§
MR. SAMUEL ROBERTS (Sheffield, Ecclesall) moved to substitute 11d. for 1s. as the income-tax for the present financial year. He saw that when the advance was made in the tax for the purposes of the war the Chancellor of the Exchequer stated that the income-taxpayer ought to be the first to receive relief when the war was concluded. The war had been over about six years, and the only relief was that given last year to those who earned incomes under £2,000 a year, amounting to £1,250,000 out of a total of about £32,000,000. In his first Budget in 1906, the present Prime Minister said—
In regard to the income-tax, I do not hesitate to associate myself with the declarations of more than one of my predecessors that an income-tax at a uniform rate of 1s. in the £ in a time of peace is impossible to justify and difficult to defend. It is a burden on the trade of the country which, in the long run, affects not only profits but wages, and from the point of view of the nation it is open to the same objection as the continuance at an abnormal figure of the floating debt, namely, that it tends to destroy, or at any rate, contract the most readily available reserve on which the State can draw in a sudden or unforeseen emergency.
The Prime Minister put it very clearly that it was not only a tax upon profits, but, ultimately, a tax on the working people, because profits could not be earned unless wages were paid, and, therefore, if there was less money to invest, the workman himself must really feel the burden. The second reason that the right hon. Gentleman gave, that it must tend to contract, the most readily available reserve, was also a very sound financial one. The income-tax was first imposed by Pitt over 100 years ago as a war tax. It continued during the wars with France at a high rate. When the war was over the income-tax dropped, but it was revived again by Sir Robert Peel in 1843. The point was that the income-tax and the Sinking Fund were our two great reserves for emergencies. In order that those two great reserves might be the powerful engine which the late Mr. Gladstone said they ought to be, they must have in times of peace the income-tax at a low or moderate figure, whilst on the other hand they must have the
920
Sinking Fund at a high rate. If they had those two conditions the country was in a safe financial position in case war broke out. Now what did Mr. Gladstone say on this point? He said—
Much as might be said of the importance of an Army or a Navy Reserve and having your armoury and arsenals well stored. I say this fiscal reserve is no less important.
With regard to the present year the Prime Minister gave a welcome relief to those deserving people who were earning under £2,000 a year. It was also true that a great many deserving people with small incomes earned in past years received no relief at all. He wished to put in a plea on behalf of those people. It was true that abatements were allowed, but it was also true that the income-tax of 1s. was charged on those incomes. The amount of relief given only to the income-tax payer amounted to £1,240,000 or less than a halfpenny in the £, and as a matter of fact during the last financial year the Chancellor of the Exchequer received in cash as much as £1,880,000 in excess of his Budget estimate of income-tax money. That was actually £780,000 more than the sum paid the year before. The Chancellor of the Exchequer said, in his Budget statement—
Last year I gave a substantial relief to a large number of income-taxpayers; this year, therefore, it would be the natural course for the indirect taxpayer to be relieved.
The right hon. Gentleman had relieved the indirect taxpayer, whether wisely or unwisely, by remitting over one-half of the sugar duty. What he wished to press upon the Chancellor of the Exchequer was the fact that he thought the Prime Minister, in his Budget statement, was hardly right in his statement that he had really given relief to the income-taxpayer, because he received £780,000 in excess of the receipts of former years. He would like to emphasise another point in connection with direct and indirect taxation, viz., that the death duties were really an income-tax paid out of capital. Let the Committee, for example, take an estate yielding £100 a year. The estate duty would amount to 11d. in the £, extending over the whole life of the person inheriting the money. Therefore, that man had not only to pay
921
income-tax, but he had really to pay estate duty in addition. He would like to draw the attention of the Chancellor of the Exchequer to what obtained in this matter in other countries. The fact was that in many of the largest and most important countries in the world there was no income-tax charged at all. The United States of America collected a large amount of money, amounting to £56,000,000, by the Customs duties, but there was not a penny paid in income-tax. There was no income-tax in Russia, nor in Canada. It was true that in France an Income-Tax Bill had been brought before that Chamber, but did the right hon. Gentleman know what had happened to it? The matter was discussed in the French Chamber, and one of the Radical Deputies canvassed his friends to rally to his relief when he moved a Resolution that the French Chamber should sit until that Income-Tax Bill was passed. The Resolution was to the effect—
That the Chamber being resolved to carry through the Income-Tax Bill in good time counts on the Government to promote it and prosecute discussion thereon.
A division was taken, and the Members of the French Chamber were so anxious to get away to the country that the Resolution was defeated by 294 votes to 220, and so the Deputies had gone on their holidays and the Income-Tax Bill has been deferred to a more convenient season. There was no income-tax in Belgium or Portugal. There was an income-tax in Germany, but the highest point of 5 per cent, was not reached until incomes amounted to £5,000 a year. In Switzerland, Denmark, Sweden and Norway there was a very moderate income-tax charged, and the only two countries where there was an excessive charge in regard to the income-tax wore Italy and Spain, where the tax was very high indeed. He hoped the Chancellor of the Exchequer would consider the claims of the income-tax payers of this country, first, on the ground of the promises given to them when the tax was raked from 8d. to 1s. that they should be the first entitled to relief when the war was over; secondly, because the tax was not only a tax upon profit but upon the wages of working people; and lastly,
922
because it was financially a sound policy to keep the income-tax at a reasonable figure, otherwise, in times of war, the Chancellor of the Exchequer would find himself in very great difficulties. Compared with all the other countries he had mentioned this country alone had an abnormally large income-tax, which was far higher than the people ought to be called upon to pay. He had much pleasure in moving the Amendment standing in his name.
