INCOME TAX.—RESOLUTION. (Hansard, 11 May 1886)

§ MR. BARTLEY (Islington, N.)
, in rising to call attention to the way in which Income Tax was levied; and to move— That a Select Committee be appointed to inquire into the way in which Income Tax is levied, especially on unlet property, on partially let property, on property rated above its present letting value, on the investments of Insurance Companies, Savings and other Banks, and other cases in which Income Tax is claimed on more than the income actually received, said, he wished to remind the House of a few instances in which excessive hardship was inflicted upon those who had to pay Income Tax on larger sums than they were really earning. The real crux of this point was the payment of the collectors and assistant commissioners by a system of poundage. In all the Associations which were growing up for the reform and better administration of the Income Tax, the first principle laid down was that the poundage system should be done away with. The way in which the Income Tax was assessed led to serious anomalies and excesses. Since he introduced the subject in the debate on the Customs and Inland Revenue Bill he had received many letters thanking him for having called attention to the excessive payments which in various instances people had to make. In one case a man was called on to pay Income Tax on £3,000 a-year profit, when at the end of the year he was a bankrupt. In another case a man who had earned only £8 profit for three years was required to pay on £50 a-year. In another more startling case he had been shown the accounts of a Company which, though losing £20,000 a-year for some years, was paying Income Tax on £12,000 a-year profit. There was another class of injustice—small doctors who were paid salaries by Boards of Guardians for attending to the poor, and also a certain amount of extra fees, were made to pay on the full amount of their earnings, and had no allowance made to them for expenditure on drugs and other necessaries of their Profession, and which came out of their income. Again, as to depreciation of profit, if 802 a man purchased a patent, say, for £10,000, if it brought in an income of £1,000 a-year he was required to pay Income Tax on that sum, though the patent might terminate at the end of 10 years. Then there was the uncertainty of the law on this subject, rendering it highly important that there should be a complete investigation. He was connected with an Institution which had been going on for 15 years. During that time there had been three surveyors of taxes with whom the Company had been concerned. The first surveyor thought that depreciation, whether on their leases or on their furniture, was not to be considered as income, and allowed them to deduct it on both. Unfortunately, a second surveyor took his place for five years, and he held that neither the one nor the other should be exempt. And now they had a third, and he held that depreciation on leases was income, but depreciation on furniture was not. Therefore, though we had had Income Tax for 40 years, within 15 years it was possible to have three different decisions upon the same subject. He thought that he had made out his second position—that some Committee ought to be appointed for the purpose of laying down distinctly, clearly, and finally the mode in which the Income Tax should be assessed. It was notorious that in large towns the assessment of houses was very often in excess of their letting value, and Income Tax was charged upon the full assessable value though that amount might not have been earned. People did not complain so much when the tax was only 2d. or 3d. in the pound; but when it was 8d., and, concurrently with that, trade was bad and the small tradesmen did not know, where to turn, then people did complain, and it was the duty of that House to see that the tax was levied in the fairest possible manner. The constituency which he represented was very largely composed of small tradesmen, who were greatly interested in the subject, and that House was bound to see that no hardship was inflicted, while it was also bound to see that everybody paid his full share. Reports from different Associations in such places as Wolverhampton and Birmingham showed that they were not satisfied with the system of assessment or appeal. The tax should be limited to income that 803 was earned—not to the gross income, but to the net sum which a man put into his pocket. The hon. Gentleman concluded by moving his Resolution.

§ THE SECRETARY TO THE TREASURY (Mr. HENRY H. FOWLER) (Wolverhampton, E.)
said, that, with all respect to the hon. Member, he did not think he had made out a case to support the Motion which he had put upon the Paper of the House. If he had understood the hon. Member correctly, what he chiefly objected to was the present mode of remunerating collectors by a poundage, and the means of appeal against assessments. The Government had really very little control over the Income Tax. That tax, he should think more than any other tax levied in this country, was levied, so to speak, outside the Government, and was in the hands of local gentlemen, who were selected for the purpose, and had special qualifications; and, as a matter of fact, the Government had hardly anything whatever to do with it. For the special purpose of dealing with cases under Schedule B, under which traders were assessed, special commissioners were set apart, and if a taxpayer was not satisfied with their assessment, he had the right of appeal to Somerset House. He could hardly conceive it possible to devise a machinery more perfectly in the hands of the taxpayers themselves than the machinery under which the Income Tax was assessed and levied, and more independent of the Government. The principle of the Income Tax was always administered with great wisdom, great forbearance, and great equity. Very strong Committees had been twice appointed to investigate the whole mode of assessing the Income Tax, and both had reported that they could do nothing. He did not think that was any encouragement to the House to embark again in the matter. With reference to the poundage question, he entirely agreed with the hon. Member on that point, 804 and he was happy to say that now the collection of taxes in all the large towns had passed into the hands of the Inland Revenue. If the hon. Member had been prepared with a Motion on the poundage question, he would have felt very great difficulty in opposing him. The hon. Member had raised the very old question of the principle on which the Income Tax was levied. That principle had been discussed over and over again on the old question whether income arising from an uncertain source was to be taxed at the same rate as income arising from a certain source. But the principle which the House of Commons had affirmed over and over again was that the Income Tax was to be levied upon the income for the year, and that property should pay upon the actual income value, and trades and professions upon the actual net income earned. There were a great many complaints made about the returns made by surveyors; but inaccuracies were due to the reluctance of taxpayers to make returns themselves. It was the duty of the taxpayer to make his own return, and what the House ought to require was a case of an honest taxpayer who had made an honest return being unfairly charged beyond what he ought to pay. If the tribunal which the State had selected to hear appeals failed to do justice in such a case, it would be the duty of the House to inquire whether any other tribunal could be substituted for it. No such failure, however, had been proved; and under the circumstances he was bound to say that he did not think a case had been made out for a Committee, as he did not see any probability that another Committee, if appointed, could inquire into the working of the tax with any better result than had attended the efforts of the two Committees that had previously sat. While, however, on the one hand, the Government did not think that any case had been made out for a Parliamentary inquiry, on the other hand the Treasury and the Inland Revenue would be exceedingly obliged to any hon. Member who would bring before their notice any case of hardship. Any such case should certainly be inquired into.

§ SIR ROBERT FOWLER (London)
said, the hon. Gentleman who had just spoken (Mr. Henry H. Fowler) had, no doubt, said all that was to be said in 805 favour of the tax; but still there was a great deal to be said in favour of inquiry. He feared they must look on the tax as a permanent charge; at all events, he was not sanguine enough that they would be able to get rid of it. Sir Robert Peel had originally intended that the Income Tax should endure for three years only; while the Prime Minister had offered to abolish it; and yet at the present moment it stood at 8d. in the pound, and appeared likely to increase in case of war. Inequalities in levying the Income Tax could hardly be dealt with by the whole House, and he thought that they might very properly be referred to a Committee for inquiry. He, therefore, cordially supported the Motion.

§ SIR WHITTAKER ELLIS (Surrey, Kingston)
said, what he feared was that the Income Tax being looked upon as a permanent tax, it would be extended to a very large degree. He, therefore, considered that this Motion raised a question of the deepest interest to the community, inasmuch as a tendency had been indicated to throw a larger burden upon all forms of property. The mode of collecting the tax deserved the serious consideration of the House. He cordially supported the Motion.