INCOME TAX.

HC Deb 31 July 1882 vol 273 cc246-55

Clause 11 (Grant of duties of income tax).

Amendment proposed, In page 4, line 39, leave out "fivepence," and insert "sixpence halfpenny."—(Mr. Chancellor of the Exchequer.)

Question proposed, "That 'five pence' stand part of the Clause."

MR. J. G. HUBBARD

said, that before this Amendment was agreed to he wished to say a few words upon the subject of the Income Tax. This tax, amongst its other inequalities, had this special one—that it favoured wealth and oppressed poverty, it favoured capital and oppressed industry. Its incidence was often very unjust and anomalous. It might be fairly said that a very large proportion of the landed and house property of this country was heavily mortgaged. Let them suppose that any given house or piece of land was of the nominal value of£2,000 a-year. For the purposes of local rating it might be assessed at£1,800; but the Income Tax would be charged upon£2,000. If the property were mortgaged for£1,600 the owner would, to that extent, recoup his Income Tax; but he would still be chargeable on£400, having a residue of£200 only. This was an anomalous state of things, and he had hoped that something would have happened to have induced the right hon. Gentleman to place this very important subject under the consideration of the very able administrators of the Inland Revenue, and of the Local Government Department, and that measures would have been introduced to mitigate the inconvenience attaching to the present law.

THE CHAIRMAN

said, the observations of the right hon. Gentleman would be more pertinent if made upon the whole clause. The Question now before the Committee was simply the substitution of the words "sixpence halfpenny" for "fivepence."

Question put, and negatived.

MR. MAGNIAC

proposed to insert, in page 4, after line 39— Provided, That in the case of any Company established in the United Kingdom with the object of carrying on business wholly or in part abroad, Schedule D of the said Acts shall apply only to such proportion of the annual profits or gains of such Company as shall be actually received and distributed in the United Kingdom. He proposed this very reasonable Amendment with the consent of the commercial community. If a Company were established in England, but carried on business in a foreign country, and if the only operation connected with the Company in which English people were concerned was the transmission of the necessary money to pay dividends to the English shareholders, it had been lately held that the whole of the profits of the Company were liable to pay Income Tax. There might be very good reasons for it; but those persons who were concerned did not understand them. Foreign shareholders asked why they should pay Income Tax to the English Government; and, on the other hand, the few English shareholders asked why their profits should be diminished in order to pay the Income Tax which was levied on the foreign shareholders? A Judge who lately tried a case of the kind made some very strong observations. He said that, with excessive reluctance, he felt bound to decide against the Company and in favour of the Treasury. If there were good reasons why the Income Tax should be exacted under such circumstances, the mercantile community would be found, as in the past, perfectly ready to bear the burden.

Amendment proposed, In page 4, line 39, insert—"Provided, That in the case of any Company established in the United Kingdom with the object of carrying on business wholly or in part abroad, Schedule D of the said Acts shall apply only to such proportion of the annual profits or gains of such Company as shall be actually received and distributed in the United Kingdom."—(Mr. Magniac.)

Question proposed, "That those words be there inserted."

MR. COURTNEY

said, he was afraid it was impossible to accept the Amendment of his hon. Friend; indeed, he thought that, on examination, there was very little to be urged in its favour. The words of the Amendment were— That in case of any Company established in the United Kingdom with the object of carrying on business wholly or in part abroad, —he would give his hon. Friend (Mr. Magniac) the benefit of the doubt, and say that business was carried on wholly abroad— Schedule D of the said Acts shall apply only to such proportion of the annual profits or gains of such Company as shall be actually received and distributed in the United Kingdom. The Company was formed here, and the Company and the foreign shareholders acquired the position of shareholders in an English Company. The protection and advantage a foreign shareholder had in being a shareholder in an English Company made up the whole case. The foreign shareholder might be an Englishman who had lived abroad, but who sent home his capital to a Company here. Was that Englishman to be relieved of the taxation which he ought to pay because he lived abroad? Whether an Englishman or foreigner, it made no difference. A Company which was domiciled here was protected by the English law; it depended upon its domicile for the maintenance of its position; and, therefore, the shareholders must pay a fair share of taxation.