§
Amendment proposed—
In page 5, line 35, to leave out the words 'one shilling,' and to insert the words 'eleven pence.' "—(Mr. Samuel Roberts.)
§ Question proposed, "That the words 'one shilling' stand part of the clause."
§ MR. LLOYD-GEORGEsaid the hon. Member had proposed that the Committee should accept an Amendment which would reduce the revenue of the year by £2,500,000. Of course, the Government could not accept that proposal unless the hon. Member was prepared to substitute something else. Was the hon. Member prepared to put another 2d. on tea or put back the sugar duty?
§ MR. FELL (Great Yarmouth)There is the coal tax.
§ MR. SAMUEL ROBERTSsaid he could easily find the right hon. Gentleman some more money by taxing manufactured articles.
§ MR. LLOYD-GEORGEsaid it must be obvious to the hon. Member that he could not accept such a proposal. No doubt if they went thoroughly into the question a ruthless examination might result in a very considerable sum of money being obtained for public purposes. At the present moment it was obvious that they could not allow a reduction of a penny in the income-tax. The hon. Member had quoted the speech of his predecessor in which he said that the income-tax payer had claims upon the Chancellor of the Exchequer whenever the opportunity came for a reduction. As far as he could see that opportunity had not yet arrived and he did not see 923 any immediate possibility of its arriving. The Prime Minister in the very next Budget gave considerable relief in the most hard cases, and more especially to the professional classes who were perhaps more pressed than any other class by the income-tax, by reducing the income-tax upon earned incomes from 1s. to 9d. The hon. Member had spoken of other countries in which the tax was considerably lighter, but he would remind him that in some cases the taxes on the necessaries of life were very much higher than here. If they had to elect between a tax on the necessaries of life and a tax on income, especially incomes in the region of £1,000, £2,000, £3,000, he thought the people of this country would prefer taxing income which was only essential for superfluities rather than imposing it on the necessaries of life of the poorer classes. The hon. Member had left out one important Empire when he surveyed the income-tax imposed by the various countries of the world. He did not state what Italy charged. There was another very interesting State, namely, Japan, where a graduated income-tax had been imposed. He was told that it ran up to 5s. in the £. That was a very interesting experiment, and he was told that on the whole it had been successful. [An HON. MEMBER: No.] The highest authority he could quote was the Japanese Chancellor of the Exchequer, who informed him, much to his satisfaction, that there was a graduated income-tax working in Japan, and that it was a successful experiment. It was true that it had only been in operation for a couple of years, but the Japanese finance minister was very satisfied with the results. He thought the graduated income-tax had also been successful in Germany. He could not in the present Budget contemplate the possibility of knocking off another penny.
§ *MR. HICKS BEACHsaid he could understand the Chancellor of the Exchequer saying that he could not in the present Budget contemplate the reduction of the income-tax by 1d. for fear of upsetting his financial arrangements for the year. But when the right hon. Gentleman asked hon. Members on that 924 side of the House what tax they would impose in lieu of the 1d. proposed to be taken off the income-tax he would remind him of the coal tax which brought in a large revenue. In the opinion of many of the right hon. Gentlemen's own colleagues the taking off of that tax was a very great mistake. His hon. friend had put the case clearly for a reduction of the income-tax. The present Prime Minister admitted last year or the year before that a high income-tax was a very great disadvantage, and that in its ultimate issue it was a tax not only upon profits but also upon wages. It was obvious to the Committee that if every individual had to spend a certain portion of his income in payment of taxes, that portion was diverted from more productive expenditure on which it would otherwise be expended, and it thereby tended to diminish the amount of money spent throughout the country on productive wages. What to his mind was the important aspect of this question was that the high income-tax was imposed and kept on for the purpose of paying off our liabilities in connection with the South African War. The tax was raised during the war from 8d. to 1s. 3d., and though it might have been justifiable to keep the tax at a high limit during the time we were actually engaged in that war, and when it was still necessary for the purpose of paying off the liabilities incurred during the war, he felt that it was a very serious thing for any Government to contemplate a high income-tax during a time of peace. They were told no doubt that, with a Liberal Government in power, there was very little prospect of the country being forced into a great war, but nobody could tell what would happen in ten years time. This country might be engaged in a serious war involving considerable expenditure, and, therefore, it was a very serious thing to keep the income-tax at the high level at which it now stood, not for the purpose of paying off liabilities of the late war, but for the purpose of paying the normal expenditure of the country. It meant that the income-tax was now kept at a high level for the purpose of paying for some expensive schemes, such as old-age pensions, which had been introduced by the present 925 Government. Whatever the right hon. Gentleman might think of the desirableness of the income-tax for the purpose of paying the cost under the old-age pensions scheme, he personally was strongly of opinion that when a scheme was introduced by them based on a non-contributory basis, the least the Government responsible for that scheme could have done would have been to keep on some such tax as the sugar tax, which would have yielded a large revenue, and to which everyone of those interested in the old-age pensions scheme would have contributed. Liberal Chancellors of the Exchequer, including Mr. Gladstone and the present Prime Minister, had declared that it was a very great mistake to keep the income-tax at a high level, because it destroyed the great reserve of this country in time of war. That was the chief argument against maintaining the tax at a high level, and for that reason alone, even if there was no other, he would support the Amendment of his hon. friend. Last year the Prime Minister, who was then Chancellor of the Exchequer, introduced a scheme of differentiation, under which relief was given to certain income-tax payers, and it had the curious effect that it did not cost the Chancellor of the Exchequer so