§ (1) In addition to the Income Tax charged at the rate of one shilling and twopence under this Act, there shall be charged, levied, and paid for the year beginning on the sixth day of April nineteen hundred and nine, in respect of the income of any individual, the total of which from all sources exceeds five thousand pounds, an additional duty of Income Tax (in this Act referred to as a Super-tax) at the rate of sixpence for every pound of the amount by which the total income exceeds three thousand pounds.
§ (2) For the purposes of the Super-tax, the total income of any individual from all sources shall be taken to be the total income of that individual from all sources for the previous year, estimated in the same manner as the total income from all 60 sources is estimated for the purposes of exemptions or abatements under the Income Tax Acts; but, in estimating for the purpose of Super-tax the income in respect of any land on which Income Tax is charged upon the annual value estimated otherwise than in relation to profits, there shall be deducted (in addition to any other deduction) any sum by which the assessment is reduced for the purposes of collection under Section thirty-five of the Finance Act, 1894, and a sum for the expenses of management not exceeding five per cent. of the annual value of the land, and also in the case of a person in the service of the Crown abroad, any such sum as the Treasury may allow for expenses which in their opinion are necessarily incidental to the discharge of the functions of his office.
§ 6.0 P.M.
§ Mr. WALTER GUINNESS moved, in Subsection (1), to leave out the word "for" ["and paid for the year beginning"], and to insert the word "during."
§
The Amendment should be read in combination with a later Amendment to leave out "nine" and insert "ten." The object of the two Amendments is to prevent this Clause being retrospective in its action. As it stands, those who are liable to Super-tax will have to pay this tax on the income received in the year previous to the year dealt with generally in the Finance Bill. That would lead to very great injustice, because there is no doubt whatever that in the case of large incomes there is a very great variation between one year and another. Sir Henry Primrose, in his evidence before the Select Committee on the Income Tax, mentioned the very great discrepancies in relation to large incomes particularly. He said:—
Year by year there are a certain number of people who earn £5,000 or £10,000, but they do not do it every year. They are not always the same people. That is especially true of perhaps the larger incomes. A man may make £40,000 in one year and perhaps he makes nothing for two and three years and so on.
§ I think if these incomes are now to be charged Super-tax, not on this year, but on the year which ended at the beginning of April last, a very great injustice will be caused. I ask that the year of charge for Super-tax shall be the same as the year of charge for Income Tax, and as according to Sub-section (2) of this Clause you are to take the whole completed year, you should take the whole of the present year and charge your tax at the beginning of next year. I think the Chancellor of the Exchequer can afford to agree to this, because if he will amend the Clause which 61 lays down the date for serving the notice, and if he will make it the duty of taxpayers to state their incomes during April instead of during September, he will be able to get the Super-tax in quite early in the next financial year instead of waiting till the end of this financial year. As he has stated that even under the best circumstances he only expects to get half a million from Super-tax this year, and as we also heard this afternoon that the concession which had been made to agricultural owners will affect the figures of the Super-tax, and he does not quite know how much he will get, he can well afford to grant this exemption, which will take away a very heavy grievance from this new Super-tax.
§ Another great injustice will arise from the fact that, as the Super-tax is to be levied, it is to be on the total income as arrived at for the purposes of abatement. If that is so, people may fairly ask to have a year's notice, so as to know during the current year that they will be charged Super-tax on their incomes. The particular case which I have in mind is where a man has a large loan from a bank. Of course, in the case of ordinary Income Tax, he is entitled to deduct the interest which he pays to the bank from his total income, and he gets back his Income Tax on that amount; but he is not to have that same benefit in the case of Super-tax, and there may be many men who in the last completed year will have had a far smaller total income than appears, owing to the fact that they had a heavy overdraft at their bank. If they were told they were going to pay the Super-tax, not on their pet income, but on their gross income, they would have taken very good care not to have had a heavy overdraft. They would have liquidated some of their assets, and their gross income would have been very much closer to their net income. There is no precedent whatever for making your Income Tax retrospective. In every previous Income Tax Act it has always been made applicable to the current year. Section 176 of the Income Tax Act of 1842 says:—
§ "Every assessment to be made under this Act within the year appointed for making the same shall be deemed to be for the current year, and shall be in force for that year."
§ This is, therefore, only in accordance with the precedent of the Income Tax in former years. Further, until 1907, even where people were assessed under Schedule D on the three years' average, they 62 could get back any surplus of Income Tax by which the income of the year fell short of the average. The right hon. Gentleman's predecessor took away that advantage, but I think this particular case will certainly involve a very great hardship. If the right hon. Gentleman wishes to avoid injustice he ought to take steps not to tax income which has already been spent. If a man is warned that he has to pay Super-tax at the time he is first receiving the income he will have far less grievance, because he will know he has to meet the payment, and he will keep back the Super-tax until it is required, and, in view of the comparatively small amount of money involved in the matter, and the fact that he will only be about two months out, I hope he will accept the Amendment.