GENERAL SIR GEORGE BALFOUR

said, the case was not altogether as the Financial Secretary to the Treasury stated. He knew a Company which carried on business in the Mauritius, where local shareholders resided, on whose local profits a tax was levied in England, though these shareholders were taxed in the Mauritius for the Island Revenue; thus, though only a portion of the profits were sent home, all the profits of the shareholders living in the Mauritius had their incomes taxed at the same rate as the shareholders living in England. His hon. Friend the Member for Bedford (Mr. Magniac) drew a very proper line. Whatever money came to England ought to bear a fair amount of English taxation; but not so with the other portion of the profits of a Company which never came to England, but were distributed locally where created.

MR. J. G. HUBBARD

said, his hon. Friend the Member for Bedford had raised an exceedingly interesting question. It was one which was worthy of the consideration of those who had the arrangement of the incidence of the Income Tax. His hon. Friend (Mr. Courtney) had omitted to say that the legal position of the taxpayers was simply this—whether it was a firm or an individual, it made no difference; if the individual or firm were located here, domiciled in the United Kingdom, they were under the protection of the Government; and they were, therefore, subject to the taxation of the country. There was another portion of the question which was alluded to by the hon. and gallant Gentleman opposite (General Sir George Balfour), and in respect of which some legislation would be requisite—he referred to those institutions and firms which were not located here at all. They were not English firms, but firms which, from vanity or other motives, desired the name of London establishments. They inscribed their names upon their doors and in the Trade Directory, and the consequence was they were called to account, and challenged to pay Income Tax. They pleaded, perhaps with truth, that all their profits were made abroad, and that all their accounts were kept abroad. Their case was a problem which the Commissioners had not as yet been able to solve. He thought the only solution of the question was that such a portion of the profits made by such institutions should be charged as would equal the commission they would pay to competent and authorized agents in this country. He thought his hon. Friend must agree that if Companies were domiciled here, they must be subject to ordinary obligations, and make a return of their profits, and be taxed accordingly.

MR. MAGNIAC

said, the Companies he had in view were not governed by the English law, but by the law of the country in which their operations were conducted. He would not, however, press his Amendment. The question would grow, and attract public attention at another time.

Amendment, by leave, withdrawn.

On the Motion of Mr. CHANCELLOR of the EXCHEQUER, Amendments made, in page 5, line 4, by leaving out "two pence halfpenny," and inserting "three pence farthing;" in page 5, lines 5 and 6, by leaving out "one penny three farthings," and inserting "two pence and three-eighths of a penny;" and in page 5, after line 6, by inserting— Provided always, That, where any dividends, interest, or other annual profits or gains are due or payable half-yearly or quarterly in the course of the said year, the first half-yearly payment and the two first quarterly payments shall be deemed to have been or be chargeable with the duty of five pence, and the other half-yearly payment and the two other quarterly payments shall be deemed to be chargeable with the duty of eight pence,

Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."

SIR WALTER B. BARTTELOT

said, the right hon. Gentleman had asked them to grant 3d. in the pound extra Income Tax, and the whole of the money was to be charged upon the last half of the year, so as to enable the right hon. Gentleman to raise£2,300,000 for the war expenses in Egypt. The right hon. Gentleman had stated very clearly and distinctly that if, unfortunately, affairs should go on in Egypt, and the condition of things there should not be settled during the next three months, he would have again to come to the House and ask for a further Vote of Credit with which to carry on the war. He would like to know how the right hon. Gentleman meant to raise the money? It had been stated by the Prime Minister, and by the Secretary of State for War, that they did not like to ask for more money at one time than was required. If it was necessary for the Government to come to the House in the month of October and ask for more money, the question he wished to put, and which he hoped the Prime Minister would fairly consider, was that in view of the fact that the Income Tax was paid by a very small proportion of the people of the country—especially by a very small proportion of those who now had great political power—he would not see whether all, or, at any rate, some portion of the money to be raised might not come from some other tax, so that all the people of the country might be called upon to bear their fair share of the burden of the war. He put the question to the right hon. Gentleman in order that it should not be said that no warning was given him by anyone with regard to the taxation in respect of the war.