much as he thought it would, because people became more ready to bring in the full amount of their income to assessment. He thought that was a very good point in favour of the reduction of the present tax from 1s. to 11d. Last year's relief did not touch a large and deserving class of people—namely, those who had an income derived from savings which by the exercise of thrift they had put by during the time they were working. He wished again to enter his strong protest against the line taken last year in granting relief to people whose income took the form of pensions, and not to people whose sole income was derived from savings. He admitted that income derived from pensions was in a different category from income derived from no effort, but surely if it was fair and just to give relief to people whose present income was derived from pensions on the ground that a pension was really deferred income, it was equally fair and just that similar relief should be given to those who had been thrifty 926 and saving at the time when they were working hard and were now living on incomes derived from savings. He hoped the right hon. Gentleman would consider this point in the interval between now and the Report stage of the Bill and see whether he could not grant relief to the most thrifty class of the population.
§ *MR. CHIOZZA MONEY (Paddington, N.)said the hon. Gentleman who had just spoken seemed, like many others, to entertain the fallacy which was widespread that a shilling income-tax actually existed. The Prime Minister in his Budget statement this year had pointed out that it was a complete misnomer to call it a shilling income-tax, and that, as a matter of fact, it was much less, amounting on the average to only 9d. or 9½. in the £. The income of the income-tax paying classes this year could not be less than £1,000,000,000, and that at 1s. in the £ would yield £50,000,000, but as the revenue from income-tax did not yield that amount the tax could not be 1s. As a matter of fact there were about 200,000 people at the outside who paid at the rate of 1s. Who was to blame for this misapprehension? If they passed an Act of Parliament every year which set out that the income-tax was 1s. in the £, they could not wonder if Members of Parliament and others constantly repeated that as a sort of parrot cry. He found in speeches and in electioneering literature that the tax was stated as being 1s. in the £. Why not have the income-tax so graduated as to show on the face of it what the rate really was in respect of different amounts of income, instead of having it graduated in the absurd manner which now obtained? What had happened? As the necessity for more revenue had arisen successive Chancellors of the Exchequer, irrespective of Party, had in making each rise in the income-tax granted concessions to the middle class taxpayer, who was the object of worship on both sides of the House. That system had been carried on until under the late Government they reached the point where the income-tax was graduated up to £700 a year. Last year another Step was taken by the Prime Minister, who was then Chancellor of the 927 Exchequer, when he made a concession to those persons who were alleged to have earned their income up to £2,000 a year. If those persons showed that their income from all sources did not exceed £2,000 a year they were allowed to claim a 9d. rate; that was to say a nominal 9d. rate. He said nominal, for they were granted all the original abatements, so that the 9d. rate in its turn was graduated. He would be sorry to endeavour to give to the House off-hand an idea of what the graduation amounted to. It was done in the Inland Revenue Report, but he defied any hon. Member to carry the details in his memory; and that was why there was that great misapprehension which led to Amendments like that now under discussion by which the Committee was asked to reduce the 1s. income-tax which did not actually exist. Why could not this clumsy, obscure, and unjust system be discarded in favour of a plain system such as obtained in Prussia? In that country the income-tax was 4 per cent, up to £500 a year, but at the same time the assessment to Imperial taxes was also the assessment for the local income-tax; and it followed that the rich man paid a larger proportion with a pro tanto relief to the poorer taxpayer. The hon. Gentleman opposite had drawn a touching picture of the woes of a man who had a little sum in Consols and who had to pay income-tax upon it. The way to give that man relief was to ascertain precisely where the income of the country was, and to obtain a proper contribution from persons who had large incomes. The Chancellor of the Exchequer talked the other night about robbing the hen roost. [IRONICAL cries of "No."] Well, about visiting the hen roost; but it was necessary to ascertain first its address and what was in it. If they only got to know that, information could easily be got as to how the income of the country was distributed, and if the doctrine of taxation according to ability laid down by Adam Smith long ago were applied, and regard were had to the principles which had been subscribed to in theory in this country for generations, the relief of the middle class taxpayer must follow. Of the enormous sum which came under review, as was mentioned by the Prime 928 Minister in his Budget speech—it was a sum approaching £1,000,000,000 sterling—£600,000,000 sterling lay above the £700 a year limit, and if that were taxed at 1s. per £, it would alone yield £30,000,000 a year. In that event the hon. Gentleman opposite would be able to go to his constituents and tell every one of them who had an income under £700 a year that he would be entirely relieved of the payment of income-tax. To speak seriously, he was the last one to say that a middle-class man with £500 or £600 a year ought not to make a proper contribution to the national expenses, for he served his country neither as an officer nor as a private. He only grumbled, and it seemed to be the province of hon. Gentlemen opposite to encourage him to grumble, but it could not be said that the sum which such a man was called upon to pay unjustly pressed him. Once more he appealed to the Chancellor of the Exchequer, in view of the financial condition of the country, in view of the fact that we were widening out expenditure in directions believed by both sides of the House to be proper, to set our direct taxation on a proper footing. What was the virtue of direct taxation? It was that they could go to a man directly and inquire what his income was. What was the argument against indirect taxation? It was that it was capricious, and that it hit the wrong man at the wrong time. By a graduated income-tax on a proper scale they could deal with each man according to his deserts, and, making all allowance for his circumstances, call upon him to make a proper contribution for the upkeep of the country.
