He was by no means prepared to say that he should not admit the force of the argument which had been used in reference to it; but, at the same time, he did not wish to pledge himself to anything until he had given further consideration to the matter. In order to place the two classes of estates upon an equal footing, it would be necessary to raise the amount of the duty upon testate estates. He admitted that these were all matters that required consideration, and since last year he had given some attention to the subject. The hon. Member, however, must admit that this was a very difficult question, which had been for a number of years under consideration by the ablest financiers, who, down to the present time, had been unable to see their way to a solution of the problem. In these circumstances, he did not think he was open to any serious charge for not having as yet succeeded in satisfactorily settling the question. Dealing with the subject of consanguinity, he must remark that if too high a duty were exacted in respect of property bequeathed from father to son, or from husband to wife, the Revenue would lose largely by moans of inter vivos arrangements, while a good deal of ill-feeling might be roused by adopting that course. With regard to the subject of the descent of property to illegitimate issue, while he admitted that many hard cases might result from the operation of the present system, he doubted whether it would be wise to disturb an arrangement which had existed for so long. Though he admitted the justice of much that had been said by the hon. Gentleman, he should demur entirely to the acceptance of such a proposal as that lie had placed on the Paper. It would be altogether unwise to commit the House to such a proposition as that there should be an uniform rate of the value of personal estate. General questions of taxation were open to considerable doubt; but, with regard to this, it was a proposal of a different character. It asked the House to commit itself to a specific plan which he could not admit 923 to be the right, or best plan even, to attain that which the hon. Member wished, and he, for one, would not agree to it. If the House were to pass any Resolution at all, he thought the Resolution as it would stand with the Amendment of his hon. Friend the Member for Sussex (Mr. Gregory) would be harmless and, to a certain extent, beneficial. He should prefer that no Resolution should be passed at all, and that the House should be contented with the discussion, which had been of a very interesting and suggestive character; but, if a division were taken, he should be prepared to negative the Motion of the hon. Member for Stockton, and to support the Amendment of the hon. Member for Sussex.
§ MR. DODDS
said, he had no wish to detain the House, but he must beg leave to say a few words in reply. With reference to the remarks of his hon. Friend the Member for East Sussex(Mr.Gregory) as to the desirability of making a man pay for the administration of his estate by the law in the event of his dying intestate, he thought the hon. Member could scarcely be serious in putting such a proposal forward. The Act for the distribution of intestate estates imposed no duty on the State. The representatives of the man who died intestate were responsible for putting it in operation. He could not conceive the smallest reason for the differential duty being paid on that account. As to the suggestion about an estate with a life interest and remainder over to somebody else, the difficulty could be got over in the simplest possible way by taking the whole duty out of the corpus of the fund, by which arrangement everybody would pay equally from the commencement. The tenant for life would have £100 reduced by 4 per cent, and would receive the interest upon 96 per cent. Then it was said that the duty would be thrown entirely upon the residuary legatee, if the testator did not make a proper provision for the duty in his will. Rut the hon. Member must know very well that a solicitor, in drawing a will, always took the instructions as to whether duty was to be charged upon a particular legacy or not. It was the duty of the solicitor to see to that in drawing a will; while, in the case of an intestacy, the difficulty would not arise, because each would take Ms share out 924 of the portion. Then it was suggested that it was very hard to charge interest upon the duty, where it had not been paid for a long time. He quite admitted that it did sometimes seem hard, and in one case recently, within his own experience, where the duty was £1,000, the interest was between 20 or 30 per cent of that amount. But he could see no hardship in the arrangement. The duty was due, and if it had been paid, the State would have had the benefit of it; while, on the other hand, the person having the money, had no doubt been making more of it than the 4 per cent the State charged him. He must beg pardon of the hon. Gentleman opposite (Mr. Goldney) for interrupting him. He thought the hon. Member was mixing up the probate and legacy duties. The probate duty certainly was brought in in 1694; but the legacy duty was not imposed till the year 1780, in the time of George III. With regard to the case of a man selling property, he must remind the hon. Gentleman that there was no difference whether a man sold to a relative or to a stranger. Therefore, he failed to see any answer to his proposal in that objection. It must be remembered that he was not suggesting for a moment that there should be any increase in these duties. The Chancellor of the Exchequer had clearly defined that; his proposal simply was that the same duty should be levied in a different form. He thanked the Chancellor of the Exchequer for the way in which he had accepted some of his propositions, and he hoped now that the question was clearly before the House, that the Government would take it up another year. He might acid, as to the difficulty of raising money, that if a certificate were granted at the Inland Revenue Office of the amount payable, and that certificate wore made a voucher to the insurance companies, or the bankers, anyone having any part of the estate could easily get money. If that was not done, then they might make a portion payable after a certain time. He had heard nothing during the debate to impair or weaken his case, and he must therefore ask the opinion of the House upon it, feeling quite sure that the time was not far distant when his proposition, or something very like it, would be agreed to by some Chancellor of the Exchequer.
§ Question put.
§ The House divided:—Ayes 59; Noes 131: Majority 72.—(Div. List, No. 105.)
§ Words added.
§ Main Question, as amended, put.
The House divided:—Ayes 131; Noes 24: Majority 107.—(Div. List, No. 106.)
Resolved, That, in the opinion of this House, it is expedient to reconsider and revise the progressive rates of Probate and Administration Duty, and to afford greater facilities for the assessment and settlement of Legacy and Succession Duties upon future or contingent events, and for the relief of executors, administrators, and trustees in respect of the same.