MR. NEWDEGATE

said, that since the question as to providing the means for meeting the expense of the Egyptian Expedition had been raised by his hon. and gallant Friend the Member for West Sussex (Sir Walter B. Barttelot), he (Mr. Newdegate) would, with the permission of the Committee, avail himself of the opportunity of correcting an error into which he had fallen on Friday last, during a discussion on the taxation of luxuries in this Committee. He had then stated, in answer to the Secretary to the Treasury (Mr. Courtney), that£16,000,000 of Customs duties, exclusive of those imposed upon prime necessaries and the principal materials for manufacture, had been repealed or reduced up to 1861. At the time he stated this he was speaking from memory without the means of reference; and his memory, he regretted to find, had betrayed him as to the date, but not as to the amount. He begged to apologize to the hon. Gentleman the Secretary to the Treasury, and to the Committee, for the error into which he had lapsed. He had now in his hand the calculations to which he had intended to refer; they were all taken from the Statistical Abstracts of 1870 and 1878, and he found that these constituted the amounts of Customs duties repealed or reduced more than imposed during the several periods to which he would now refer. From 1840 to 1854 inclusive,£10,092,719; from 1855 to 1869 inclusive,£9,255,526;from1870 to 1874 inclusive,£6,924,245;total diminution,£26,272,490; so large was the amount of annual revenue abandoned in deference to the dogma of free imports; but he would cast out of his statement the first period, that from 1840 to 1854 inclusive, when the amount of Customs duties abandoned was£10,092,719. He abandoned, in his present statement, the Customs duties abrogated during this first period, because the duties abandoned during that period included the repeal of the principal Customs duties formerly imposed upon prime necessaries, and upon the principal materials for manufacture. He should, therefore, take the two subsequent periods, that from 1855 to 1869 inclusive, when£9,255,526 of Customs Revenue were abandoned; but with the above period he should take the period from 1870 to 1874 inclusive, during which£6,924,245 of Customs Revenue were abandoned. These two periods taken together formed a period from 1855 to 1874, wherein an aggregate of£16,179,771 of Customs duties was abandoned. This was the aggregate period to which, on Friday last, he had intended to refer as that during which£16,000,000, in round numbers, of Customs duties had been abandoned, although a very small portion of those Customs duties were imposed upon prime necessaries, or upon materials necessary for manufacture. He (Mr. Newdegate) begged to call the attention of the First Lord of the Treasury to these facts, because if this country should become exposed to the demands of a heavy war, it should not be forgotten that other resources than an increase of the Property and Income Tax were available; it would be neither just nor politic to limit the taxation necessary for the maintenance of such a war to the direct taxation levied upon property and income—the burden ought to be more generally distributed, for then it would be more easily borne. He thanked the Committee for having allowed him to call its attention to these important facts.

THE CHANCELLOR OF THE EXCHEQUER (Mr. GLADSTONE)

said, it would be a great calamity if we should ever be driven into a position in which it would be necessary to re-impose charges upon articles that had been liberated from taxation. But the question put to him by the hon. and gallant Baronet was a very fair one; and in answer to that he had to observe that the Income Tax, as at present constituted, undoubtedly fell upon a very limited portion of the population of the country—in his opinion, upon too limited a portion. The tax was at first imposed upon all incomes of£150 and upwards, and in 1853 a proposal was made and accepted by the House that the sum subject to taxation should be£100. Reflection confirmed him in the belief that this was a wise proposal; and he had to confess, with some regret, that during the existence of a Government for which he was responsible, retrogression was made from that position, which, to his mind, was distinctly a step in the wrong direction. But a still wider measure—not a step, but a stride—was adopted by the late Parliament when, to his great astonishment, and in spite of the best protest he could make, it immensely restricted the number of persons liable for the tax. He regarded it as extremely doubtful whether the time would come when this would be retrieved; but he hoped it might come. Although it had happened on more than one occasion, and might happen again, that when a sudden emergency like the present arose, recourse should be had to the Income Tax on the ground that it produced the minimum amount of disturbing effect, yet he perfectly agreed with the spirit of the hon. Member's remarks—that it would not be right for any Government or Party, in the event of the prolongation of the present operations or of the aggravation of the burden of cost, to look to the Income Tax alone, and not to other sources of Revenue.