§ SIR F. BANBURY (City of London)said that the hon. Member had stated, that the income of the country was one thousand millions. On what foundation did he make that extraordinary statement? It was merely a guess.
§ *MR. CHIOZZA MONEYsaid that last year the Chancellor of the Exchequer, now Prime Minister, told them that the income of all classes, as returned for income-tax purposes, had leapt up by 35 millions on the gross total of 980 millions the previous year, and everybody knew that a lump of 35 929 millions in a single year did not show the whole rise.
§ SIR F. BANBURYsaid that the explanation of the hon. Member only showed that the Prime Minister had made a guess in the same way as the hon. Member. As a matter of fact, there were no accurate figures in existence which showed the income of the country. It must also be remembered that there were abatements which had to be considered. The real argument which would induce him to vote for the Amendment was this. Since they had had the privilege of being governed by the Radical Party they had had reductions in indirect taxation to the extent of something like six millions or seven millions—two and a half millions of coal duty, three and a half millions of sugar duty, and one million of tea duty. But they had had practically no reduction at all in direct taxation. There had been a nominal reduction of taxation on earned incomes below £2,000 a year; but, as his hon. friend had told the Committee, the extraordinary result had accrued that although there had been a reduction in the tax, there had been practically no reduction in the receipts. He himself last year ventured to say that something of that sort would ensue, because he believed that there were a large number of people—and in that he had been corroborated—who would not submit to the ordeal of publishing what their income really was. While, therefore, there had been practically no reduction in direct taxation apart from the reduction on earned incomes under £2,000 a year, there had been an increase in the death duties, and the right hon. Gentleman must not forget that even supposing the 9d. reduction was an advantage, there was a corresponding disadvantage in the increase of the death duties. Therefore, taking the most favourable estimate, from the point of view of the hon. Gentlemen opposite, they arrived at the conclusion that they had had a reduction of nearly 7 millions in indirect taxation and no reduction in direct taxation. He had been in the House of Commons for sixteen years, and had heard it laid down by Chancellors of the Exchequer on both sides that when there was a reduction in indirect taxation 930 there must be a corresponding reduction in direct taxation. All that had been swept to the winds by hon. Gentlemen opposite, notwithstanding the fact that the direct taxation was imposed for war purposes, and, therefore, when the war was over and the amount of direct taxation was not required, that amount should have been reduced. His hon. friend said that, in his opinion, because they were blessed with a Radical Government, the chances of going to war were not very great. He did not agree with his hon. friend. They were reducing the Army, and apparently were going to reduce the Navy, and. if foreign countries saw that we were not in a position to defend ourselves the temptation to come over here and take some of the thousands of millions of which the hon. Member for North Paddington told the Committee we were so full in this country would be very great. The instincts of the robber did not belong entirely to the right hon. Gentleman the Chancellor of the Exchequer; they were shared with him by many countries. He sincerely hoped the hon. Member would go to a division on this question, because there was no doubt that to keep the income-tax at the present high rate pressed extremely hard on all classes of the community. The income-tax was too high, and ought to be reduced. We were not in the position we were in ten years ago. Our securities did not stand so high, and it was very difficult to raise money. The right hon. Gentleman had been trying for two years to raise £5,000,000 for Irish stock. What would be the case if we went to war and had to raise £60,000,000? It would be much more difficult to do now than it was ten year ago. When in 1890 Consols stood at £117, they were told that they were the war chests of the country, and stood against the war chests of France and Germany. He did not want to blame anyone for the condition of things now, but if he were challenged he could show that money was leaving the country fast, because people knew that if they left their money here they would he visited by the Chancellor of the Exchequer and his satellite the hon. Member for North Paddington. It was not wise of the right hon. Gentleman to put 931 all his hopes on this particular tax. It was an advantageous tax to look to in an emergency, but it was not a tax to be used for the purposes of the ordinary finance of the country.