§ The FINANCIAL SECRETARY to the TREASURY (Mr. Hobhouse)The answer to the hon. Gentleman is that in nearly every Finance Act the word has always been "for," and not "during." What I understand him to propose is that the Super-tax should be based for the following year upon the income of this year. That would not be an ascertainable fact, and the Super-tax must be based upon ascertainable facts. The ascertainable facts in this relation are the average on which Schedule D has been calculated for the past three years. The hon. Member is basing the Super-tax on something which is not definitely ascertainable, but on something hypothetical.
§ Mr. WALTER GUINNESSI do not ask that it should be based on an average, but that next April you should charge your Super-tax on the actual income arising in the same way as income for abatements and exceptions received during the present year of charge of the Income Tax.
§ Mr. HOBHOUSESchedule D is only arrived at on a three years' basis. I regret that we cannot accept the Amendment.
§ Sir EDWARD CARSONI never object to Income Tax. I think it is a fair tax. A man knows where he is, and can regulate matters accordingly. I understand by the Bill that I shall have to pay Super-tax this year upon the income that I made last year—an average on the three years up till last April. Every professional man will have to pay Super-tax upon income at the rate earned in the last three years—earned before the Bill came into operation. That is what I object to. Take my own case. Supposing I had not been able to go on with my 63 profession this year, or supposing I had been ordered abroad, or supposing the labours of the House had knocked me up—take the case of a man who is not able to earn anything like the income he made in the last three years. I ask the Chancellor of the Exchequer, is it fair to ask him now to pay a Super-tax on an income calculated, as you say, on a three years' average if he does not make anything like the average in the year in which you are raising the tax? There must be cases in which that will work out extremely unfairly. There must be many men whose incomes may be very largely reduced through illness or other reasons during this year. I suggest to the Chancellor of the Exchequer that the fairest way to do is to charge the Super-tax upon the actual earning of this year. If you say to me, "I charge you Super-tax on anything you have earned over £3,000, your income being over £5,000," surely the fairest way is to ask me to make a return for the year in which I have to pay the Super-tax. I do not think anyone will object to that, but it will be a great hardship if a man should have to pay in respect of income which he has spent or dealt with in the year prior to the date at which the Super-tax is imposed. I think the right hon. Gentleman will find many cases to which that would be applicable.
§ Mr. LLOYD-GEORGEI think a good deal could be said against the present method of taking a three years' average for the purpose of assessing Income Tax, but, on the whole, the balance is distinctly in favour of that average. I am not sure, from the individual point of view, that a much better method could be found. By taking the average income for three years you assess a man at a certain amount instead of on an income which fluctuates from year to year. But of this I am perfectly clear, that from the point of view of the revenue it is undoubtedly a good method. It enables us to get a steady income derivable from Income Tax. Otherwise, in times of good trade, our income from this tax might rise beyond what the country requires, and in a year of bad trade it might fall far short of our requirements from the point of view of the Exchequer. Therefore, from the point of view of the Exchequer, it is infinitely better to have the three years' average in order to get a steady income. The right hon. and learned Gentleman (Sir E. Carson) said you cannot follow that principle 64 with respect to the Super-tax. I do not see why there should be any difference in connection with the Super-tax.
§ Sir E. CARSONThe new tax only applies in respect of the last six months.
§ Mr. LLOYD-GEORGEThis is the only way in which you can arrive at the amount on which to assess. It is simply a date at which you are able to ascertain the basis on which you are to get your tax. The right hon. Gentleman says, "Supposing I am unable to earn my income this year," but there is also another side to this. Supposing the right hon. Gentleman had doubled his income, he would only pay on the average of the last three years. I put it in another way. Supposing that last year a concern in which a man held shares paid 5 per cent., and this year it pays 6 or 7 per cent. the Revenue would undoubtedly suffer. On the whole, this three years' average has been found to work well for the individual taxpayer and the revenue. Next year, if a man's income goes down he will not pay more than the average of three years. I hope the Committee will not disturb this principle on which Income Tax has been levied for 50 or 60 years. It has worked uncommonly well. If there was any real hardship at present I might say that there might be a case for altering the method of assessment, but as that does not apply I do hope it will not be altered.
