*MR. HERBERT LEWIS (Flint Boroughs) moved an Amendment, of which he said he had not given notice, to deal with the Income Tax on the graduated scale. His Amendment was to insert after the word "charged," the words:—
In the case of incomes under five hundred pounds a year at the rate of fourpence, between five hundred and seven hundred and fifty pounds a year at the rate of sixpence, between seven hundred and fifty and one thousand pounds a year eightpence.
His proposal was that for incomes under £500 a year a rate of 4d. in the pound, between £500 and £750 6d. in the pound, and between £750 and £1,000 8d. in the pound. He was precluded by the Standing Orders from carrying the principle of graduation any higher, because it was not competent for a private Member to move to lay an increased charge on any class of taxpayers. If, however, the Government accepted the principle there would be nothing to prevent them from increasing the scale of Income Tax upon incomes above £1,000 a year. This would prevent the Revenue from suffering any loss. His object in moving the Amendment was to establish a graduated Income Tax and this was an object which had commended itself already to the House. The Finance Act of 1894 established once for all the principle of graduation, and there was no reason why that principle should not be adapted to the Income Tax as it was now adopted in the case of the Death Duties. He did not contend that the lower middle classes should not contribute to the taxation of the country; all that he contended was that they actually paid more than their share in proportion to their means. He should probably be met by the reply that if this were adopted it would raise a considerable difficulty in the way of the collection of the tax, but he ventured to think that these were difficulties which could be easily overcome. He would probably be met by the argument that it would be difficult to aggregate the whole of a man's income for the purpose of assessing the
rate of taxation which he should be called upon to pay. But that would be nothing compared to the difficulties which were now placed in the way of men of small incomes claiming the remission of Income Tax to which they are now entitled, and he urged that they should try to make those difficulties less. He confessed that he saw very little difficulty in the way of a man aggregating his income. The principle was adopted in the Finance Act of 1894 under parallel circumstances. The result of his Amendment would be that it would be possible to relieve incomes under £1,000 a year, and thus take from the shoulders of those who had to bear a heavy and disproportionate burden of taxation a little of the load they had now to bear.
§ *THE CHANCELLOR OF THE EXCHEQUER
said that the hon. Member had raised a very large question without any notice whatever. He seemed to think that to alter the present system of levying the Income Tax would be a very simple, light and easy matter. He could assure him that no one who had studied the Income Tax would be of that opinion. What the hon. Member proposed was that they should adopt the principle of graduation in connection with the Income Tax. There was a great deal to be said in regard to a graduated Income Tax, but his belief was that if an attempt were made to work it out it would be found to be an impossibility. He entirely declined to argue this question now, as it had not been fairly raised, either as regarded himself or as regarded a matter of such great importance.
§ *MR. LUTTRELL
said he hoped his hon. Friend would press this question to a division. Many of them believed in the system of graduation because they believed it was the only way by which they could make the broadest shoulders bear the heaviest burden. This was an old question, and he was quite sure that, although the question might have been approached hastily, there were few men more able to express their opinions upon it than the Chancellor of the Exchequer. The right hon. Gentleman had said that it would be almost an impossibility to carry it out, but he would remind him that other countries had carried out and had made proposals in this respect. France made 1025 such a proposal only the other day, and the reason why it was not passed was not because of the impossibility of carrying it out. If the French Government were able to make proposals which were feasible, why were we not able? He could not believe that it was inability to draw up a feasible scheme. He believed that the opposition of the Chancellor of the Exchequer was because he was opposed to it in principle. They (on the Opposition side) were in favour of the principle, and he, being strongly in favour of the principle, would consequently vote for this Amendment.
§ MR. HENRY BROADHURST (Leicester)
said he would not deal with the financial arguments. The right hon. Gentleman had admitted that it was a very important matter. He rather agreed that it would not be quite reasonable to expect the Chancellor of the Exchequer to agree to this Amendment. He wished, however, that the right hon. Gentleman could place himself in the position of persons with an income under £500 a year, with positions to keep up which involved an enormous strain upon their resources. He could not but think that, if this system was adopted, it would improve the revenue of the country, as there would be less evasion and less friction. He wished that the Chancellor of the Exchequer would go a step further than the admission of the importance of this question, and promise that between that time and his next Budget he would thoroughly consider this matter, and, if possible, meet them in some degree in that Budget. It was so difficult for a rich man like the Chancellor of the Exchequer—[The CHANCELLOR of the EXCHEQUER dissented]—at all events, the right hon. Gentleman was not in the position of the man with between £300 and £500 a year.
§ MR. BROADHURST
said that clerks and others had great difficulty in obtaining these abatements and exceptions, as their time was so occupied.
§ *MR. ERNEST GRAY (West Ham, N.)
hoped this Amendment would not be pressed to a division. It would be very ill-advised to do so, in view of the fact that the Committee had not had sufficient notice of the matter the 1026 Amendment not having been placed on the Notice Paper. He was not quite sure that his views on the subject were in conformity with Conservative orthodoxy, and it might be that there was much to be said in favour of the graduation of the Income Tax. If the matter was pressed to a division, however, he should have to record his vote against the Amendment, simply on the ground that the matter could not then be suitably discussed. He had not known that this question was likely to be raised.