§ *MR. FELLsaid it had been stated that though the income-tax was described as being 1s. it was in fact much less. But many dividends were paid in this country, and he would like to point out that in every case they paid 1s. income-tax. The hon. Member for Paddington had suggested that every tax should be paid at the source at 1s. and that those who were entitled to pay less should be left to struggle with the authorities to get back that which they should not have paid; but the Committee knew they would never get it back. Though the tax, as the Prime Minister had said, might be 9d., many poor investors paid 1s. because it was deducted from the dividend before they got it. One fact he thought the Chancellor of the Exchequer had possibly ignored. In the Budget which the Prime Minister was supporting the right hon. Gentleman took credit for the fact that he had given an abatement of income-tax of over £1,000,000, but he did not take into account that he had annexed that income which in previous years was allowed to be returned to falling businesses and which last year amounted to some £700,000. With regard to the inquisitorial nature of the tax he very much questioned whether other countries which had an income-tax collected it in the way we did. In the United States and Canada they relied on indirect taxation as a source of revenue, and scouted the idea of an income-tax. We were not the only people blessed with great intelligence, and in giving up indirect taxation and maintaining at an increased rate direct taxation we were going in the directly contrary way to those great Powers the intelligence of whose people was not inferior to our own. The Amendment could not be carried, but the question of whether the tax should be 11d. or 1s. was one that should
§ be discussed. He had an Amendment on the Paper in which he proposed it should be 8d. which was the normal rate of the income-tax before the war. He would not move that Amendment, but as a protest against the retention of the tax at its present high figure he should heartily support his hon. friend.
§ MR. LEVERTON HARRIS (Tower Hamlets, Stepney)pointed out that the hon. Member for Paddington, in reply to the hon. Gentleman who moved this Amendment and who complained that this tax pressed very hardly on the industry of this country, had stated that in fact the income-tax was not 1s., but 9d. in the £. Had the hon. Member considered what the income-tax was likely to be to a good many people this year, and whether they would not have to pay considerably more than 1s. in the £? The right hon. Gentleman the Prime Minister when introducing the Budget said that he budgeted for an increased revenue from the income-tax. The right hon. Gentleman was informed then that there would be no increase, because trade was falling. The right hon. Gentleman agreed that trade might be falling, but pointed out that inasmuch as the income-tax was paid on the average income of the past three years it would make no difference; that although the incomes might decline the revenue from the income-tax would increase. So that this year as a matter of fact many people were going to pay an income-tax far in excess of income. He would not press that point further, except to say that in the case of a great many people the income-tax would be more like 1s. 4d. in the £ than 9d., and in some cases it would be even higher than 1s. 4d. On these grounds and because he believed that a high income-tax must have a damaging effect upon the prosperity of the country, he supported the hon. Member in his Motion for the reduction.
§ Question put.
§ The Committee divided:—Ayes, 242; Noes, 38. (Division List No. 194).
935| AYES. | ||
| Abraham, William (Cork, N.E.) | Allen, Charles P.(Stroud) | Baker, Sir John (Portsmouth)] |
| Abraham, William (Rhondda) | Ashton, Thomas Gair | Balfour, Robert (Lanark) |
| Agnew, George William | Astbury, John Meir | Baring, Godfrey (Isle of Wight) |
| Barker, John | Haworth, Arthur A. | O'Kelly, James(Roscommon, N. |
| Barlow, Sir John E. (Somerset) | Hazel, Dr. A. E. | O'Shaughnessy, P. J. |
| Barnard, E. B. | Hedges, A. Paget | Parker, James (Halifax) |
| Barnes, G. N. | Hemmerde, Edward George | Partington, Oswald |
| Beale, W. P. | Henderson, Arthur (Durham) | Pearce, Robert (Staffs, Leek) |
| Beck, A. Cecil | Henderson, J.M.(Aberdeen,W.) | Phillips, John (Longford, S.) |
| Bell, Richard | Henry, Charles S. | Pollard, Dr. |
| Bellairs, Carlyon | Higham, John Sharp | Ponsonby, Arthur A. W. H. |
| Benn, Sir J. Williams (Devonp'rt | Hobhouse, Charles E. H. | Power, Patrick Joseph |
| Benn, W.(T'w'r Hamlets, S. Geo. | Hodge, John | Price, C. E. (Edinb'gh, Central) |
| Berridge, T. H. D. | Hogan, Michael | Price, Sir Robert J. (Norfolk, E |
| Bethell, SirJ.H.(Essex, Romf'rd | Hope, W. Bateman (Somerset, N | Priestley, W.E.B. (Bradford, E. |
| Bethell, T. R. (Essex, Maldon) | Horniman, Emslie John | Rea, Russell (Gloucester) |
| Black, Arthur W. | Hudson, Walter | Rea, Walter Russell (Scarboro' |
| Boland, John | Hyde, Clarendon | Reddy, M. |
| Boulton, A. C. F. | Idris, T. H. W. | Richards, T. F. (Wolv'rh'mpt'n |
| Bowerman, C. W. | Illingworth, Percy H. | Richardson, A. |
| Branch, James | Jackson, R. S. | Ridsdale, E. A. |
| Brigg, John | Jacoby, Sir James Alfred | Roberts, Charles H. (Lincoln) |
| Brodie, H. C. | Jardine, Sir J. | Roberts, G. H. (Norwich) |
| Brooke, Stopford | Johnson, John (Gateshead) | Roberston, SirG.Scott(Bradf'rd |
| Brunner, J. F. L.(Lanes.,Leigh) | Jones, Leif (Appleby) | Robinson, S. |