§ Mr. AUSTEN CHAMBERLAINI do not think the Chancellor of the Exchequer quite appreciated the request made by my two hon. Friends. My hon. and learned Friend (Sir E. Carson) did not object to the assessment taken on the three years' average, and for my part I agree with the Chancellor of the Exchequer that it is certainly a great advantage to the revenue, not because it gives us more money on the whole, but because it gives a steadier income than would otherwise be the case. It will protect the revenue in lean years, when money is most wanted, at the cost of some sacrifice in fat years, when it is less wanted. I agree also that in the bulk of cases it works quite fairly to the taxpayer, always subject to the consideration that it does work hardship, especially since the change which was made by the Prime Minister when Chancellor of the Exchequer, in the case of incomes which steadily decline, not merely in periods of depression as the result of fluctuations up and down. In the case of a steadily and permanently rising income the advantage is 65 with the taxpayer. If it is a steadily falling income, because business is coming to an end, or in the case of an individual whose exertions are put an end to by sickness, or any other cause, then it does work with very great hardship. That hardship is all the greater when you come to a special tax like the Super-tax we are now discussing. It assumes that a man has a large income to start with of not less than £5,000 before the tax can be levied at all, and then it is levied on so much of the income as exceeds £3,000. My right hon. and learned Friend supposed the case of a professional man who is making a big income, and whose activities are suddenly arrested by ill-health, or it may be by his retirement from business, having arrived at an age when he thinks he may enjoy rest and recreation. In that case this method of assessing the Super-tax will weigh very heavily. While that man was earning his income he was laying by capital which now produces his present income. He made at that time a much higher income, and, therefore, you are now going to tax his smaller income at the rate which was chargeable on the higher income. That is a hard case. It is a hardship which exists to a certain extent under the present law, but it will be aggravated by the new proposal of the Super-tax. That was not exactly the point which my hon. Friends raised. They did not ask the abolition of the three years' average as I understood them. What they asked was that we should assess for the purpose of the Super-tax the income of this year, and not the income of past years. Take the income of the present year and levy your new tax upon that.
§ Mr. LLOYD-GEORGEHow are you to ascertain the amount?
§ Mr. AUSTEN CHAMBERLAINI do not quite see why you should not tax on the income of the present year, even if some rectification had to be made afterwards. The Financial Secretary to the Treasury said that the proposal of my hon. Friend would necessarily involve abolition of the three years' calculation. It might involve some modification of the original proposal, but at any rate you should take the income of the current year as the basis of your new tax. The Super-tax should be assessed on the income of the year in which you impose the tax. That may be a good or a bad proposal, but it is not a proposal on which the Chancellor of the Exchequer said one word in the reply he made. He devoted himself entirely to the three years' 66 average which my hon. Friends do not propose to dispense with. I agree with the Chancellor of the Exchequer that it is necessary to maintain the three years' average in the interest of national finance.
§ Sir F. BANBURYI should like to have this matter cleared up. As I read the Bill, I do not gather that the three years' average is to come in. Will the Chancellor of the Exchequer explain Sub-section (2), which says: "For the purposes of the Super-tax, the total income of any individual from all sources shall be taken to be the total income of that individual from all sources for the previous year, estimated in the same manner as the total income from all sources is estimated for the purposes of exemptions or abatements under the Income Tax Acts.…" I may be wrong, but I believe that the manner of calculating every year for the purposes of exemptions or abatements is not the same as the manner of calculating for the payment of the tax upon the income. Therefore it seems to me that the Super-tax will be calculated upon the amount of the previous year's income, without any respect to the income of the present year. I hope the Chancellor of the Exchequer will clear that up. As far as I know the system of averaging only applies to incomes derived from professional sources or business. Of course, the Super-tax will be charged on the incomes of a large number of people whose incomes are derived from investments. It might very easily arise that a person who had invested in 1908 has received a dividend of 6 or 7 per cent., but in 1909 the dividend might be reduced to 3 or 4 per cent., or it might be non-existent. That might happen if the capital was invested in the ordinary stocks. An hon. Friend reminds me that in the case of preference shares or debentures in breweries the Chancellor of the Exchequer is going to charge on revenue derived in 1908, while the revenue derived in 1909 will be very different. Therefore, I maintain that the Amendment of my hon. Friend has very great point if only for that reason alone. There might be another case where quite honestly, and without desire to evade the Super-tax, it might be that someone had given away a considerable portion of his fortune to his daughter or his son, but he will have to pay Super-tax upon that income which was derived from that portion of the property which he has already given away. Therefore I think, as this is a new tax put upon an old basis, that the Chancellor of the Exchequer 67 ought to accept the Amendment of my hon. Friend to substitute ten for nine, which will leave the Clause as regards the averages in exactly the same position as it stands at present.