§ DR. CLARK (Caithness)
said the hon. Gentleman who had just sat down was not aware of the fact that this question was discussed on the introduction of that Bill, and that Chancellors of the Exchequer for the last dozen years had had this question forced upon them at that stage. He himself had moved practically the same Amendment when the right hon. Member for West Monmouthshire was Chancellor of Exchequer, and it was seconded by the hon. Member for East Islington. It had also been raised when the present First Lord of the Admiralty was Chancellor of the Exchequer. The right hon. Gentleman had not said that he was opposed to the proposal on principle any more than had previous Chancellors of the Exchequer, but had opposed it on the ground of difficulty. The principle of graduation was due to a large extent to the Conservative Party, as Sir Stafford Northcote had made the greatest progress in regard to graduation, and his limit of £400 had afterwards been increased to £500 by the right hon. Member for West Monmouthshire. In the Budget of 1894 they had a still further development of the principle. He pointed out that there were two classes who paid taxes—those who paid on money which they earned, and those who paid on incomes derived from banks or joint stock companies, etc. With regard to the latter class, he did not think there would be so much difficulty as was sometimes stated. It was always difficult to know when to bring forward an Amendment of this character. When it was moved in Committee they were told that it ought to be moved on the Report, and when it was brought forward on the Report they were told that they were too late and that their Amendment should have been 1027 moved in Committee. In these circumstances the right hon. Gentleman the Chancellor of the Exchequer could not be surprised at the Amendment being pressed at the present stage of the Bill. It must be remembered that the middle classes paid more towards the Income Tax than any other section of the community, and that the greater part of their income was derived from their professions or trades. It was not fair to place burdens upon such people which they were unable to bear. He was sorry to hear the right hon. Gentleman the Chancellor of the Exchequer say that he could not accept the Amendment, especially as the lower middle class, to whom it would give some relief, were a very powerful class, and paid such a large sum into the Exchequer by way of Income Tax.
§ MR. LLOYD-GEORGE (Carnarvon Boroughs)
thought that upon the question of order it would be competent to hon. Members to bring forward the subject of a graduated Income Tax upon the question that the clause stand part of the Bill. The right hon. Gentleman the Chancellor of the Exchequer had said that he had no objection to a graduated Income Tax in point of principle, but alleged that it was impracticable to carry the idea into effect, because it would be impossible to ascertain with sufficient exacitude the amount of each man's income upon which the tax was to be levied. He should like to know upon what ground it was impracticable to carry out the idea. He admitted there was a difficulty in ascertaining the amount of income which a man derived from undisclosed mortgages, and he believed that the Exchequer was deprived of thousands of pounds every year because men were not sufficiently honest to declare the amount of income which they derived from those sources. There were many people who were enjoying an income of from £1,500 to £2,000 a year, who only made a return to the Income Tax of £300 a year, and it was only after their death that it was ascertained that they had been paying on a less income by £1,200 or £1,500 per annum than they ought to have done. He could not understand why the right hon. Gentleman the Chancellor of the Exchequer should object to what he called an inquisitorial inquiry into the 1028 sources of income of the millionaire which he permitted in the case of the schoolmaster or of other professional men. The Exchequer had no check upon those who possessed large incomes. Another point to which he desired to draw the right hon. Gentleman's attention was that which related to the income derived from joint stock companies. At present Income Tax was paid by the companies themselves upon the dividend which a man received, and therefore he did not include the amount of income so derived in his Income Tax return, with a result that he claimed a reduction of the tax to which he was not entitled. It would be better, in his view, that the companies, instead of paying the Income Tax on the dividend, should make a return to the Income Tax Commissioners of the amounts they paid to each of their shareholders, and thus compel a man to disclose the whole of the income.
§ *MR. T. P. WHITTAKER (Yorks., W. R., Spen Valley)
admitted that there were great difficulties in arriving at a satisfactory scheme for graduating Income Tax, but he was of opinion that those difficulties were not altogether insuperable. Where the tax was paid by large companies, and also where it was paid by the occupiers of houses, there was extreme difficulty, and he was afraid if they got away from that method of collecting the tax they would lose a great amount of the tax. But it seemed to him that, in the cases of incomes earned in business, or by a profession, or in the cases of salaries, graduation might rightly be adopted. As far as he was concerned, he should be fairly well satisfied if that were done. But persons in the position of deriving income from investments and landed property were not in a position to claim so much consideration. There was a distinct difference between the two cases of income. ["Hear, hear!"] If a man earned an income by his own profession, efforts, or in business, it was, so to speak, a temporary income, that was, an income which was liable to cease in or with his own lifetime. If the income was derived from investment that was something like a permanent income, and there was not the same necessity to give relief in that case. ["Hear, hear!"] There would be no difficulty whatever in 1029 graduating the tax on earned incomes, business incomes, and on salaries. In the case of incomes derived from investment the difficulty which had been alluded to had to be faced now to a certain extent, because when the taxpayer claims abatement he has to prove that his total income is under £400 or £500. Though he admitted that the Amendment of his hon. Friend was not the most practicable scheme, he thought the tax might be levied on all incomes derived from investment by a fixed poundage, and abatement be allowed in each case where the payer could prove that his total income was under a fixed amount. He repeated that he thought graduation could be fairly adopted in cases of salaries and professional incomes, but in regard to incomes derived otherwise from investments, he thought that question was not one which had been fairly faced by the Chancellor of the Exchequer, or by the officials of the Inland Revenue. He was sure that it would give satisfaction to many Members of the House if the Chancellor of the Exchequer, before he introduced his next Budget, would consider that phase of the question, with a view to adopting it if possible.
§ *THE CHANCELLOR OF THE EXCHEQUER
said that of course he would consider what hon. Members had said on this question. At present he did not see any solution of the difficulty, but, of course, it was his duty to consider the question, and he would do so.
§ Question put, "That those words be there inserted."
§ The Committee divided:—Ayes, 84; Noes, 168.—(Division List, No. 320.)
§ On the return of the CHAIRMAN of WAYS and MEANS, after the usual interval.
§ Clause 19,—