| Bryce, J. Annan | Joyce, Michael | Roe, Sir Thomas |
| Buchanan, Thomas Ryburn | Kearley, Sir Hudson E. | Rogers, F. E. Newman |
| Burns, Rt. Hon. John | Kekewich, Sir George | Rowlands, J. |
| Burt, Rt. Hon. Thomas | Kelley, George D. | Runciman, Rt. Hon. Walter |
| Buxton, Rt. Hn. Sydney Charles | Kilbride, Denis | Rutherford, V. H. (Brentford) |
| Cameron, Robert | King, Alfred John (Knutsford) | Samuel, Herbert L. (Cleveland |
| Carr-Gomm, H. W. | Laidlaw, Robert | Samuel, S. M. (Whitechapel) |
| Cawley, Sir Frederick | Lamont, Norman | Schwann, C. Duncan (Hyde) |
| Channing, Sir Francis Allston | Lea, Hugh Cecil (St.Pancras, E) | Sohwann, Sir C. E. (Manchest'r) |
| Cleland, J. W. | Lever, A. Levy (Essex, Harwich | Sears, J. E. |
| Clynes, J. R. | Levy, Sir Maurice | Seaverns, J. H. |
| Collins, Sir Wm.J.(S.Pancras, W | Lloyd-George, Rt. Hon. David | Seddon, J. |
| Condon, Thomas Joseph | Lundon, W. | Seely, Colonel |
| Corbett, C H (Sussex, E.Grinst'd | Luttrell, Hugh Fownes | Shackleton, David James |
| Cotton, Sir H. J. S. | Lyell, Charles Henry | Shaw, Charles Edw. (Stafford) |
| Crean, Eugene | Lynch, H. B. | Shaw, Rt. Hon. T. (Hawick, B. |
| Crooks, William | Macdonald, J. R. (Leicester) | Shipman, Dr. John G. |
| Cullinan, J. | Macdonald, J. M. (Falkirk B'ghs | Silcock, Thomas Ball |
| Devlin, Joseph | Macpherson, J. T. | Simon, John Allsebrook |
| Dobson, Thomas W. | MacVeagh, Jeremiah (Down, S.) | Sinclair, Rt. Hon. John |
| Donelan, Captain A. | Mac Veigh, Charles (Donegal, E.) | Smeaton, Donald Mackenzie |
| Duckworth, James | M'Callum, John M. | Snowdon, P. |
| Duncan, C. (Barrow-in-Furness | M'Crae, Sir George | Soares, Ernest J. |
| Dunn, A. Edward (Camborne) | M'Kean, John | Spicer, Sir Albert |
| Edwards, Clement (Denbigh) | M'Kenna, Rt. Hon. Reginald | Stanley, Albert (Staffs, N.W.) |
| Edwards, Enoch (Hanley) | M'Laren, Sir C. B. (Leicester) | Steadman, W. C. |
| Edwards, Sir Francis (Radnor) | M'Laren, H. D. (Stafford, W.) | Stewart, Halley (Greenock) |
| Essex, R. W. | Manfield, Harry (Northants) | Stewart-Smith, D. (Kendal) |
| Esslemont, George Birnie | Mansfield, H. Rendall (Lincoln) | Strachey, Sir Edward |
| Evans, Sir Samuel T. | Marks, G.Croydon (Launceston) | Straus, B. S. (Mile End) |
| Everett, R. Lacey | Marnham, F. J. | Stuart, James (Sunderland) |
| Fenwick, Charles | Mason, A. E. W.(Coventry) | Summerbell, T. |
| Flynn, James Christopher | Meagher, Michael | Sutherland, J. E. |
| Fuller, John Michael F. | Meehan, Francis E. (Leitrim,N) | Taylor, Theodore C. (Radcliffe) |
| Fullerton, Hugh | Menzies, Walter | Tennant, H. J. (Berwickshire) |
| Gibb, James (Harrow) | Micklem, Nathaniel | Thomas, Sir A. (Glamorgan,E.) |
| Gill, A. H. | Middlebrook, William | Thomas, David Alfred (Merthyr |
| Gladstone, Rt.Hn Herbert John | Molteno, Percy Alport. | Thomasson, Franklin |
| Glendinning, R. G. | Mond, A. | Thorne, G. R. (Wolverhampton |
| Goddard, Sir Daniel Ford | Money, L. G. Chiozza | Thorne, William (West Ham) |
| Gooch, George Peabody (Bath) | Montague, Hon. E. S. | Tillett, Louis John |
| Hall, Frederick | Morse, L. L. | Torrance, Sir A. M. |
| Harcourt, Rt. Hn. L.(Rossendale | Morton, Alpheus Cleophas | Trevelyan, Charles Philips |
| Harcourt, Robert V.(Montrose) | Nannetti, Joseph P. | Vivian, Henry |
| Hardie, J. Keir (Merthyr Tydvil | Nicholls, George | Walker, H. Do R. (Leicester) |
| Hardy, George A. (Suffolk) | Nicholson, Charles N. (Doncaster | Walsh, Stephen |
| Harmsworth, Cecil B. (Wore'r.) | Norton, Capt. Cecil William | Wardle, George J. |
| Harvey, W.E.(Derbyshire,N.E. | O'Brien,Kendal(Tipperary, Mid | |
| Harwood, George | O'Brien, Patrick (Kilkenny) | Wason, Rt. Hn. E.(Clackmannan |
| Haslam, James (Derbyshire) | O'Donnell, C. J. (Walworth) | Wason, John Cathcart (Orkney) |
| Haslam, Lewis (Monmouth) | O'Kelly, Conor (Mayo, N.) | Watt, Henry A. |
| Weir, James Galloway | Wilkie, Alexander | Wood, T. McKinnon |
| White, Sir George (Norfolk) | Wilson, Henry J. (York, W.R.) | |
| White, J. D. (Dumbartonshire) | Wilson, John (Durham, Mid.) | TELLERS FOR THE AYES—Mr. Joseph Pease and Master of Elibank. |
| White, Patrick (Meath, North) | Wilson, J. H. (Middlesbro) | |
| Whitehead, Rowland | Wilson, P. W. (St. Pancras, S. | |
| Whitley, John Henry (Halifax) | Wilson, W. T. (Westhoughton) | |
| Wiles, Thomas | Winfrey, R. | |
| NOES. | ||
| Ashley, W. W. | Hamilton, Marquess of | Sloan, Thomas Henry |
| Balcarres, Lord | Helmsley, Viscount | Smith, F. E. (Liverpool, Walton |
| Banbury, Sir Frederick George | Houston, Robert Paterson | Stanier, Beville |
| Baring, Capt. Hn. G (Winchester | Hunt, Rowland | Starkey, John R. |
| Beach, Hn. Michael Hugh Hicks | Joynson-Hicks, William | Stone, Sir Benjamin |
| Carlile, E. Hildred | Keswick, William | Thomson, W. Mitchell-(Lanark) |
| Cave, George | King, Sir Henry Seymour(Hull) | Thornton, Percy M. |
| Cecil, Evelyn (Aston Manor) | Lane-Fox, G. R. | Valentia, Viscount |
| Cecil, Lord John P. Joicey- | Lowe, Sir Francis William | Willoughby de Eresby, Lord |
| Craik, Sir Henry | Rawlinson, John Frederick Peel | Wortley, Rt. Hon. C. B. Stuart- |
| Dalrymple, Viscount | Renton, Leslie | |
| Fell, Arthur | Ropner, Colonel Sir Robert | TELLERS FOR THIS NOES—Mr. Samuel Roberts and Mr. Leverton Harris. |
| Forster, Henry William | Rutherford, W. W.(Liverpool) | |
| Gretton, John | Salter, Arthur Clavell |