§ Mr. LLOYD-GEORGENo doubt as the Clause now stands you calculate your Super-tax according to the same rule as that on which you calculate your 1s. 2d. Income Tax. You apply the three years' average to Schedule D, and to Schedule D alone. With regard to the others, you take the dividends in the ordinary course. The right hon. Gentleman said the point is not any question of three years at all. He submitted that the income on which you collect your Super-tax ought to be the income returned for the present year. The effect of that would be obviously to postpone the Super-tax altogether. You are only going to take the present year. You must have several returns after the close of the year. As the right hon. Gentleman knows very well, we send out papers inviting those whom we propose to tax to give an account of their income. In Scotland these papers are sent out in September, and in England somewhat later. You have got to alter all that. If we are going to charge Super-tax for the first year in respect of this year's income, you will only send your papers out after 1st January next. If you sent your papers out after 1st January you cannot expect to get any returns until the end of that month, and then these returns have to go through the usual processes, so that there would be considerable delay. I do not think that is quite the object of the right hon. Gentleman in this matter. At any rate, the only way in which you can raise revenue for the present year is to proceed on the ordinary basis—that is, by taking the income for the previous year as the basis as far as four or five are concerned and taking a three years' average as regards the other.
§ Mr. AUSTEN CHAMBERLAINThe right hon. Gentleman spoke of the difficulty of getting information about the tax if my hon. Friend's Amendment is accepted, and if you are to attempt to levy a tax on the income of the current year instead of the past year. For the moment I set aside the question of averages altogether to avoid complexity; I treat it simply as a case of this year, not last year. He said that in Scotland you usually send out your papers inviting a statement from the taxpayer in the month of August or 68 September, and that in England it is later. I have had about three applications already from his officials, two two or three months ago, so that he will see that his officials have been far more active and far more early in the field than he imagines. No doubt they imagine it is the early bird that catches the worm, and they will doubtless do the same in as many cases as they can. Accordingly these papers have already been sent out to large numbers of people. What are sent out in January are what are called threatening notices, the notices saying that you have not made your return, and now you have got to pay or worse will happen. What I want him to consider is, of what earthly use for the purpose of the Super-tax are the notices he has hitherto sent out? All the information which he has obtained is no doubt contained on forms of request to assess a person for his ordinary Income Tax; but that will not disclose whether he is assessed for Super-tax or not. I will give the Chancellor a personal case. I have filled up, I believe, some forms this year. Two of them would be filled up in other places, and in one case where I made my return it was filled up nil, because I had no income to declare for Income Tax from which the tax had not been deducted before it reached me; so that as evidence to the Chancellor, of the Exchequer when he wants to decide whether I am a person on whom to levy Super-tax or not that information is useless, and until his Budget passes, be it on the 30th September, or October, or November, or December, or in January, he will not get me to answer any form as to my total income or to give him any information which will enable him to say whether I am assessable for Super-tax or not. And everybody else will do the same thing.
Why should they give the Chancellor of the Exchequer any account of their total income for the purpose of levying a Super-tax before Parliament has approved of that Super-tax at all, and before the Chancellor of the Exchequer or his officials have any right to ask for any such thing? Clearly he will not get the information, and accordingly the Chancellor, who is basing himself upon the assumption that all this while his Inland Revenue officials are collecting information which will enable him to levy the tax, is, if I may say so, living in a fool's paradise. He cannot collect that information until he has got Parliamentary authority to demand it and to enforce the supplying of it by the taxpayer. Accordingly he must wait until 69 the Bill is passed before he can get that information. That will be very near to the close of the year. Under those circumstances, the taxpayer will presumably be able to answer with very close accuracy what his income for the year is likely to be, and there are provisions known to the existing Income Tax, and, I doubt not, known to the Chancellor of the Exchequer, by which, if there be an error in the calculation one way or the other, it can be readjusted later on. There are such provisions in the case of new businesses, I think, started within the year, and other cases of the kind, and that is what I had in my mind when I suggested to the right hon. Gentleman that he can get his money this year on the income received this year, with any slight adjustment which might be necessary owing to full information not being the possession either of the taxpayer or the Government at the close of the year. I hope I have made it clear to the Chancellor of the Exchequer that the procedure cannot be that which he appeared to think in the speech which he delivered just now. I think he may have some difficulty in applying any procedure so as to collect the whole of his money within the financial year, but I do not see that there need be any greater difficulty, considering that he cannot do anything until the Bill is passed, if my hon. Friend's Amendment is accepted than if the Bill were left as it now stands.