SIR GEORGE CAMPBELL

said, he had a strong conviction that by far the greater number of wars in which the country had been engaged were brought about by the class of persons who paid Income Tax. All recent wars, at any rate, had been made by this class. Who were the people who supported the newspapers that cried out for war; who supported the "Jingo" policy and raised the cry that British prestige was being endangered all over the world? It was certainly not the working-classes of the country who did all this; and he believed there was no more effectual means of checking this tendency to create war than by throwing the cost of war upon the class who paid the Income Tax

MR. ARTHUR O'CONNOR

said, he had no wish to detain the Committee for any length of time upon the present question; but he was afraid if he allowed this clause, as amended, to pass without any comment, his attitude with regard to the policy of Her Majesty's Government might be mistaken. To the original clause he should have had no objection; but the clause, in its amended form, made provision for a condition of things which had been brought about, in his opinion, by the fault of Her Majesty's Government. The House had, however, endorsed the action of Her Majesty's Government—at least, the great majority of Members had done so. The right hon. Gentleman the Prime Minister, following, with a fidelity that was extraordinary, the foreign policy of his Predecessors, which he once denounced as confiscation, had consented to the bombardment of a large commercial city without any declaration of war, and was now prepared to go as far as his political opponents in the way of aggression. He did not wish for a moment to appear to agree with the majority of the House with regard to the present war—on the contrary, such protest as he could make he desired to offer against the aggressive conduct of Her Majesty's Ministers. The hon. Member for Kirkcaldy (Sir George Campbell) said he believed that the wars of this country had been brought about by the class of persons who paid Income Tax, and he argued that, if possible, the cost of those wars should fall upon that class; but he (Mr. Arthur O'Connor) went further and said— Let those who make the quarrels Be the only men to fight. He was inclined to think that if this principle were applied there would be very few wars. For his own part, he should be glad to see Her Majesty's Ministers sent out to settle the Egyptian Business with an equal number of Egyptians; and he would be more inclined to vote for the impeachment of the Ministry than he was for the application of public money in support of a policy which he regarded as ignominious and cowardly.

MR. MAGNIAC

said, he was sure the hon. Member for Queen's County, whose remarks were always so fair, could not wish to convey, in an absolute sense, that the right hon. Gentleman at the head of the Government intended to have a commercial city bombarded.

THE CHAIRMAN

said, the hon. Member could not discuss this point on the Question before the Committee, "That the Clause, as amended, stand part of the Bill."

MR. ARTHUR O'CONNOR

said, he submitted, of course, to the ruling of the Chair, although he had been under the belief that Members were allowed to make personal explanations.

Question put, and agreed to.

Clause 12 (Provisions of Income Tax Acts to apply to duties hereby granted, 44 & 45 Vic. c. 12) agreed to.

Clause 13 (Provisions as to duty on dividends, &c, paid prior to passing of this Act).

On the Motion of Mr. CHANCELLOR of the EXCHEQUER, Amendment made, in page 5, line 18, by leaving out "hereby granted," and inserting" at the rate of five pence;" in line 26, by leaving out from "in" to "deduction," in line 27, and inserting— Or have made an insufficient deduction in respect of income tax, he shall be authorised to make the deduction or a sufficient deduction to make up the deficiency; and in lines 30 and 31, by leaving out "hereby granted," and inserting "at the rate of five pence."

Clause, as amended, agreed to.

Clause 14 (Provisions of Income Tax Acts to apply to duties to be granted for succeeding year) agreed to.

Motion made, and Question proposed, "That the Chairman do report this Bill, as amended, to the House."

MR. SCLATER-BOOTH

said, lie would not detain the Committee by moving the new clause of which he had given Notice with reference to the maintenance of main roads; but he would be glad to learn whether a Supplementary Estimate would be presented before the end of the Session extending the amount which the Government intended to assign to local authorities?

THE CHANCELLOR OF THE EXCHEQUER (Mr. GLADSTONE)

said, that there would not be a Supplementary Financial Estimate; but a redistribution would take place in the current financial year.

MR. WARTON

pointed out that, through what appeared to be an arithmetical error, the occupiers in Scotland and Ireland would be charged four-fortieths of a penny more than was their correct proportion under Schedule B.

Question put, and agreed to.

Bill reported; as amended, to be considered upon Wednesday.