§ *MR. FELL moved to amend subsection (2), which provided that all enactments relating to income-tax which were in force on April 5th, 1908, should have full force and effect by inserting the proviso "except such as relate to the method of assessment of the profits of companies and corporations." His object, he said, was to call attention to the way in which the profits of some companies were assessed. He believed that he had the sympathy of the Prime Minister last year, when he was Chancellor of the Exchequer, and when he said that there were grave anomalies in the assessment of the profits of companies and corporations, but that he hoped before next year to do something to correct those anomalies, though it was a matter of difficulty and probably he would have to re-draft and consolidate in some way the clauses of the Acts under which those profits were assessed. But, of course, there was always the question in regard to companies why they were not taxed on dividends instead of upon profits. They were assessed under Acts which were sixty years old, and it was impossible on that occasion to go into the case in detail. These Acts with the decisions of the Courts upon them formed a sort of law under which the Commissioners of Taxes at present worked, recording to various precedents. Of these Acts the greater numbers of persons were totally ignorant. He had in mind the case of a company which was one of 936 clear hardship, and which probably would meet with the sympathy of the Financial Secretary to the Treasury. It was the case of a company whichshowed a paper profit of £30,000, and it had no cash available at all in this country to pay dividends to the shareholders, yet it had to pay income-tax at the rate of 1s. in the £, on the whole of that £30,000. He objected to the tax of 1s. in the £ being paid, because if those profits had been paid as dividends to the shareholders, the latter could, many of them, as they had heard that night, have obtained an abatement of the tax to 9d. It was a very singular thing that though no dividends were paid to the shareholders, yet the income-tax was deducted from their profits at the rate of 1s. in the £, and they had no chance of getting it back. The company of which he spoke had shown a profit of £15,000 this year, and they had again to pay 1s. in the £ income-tax without having paid any dividend to the shareholders. Their capital had been reduced by that amount, and they would never under any circumstances get any of it back. The Government had got 1s. in the £, though not entitled to more than 9d. He believed that the case which he cited was perfectly unanswerable, and it was to meet such cases that he moved this Amendment. There was another point on which he had the sympathy of the Prime Minister last year, and that was with regard to the deductions allowed 937 to be made in the balance sheet before the net profit was arrived at. The Commissioners in assessing the profits of a company, did not allow many deductions which the auditors of the company said must come off the profits before the net profits were arrived at. The Commissioners of Inland Revenue did not allow these deductions to be made, and assessed the companies in nearly all cases at a considerably higher amount than their profit and loss accounts showed. It was a dry subject, but the Chancellor of the Exchequer met them in a sympathetic, way last year and confessed that there were great anomalies in the way these profits were arrived at, and he understood he was going to look into the way profits Were arrived at in the case of companies and corporations. Attention had been called to the case of companies with wasting concerns—mines which only had a few years to last. The best example was that of a big nitrate property in Peru which would be worked out in four or five years. They shipped so much every year and made a very handsome profit on it, but it was capital which they returned on their balance sheet and not profit. The capital would all be used up in a few years, and they should be allowed to deduct this. Another example of these curious anomalies was the sinking of shafts in collieries, for which the income-tax did not allow deductions. On what possible grounds were the income-tax authorities to settle what was the proper way of keeping the accounts of a colliery, and, when the directors and auditors stated their profits after writing off proper amounts for expenditure, to refuse to allow this, that, and the other deduction? That was a case which frequently arose. The prudent investor put by a portion of his interest to recoup his principal, but the principal, when he got it bank, would pay income-tax as well as the income which he received. The law had been made up by all these Acts and various decisions of the Courts on them. The ordinary investor was at an immense disadvantage in discussing these things, because he had very great difficulty in understanding these cases. He was ready to pay what he was legally liable to pay, but he was not ready to pay the 938 sums on which the tax was assessed in many cases. The hon. Member for the Inverness Burghs made a very strong speech last year in favour of the payment of tax only on income, and not on capital in the case of wasting securities. He had every confidence that the Chancellor of the Exchequer, if he could find time to devote his fair mind and his acute intelligence to this subject, would see that there were grave anomalies existing, one of which was unanswerable—the case of a company which showed a paper profit but distributed no dividends. It paid full income-tax on the profits, while, if they had been distributed, the shareholders would have been able to get an abatement.