There is one point as to the question of the average of the last three years. The Chancellor of the Exchequer said that the three years' average as it now exists will continue to exist and to be applied to the Super-tax. I confess that that statement surprises me, and for two reasons: In the first place, I understood the Chancellor of the Exchequer to say—no doubt wrongly; I am trusting to my memory—that the three years' average would not apply to the Super-tax, and ought not to apply to the Super-tax. The second reason it surprises me is because I do not see any way by which the Chancellor of the Exchequer can apply the three years' average to the Super-tax in the same way and to the same extent as it is applied to the ordinary Income Tax. You can apply it to the Super-tax of the professional man if the whole of his income is derived from his personal exertions. But take the case of a man whose income is derived from business. How are you going to apply the three years' average there? His income is received from a business of his own or a number of businesses in which he holds 70 shares. They declare their dividends free of Income Tax, and the Income Tax is calculated on the three years' average; but when you come to the Super-tax he has got to return the income which was received, and the three years' average can no longer be applied, although his income is derived from ordinary businesses to which in ordinary circumstances the three years' average is applicable. I would ask the Chancellor of the Exchequer to describe to us how the man's income, which is derived from businesses assessed under Schedule D, is to get the benefit of the three years' average when he makes his return for the Super-tax? Take the case of a person like myself, whose present return is nil, all his Income Tax being deducted at the source. Suppose that the total income is over £5,000, how is he to apply the three years' average, applicable to all the income which he has received, to the Super-tax? He has no knowledge of the annual profit, and is he to be allowed to substitute for the triennial average of the concern the triennial average of his own income? I think that that might be rather valuable to the taxpayer, but I do not see how the Chancellor is going to do it, and I do not see anything in the Bill which would give the taxpayer the power to insist upon it. I hope the Chancellor of the Exchequer will give us light on both these points before we part with the Amendment.
§ Sir EDWARD CARSONThe Chancellor of the Exchequer said that there would be a difficulty in adopting any rule except the rule applicable in the ordinary triennial period. May I call his attention to two sub-sections of the Act of last year? I think they are merely repeating the sections of the Act of 1842. I refer to Section 24, Sub-sections (2) and (3). The first sub-section deals with where a man really starts within the triennial period, or within the three years' assessment. In that case there is no difficulty whatsoever in effecting a settlement. The settlement may be made at the end of the year, or, at all events, by making such an arrangement, that it would not work unjustly in a case of that kind. That is one case which is very appropriate to the point raised on this Amendment. There is a more appropriate one, namely, Sub-section (3), where a man discontinues business during the course of the year. In those circumstances it would be, of course, very unfair that after the previous two years the assessment should be in relation 71 to the year in which he discontinued his business. The provision in that case is this: If it worked out unduly the Commissioners would consider the matter, and having regard to the fact that he had discontinued business, they would make an allowance. Take the case of a man who had a large income last year which would have brought him under the Super-tax if it had been in force. Take it that he had retired from business at some time during the present year, so that he lost a considerable amount of money compared with what he had in previous years. In that case, surely the proper way of assessing him would be to take the three years from the time he started, but to have some provision such as you have as regards the triennial period, in order to deal with his having discontinued business during the year, so that even if he did pay on the average of the three years, at the end of the year in which he discontinued business the matter could be adjusted in such a way that no injustice would be done, and you could make him pay the tax in conformity with the income he had received. I am perfectly sure that the Chancellor of the Exchequer will find that many cases will arise where very great hardship would be put upon a man by having to pay Super-tax this year in relation to income which he had last year. I think these provisions of the Income Tax Act to which I have referred will show the right hon. Gentleman that it is a matter which has been actually laid down in relation to the triennial period where a partner has discontinued business during the year.
§ Mr. PRETYMANMay I ask the right hon. Gentleman two questions? There may be confusion caused by this Clause. The three years' average for the purpose of the ordinary Income Tax is for the current year and for the two previous years. This proposal for a Super-tax is not for the current year at all. It is for the previous year, and for two years before that. There will be no basis at all for the tax. You take the total income of the individual from all sources for the previous three years. It is pretty plain that it refers to incomes. The income of the year is to be taken, and to be considered in relation to two years before that, so that you have got to go back four years instead of three years. I certainly cannot see the object of bringing in the three years' average in relation to the Super-tax. It is going to 72 introduce an element of unnecessary confusion; it will be of no advantage to the Government that I can see; and if I may venture upon a general criticism of all this new taxation proposed in this Budget, it is that it is extraordinarily complicated, and will be difficult for the individual taxpayer, who has not got the whole of the resources of a staff at his disposal It is perfectly easy, no doubt, for the right hon. Gentleman the Chancellor of the Exchequer and the right hon. Gentleman the Secretary to the Treasury, though I have observed during these Debates that not infrequently the Chancellor of the Exchequer himself has had to go and consult the officials of the Treasury as to what this taxation really does mean, and as to what exactly is the interpretation of these words. Will they apply their own difficulty, with all the technical knowledge they possess, to a consideration of the position; of the ordinary taxpayer? I believe the interpretation of these words for the purpose of exemption or abatement under the Income Tax Acts is extremely difficult. It is extremely difficult to know whether they involve the three years' average at all. I cannot see myself how these words can cover or quite distinctly enact that there is to be a three years' average. In regard to the present year it is clearly a great hardship. Any income which a man receives this year would be subject to pay tax, and a man would be justified in reserving a portion of his income to meet the tax owing to the State; but, in regard to a past income, there could be no possible expectation of that kind; yet you are going back three years, and you propose to impose a retrospective tax upon income which has been received and which has been properly expended in the past two or three years. The Secretary to the Treasury defended his proposal by reference to the provisions of the Budget, but I think he will admit that no other Budget has ever resembled this one. You cannot lay down what has been proper in regard to an old tax as being proper in regard to a new tax of this kind, and no tax ought to be retrospective on income which has been properly spent. I do hope that the Chancellor of the Exchequer will adopt such a course as will enable the person who has to pay the tax to know where he stands, and I trust that he will abandon this really most complicated and, I think, ridiculous provision that this tax is to be levied on the three years' average in regard to some parts of a man's income.
§ Mr. LLOYD-GEORGEThe hon. and gallant Member's speech is based on a wholly false assumption. He assumes that when you calculate the three years' average it includes the current and the preceding two years. If he looks at the Income Tax rules he will find that we really have followed precedent. The rule says that the duty shall be charged upon the full amount of profit on a fair and just average of three years ending with the year immediately preceding.
§ Mr. PRETYMANI said the current year of this tax, and you have to go a year further back.
§ Mr. LLOYD-GEORGEThat is not the impression the hon. and learned Gentleman conveyed, though it may be that it was the impression he desired to convey; but, certainly it is not the impression he did convey. The whole point was that we were departing from precedent, and that we were charging in respect of the preceding year, and to that extent we were departing from precedent. We are doing exactly what Schedule D does. The first time Schedule D was imposed it was imposed exactly in the same way as the Super-tax will be imposed. When it was first set up it was charged on the past year. It is the only way to do it; otherwise we would have to wait until 1st January before the notices could be sent out. No man can tell you on 1st January what his profit was on 31st December. He has first of all to make up his general accounts.
§ Sir F. BANBURYSupposing I started business on 5th April, 1909. Am I to return my Income Tax in the annual return when I was not in the business last year?
§ Mr. LLOYD-GEORGEThat is the point which has been raised by the right hon. and learned Gentleman (Sir E. Carson), and with which I mean to deal. But the general case presented here is that we ought not to charge in respect of the past year. I say it is the only way in which you can do it. When Schedule D was first set up, the assessment under it was on the previous 3 years. As I said, no man can tell on 31st December what his actual profits were for the preceding year; he cannot do it. He has got to make up his accounts; it will take a long time and some calculation before he has any notion of what his profits were in previous years. We would send out our notices and we could not expect any replies until the month of February. We have got to 74 examine them and to send them back for explanation it may be, and 31st March would be upon us before we got a penny of the Super-tax. The Super-tax would be in regard to businesses and some of them very considerable businesses.
§ Mr. AUSTEN CHAMBERLAINThis is what I understood the Chancellor of the Exchequer to say: that it was to be a tax on individual income over a certain amount. It has nothing to do with businesses, but merely with individual incomes. A business may be earning enormous profits which may be divided among a number of people with small portions, and the Super-tax only becomes payable when an individual has an income of over £5,000. If that be so, what on earth have businesses to do with the matter? It is the income of the individual and not the profits of a business.
§ Mr. LLOYD-GEORGELet me point out that a man may be engaged in business, and he pays Super-tax in respect of the share he derives from the business, as well as in respect of any other part of his income. He would have his share of the profits whatever they amount to, and however large the number among whom those profits might be divided. If he pays Super-tax it shows that the business is an enormous one, and there would be all the greater difficulty in ascertaining its profits before they could arrive at the amount of an individual share of those profits. Take the case of a man engaged in a big trading concern and who wants to find out whether he has to pay Super-tax. He has declared what his income is during the current year. He has got his returns from investment, and yet he wants to find out what he will derive from the business in which there are other partners. Before he knows what his share of the profits is it must be ascertained what are the profits of the whole concern, and he cannot get to know the amount of his share until the whole of the profits have been ascertained. It is quite impossible for this to be done unless the Super-tax is imposed in respect of the past year. Therefore, we have just followed precedent in what we propose. It is the only way in which we could do it. The right hon. Gentleman put another point as to a case where a business is stopped, say in April, and where there is not a full year. There is special provision for that.
§ 7.0 P.M.