§
Amendment proposed—
In page 5, line 36, after the word 'tax' to insert the words 'except such as relate to the method of assessment of the profits of companies and corporations.'"—(Mr. Fell.)
§ Question proposed, "That those words be there inserted."
§ *MR. REES (Montgomery Boroughs)said he would like to support to some extent the arguments used by his hon. friend opposite. It seemed to him that if a company could show on its total transactions for the year that it had not made a profit, it was hardly fair that it should have to pay, when a considerable amount of its expenditure was nominally capital. Take the case of a company which returned £4,000 or £5,000 profits on its ordinary operations and at the same time had a big contract on which it exhibited a very large loss, or, at any rate, expenditure. The same people were perhaps putting up the capital for the contract on which there; was a loss, as held shares in the capital on which the small profit was made. The small profit was completely swallowed up in the large expenditure on which there was no return. In a case like that not only had the company to pay upon its nominal profits, but if it was paying any interest during construction it had to pay on that too, although the interest during construction came out of the pockets of the people who were putting up the capital, and when under no head of the operations of the company 939 was there any profit at all. There ought to be a balance struck of the actual results in each case, and if on the year's operations, for any reason, no profit came home to those who held the capital of the company, these charges ought not to be made. He did not understand that any special rate was proposed under the Amendment, but only that the assessment should be made in a different manner in the case of companies and corporations. He believed there should be some different method of assessment, and that substantial justice was not done when a company, whose total operations might, so far from resulting in a profit, show for some years running a very large loss, should be charged at this unnecessarily high rate on the nominal profits which were swallowed up in the actual expenditure.
§ THE FINANCIAL SECRETARY TO THE TREASURY (Mr. HOBHOUSE,) Bristol, E.said the cases which the hon. Gentleman opposite had put dealt with questions which were rather outside the actual wording of the Amendment. What he understood he wanted was that where a company showed its shareholders a profit upon its transactions, it should be assessed in some method different from that by which the ordinary individual who might be engaged in exactly the same business under exactly the same terms, was assessed. That, of course, would alter the whole practice and policy of the income-tax from the time of its creation. The whole aim and object of the income-tax had been to treat individuals and companies as two identical entities for the purpose of taxation—to lay the same burden of taxation on them—and the Amendment would upset the long-established practice, which had been exceedingly profitable to the State and had not been unduly burdensome, as far as assessment went, on the corporations. The hon. Gentlemen had alluded to the fact that his proposal would affect corporations in several ways. It would affect wasting assessments and expenses incurred in connection with the formation of companies. He had talked about the Court of Chancery. It seemed to him that the Court of Chancery would never 940 permit investments in the kind of companies with which he was dealing.
§ MR. HOBHOUSEsaid that, quite apart from the loss which would fall upon the Exchequer for the present and succeeding years, he thought it would be quite impracticable and undesirable to distinguish in this invidious manner between individual and corporation.
§ *MR. WATT (Glasgow, College)said the Amendment would lead to this state of things: that if a company made profits and did not distribute them they would not be called upon to pay income-tax of one shilling in the pound on those profits. He thought that was desirable. The present position was that a company which made profits and did not distribute them was put in a worse position than a company which made profits and distributed them. The average body of shareholders were found to be in such a position financially that a quarter of them got the rebate, and the income-tax charged upon that company amounted to 9d. in the £, whereas the thrifty company, which thought it wise not to part with its profits in the way of dividends, was charged by the Government at the rate of is. in the £. He ventured to say that that was inequitable and the Government would be wise in adopting this Amendment, whereby the company which was thrifty and did not part with its profits would be put upon an equality with the company which parted with its profits in dividends.
§ Amendment put, and negatived.
§ Clause 7 agreed to.