§ Mr. AUSTEN CHAMBERLAINTake the case of partners in business, which is 75 really the case I had in my mind. Assuming they have incomes over £5,000 they will pay a Super-tax on so much of that as is above £3,000, whether derived from business or not. Does the right hon. Gentleman mean to say that that will be on the undivided profits of their business? I assume they will pay on what they receive in the year, and that therefore they would know what they received from their business in the year just as much as what they received from other sources. If their business had earned some more, and if it had not yet been divided, that would fall into the next year, not this year; am I right or wrong in that assumption?
§ Mr. LLOYD-GEORGEThey do exactly as under Schedule D. Whatever the method is there that is the method which we apply now. We follow strictly the principle of Schedule D. All we want is to follow exactly the lines of Schedule D, and I think we have done it in that respect. Whatever benefit is now given to the trader under the sections quoted by the right hon. and learned Gentleman will be given in respect of the Super-tax in exactly the same way.
§ Sir E. CARSONThat is not in the Bill.
§ Mr. LLOYD-GEORGEWe treat them in the same manner as the total for the Income Tax is now estimated. That is the intention of these words, and if the right hon. Gentleman can point out to me that they do not follow that case—
§ Sir E. CARSONI do not think they do. It never even occurred to me that the exemptions and abatements are exemptions and abatements which you would take into account in coming to the three years' average.
§ Mr. LLOYD-GEORGEI think the right hon. Gentleman is wrong. Supposing the case of a man whose income is only £600, and therefore counts exemptions as it is under £700, does the right hon. Gentleman doubt that a man who could claim these exemptions could not do so under this provision? The person paying the Super-tax ought to get the full benefit of these Clauses, and that is undoubtedly the intention. I am advised by those who are responsible for its drafting that they will get the whole benefit of whatever claim an ordinary Income Tax payer can possibly put forward. The right hon. Gentleman (Mr. Austen Chamberlain) says, "Suppose 76 you have not got replies to the returns in September or October?" Then in that case, we would have to send them out in November, when the Bill has passed, because we must get our returns. There is a great difference in inviting returns in December and November in respect of last year, and in sending out those returns in January in respect of incomes which could only be calculated as to 31st December. In the first case we can get them—we cannot get them all, but I have made an allowance for that.
§ Mr. CAVEI think most people who read Sub-section (2) of this Clause understood that the income was to be taken as the income for the previous year, without any average at all. I know many gentlemen who are experts in Income Tax Acts, and who read it in that way, that there would be no average. I assume, of course, that the Bill must be read as the Chancellor says, and that you are to take an average of three years; but there remains this point, which has not been mentioned, and that is what three years are you to take. According to the Chancellor, you are to take your income for last year on the average of the three preceding years. In other words, you are to go back four years in all for the purpose of ascertaining your Super-tax for this year. It you were taking the income for Schedule D this year, I quite agree you must go back for the last three years preceding this year; but to ascertain the Super-tax for this year you are not to go back the three years preceding this year, but the three years preceding last year. I do not see the sense of that or why it is done. I am quite sure it is not fair. Surely the simple plan to ascertain the Super-tax of this year is to call upon the man to make a return as if he was making a return for Income Tax for this year—that is, under Schedule A, which gives the actual income, and then under Schedule D, under which he gives the average for the three years expiring April last. That is the simple practice, which might be perfectly well followed. As has been said, you might have had a loss last year, or you might have had land which you have given away, and in that case it would be a gross injustice to go back. Surely the point is a very simple one. It ought to be the average up to the end of last year, and not up to the end of the year before last. Sub-section (2) says the total income is to be "the total income of any individual from all sources…for the previous year." 77 That is referring to last year, and the income for last year must be estimated on the average for the preceding three years. I am quite sure I am right in my reading of the Bill—at least the Bill would be read by other people as I read it—and if it does not mean what I take it to mean it ought to be altered. The farther you go back the greater would be the injustice.
§ Mr. LLOYD-GEORGEI understand the point is a matter of drafting. This means not three years' average but four, because it means three years taken from the end of the year before. I am advised that is not to be the case, but it is a point of drafting, and that is not the meaning which the Government intends it should have. I will be perfectly ready to alter it if there is any doubt, and the mere fact that the hon. and learned Gentleman (Mr. Cave) has a real doubt about it is quite enough to make it necessary to make it all the more clear. It ought to be made quite clear that that is not the operation to be carried out by the Bill.
§ Sir FREDERICK CAWLEYI think this requires a little consideration, and I do not think the three years' average is fair. There are many cases in which there would be no question of a three years' average at all. This three years' average for Super-tax will tell very hardly upon mill owners in Lancashire. They had abnormal years in 1906–7, but many of them previous to that were losing money, and they are losing money now. In many of the cotton mills in Lancashire they are not making a penny at the present time, and it is rather hard that they should have to pay a Super-tax en the year 1907 when now they are making nothing at all. I understand that the Super-tax is not to be retrospective; but if the Chancellor of the Exchequer takes a three years' average he will certainly make it retrospective, and in many cases its retrospective action will operate very hardly indeed. I quite agree that the right hon. Gentleman cannot take this year, but he could take last year. If he took 1908 for the Super-tax, next year he could take the average of two years, and after that he could take the three years' average. That, I think, would do away with a great deal of hardship. There will be a certain amount of hardship in taking 1908, but it will be a great deal less than the hardship involved in taking the average of the three years 1906–7–8. It would also do away with the confusion as to which three years are to be taken. There has been considerable confusion already between the Front 78 Benches as to whether the three years are 1906–7–8 or 1905–6–7. I hope, therefore, the Chancellor of the Exchequer will consider the suggestion I have made.
§ Lord ROBERT CECILAfter the speech just made the Chancellor of the Exchequer must feel that a real hardship may arise in this case. His answer is that he is applying precisely the same machinery as was applied in 1842. I would point out, however, that in 1842 the Income Tax was a new tax, and special provisions were put into the Act to deal with this very point. Section 133 enacted that the taxpayer was to be entitled to pay on his last year's income if it was less than the average of the three years. That continued for 65 years as the law with regard to Income Tax in this country. It was only in 1907 that that was abolished. Cases have come under my own knowledge where the three years' average is a hardship, not only in the case of business men but in the case of professional men, who for some reason do not earn anything like their previous income in a particular year; but they have to go on paying as if they were earning a much larger income. No doubt, taking the whole of a man's life, it works out fairly; but it is often much harder later in life than earlier. Under this proposal you are really going to tax a man upon a previous income which has nothing to do with this year. It would be a fair and just way of dealing with the difficulty to say that Section 133 of the Income Tax Act, 1842, should apply at any rate to three years until you have three years' working under the new system. After that it might be fair enough to say that a man must pay on a three years' average.
§ Mr. A. B. MARKHAMThe great majority of people who will have to pay this Super-tax have no idea what their incomes are. I am a business man, and keep proper business books; but privately I have not the remotest idea what my income is. I have asked several friends who will have to pay the Super-tax how they will calculate their income; they say that all the books they have are their bank pass books, and they will have to take out what items they can. Lawyers have an idea that an ordinary individual can tell where he was three months ago at a certain hour. I have not a memory like that. My memory does not go back more than 24 hours, and I am not able to form the remotest idea—and most people who will have to pay the Super-tax will be in the same position—from my pass book of four 79 years ago which will enable me to make an accurate return. If the return has to be made for four years there will be endless trouble with the Commissioners, and I am certain that at the finish neither the Commissioners nor I will be able to arrive at what my income really is. Under these circumstances I suggest that it would be much better to take 1908 as the basis on which this tax should be calculated. The hon. Baronet (Sir F. Cawley) made a very fair suggestion, namely, that you should take 1908 as the basis this year, and then progress year by year, so that the Chancellor of the Exchequer would be able to get his three years' average in time. I have no objection to the three years' average itself. My difficulty is that people with incomes over £5,000 a year will not in the majority of cases know what their incomes have been, because in private life they do not keep books as they do in business. If the right hon. Gentleman will accept the suggestion which has been made, he will eventually arrive at his three years' average without inflicting hardship upon anybody.
§ Mr. HICKS BEACHI agree with the hon. Member opposite (Mr. Markham) that a great many people who have £5,000 a year, as well as many who have less, will find the greatest difficulty in ascertaining what their incomes were four years ago, and it would be a great improvement if the Chancellor of the Exchequer would take into consideration the suggestion which has been made on that point. I wish, however, to ask on what basis incomes derived from the holding of agricultural land will be assessed. Is the owner of agricultural land to be assessed for Super-tax on his Schedule A assessment? It is a very important point, because, if so, they will, according to the hon. Gentleman's own showing, be paying Income Tax on incomes which they do not receive.
§ Mr. LLOYD-GEORGEThat will be dealt with later on.
§ Mr. HICKS BEACHIf the three years' average is taken—
§ Mr. LLOYD-GEORGEThe three years' average does not apply at all to Schedule A.
§ Mr. HICKS BEACHBut you are going to have a three years' average for Super-tax.
§ Mr. LLOYD-GEORGEThe hon. Gentleman is quite wrong. I only take the three 80 yeans' average under Schedule D. I certainly do not propose to take a three years' average in the case of Schedule A.
§ Mr. HICKS BEACHI am glad to hear that; but I think the whole Committee were under the impression that a three years' average was to be taken for Super-tax.
§ Mr. LLOYD-GEORGEOnly in respect of Schedule D.
§ Mr. CHIOZZA MONEYWith regard to the point of drafting, I would suggest that it is only necessary to take out the four words "for the previous year."
The CHAIRMANWe have really been discussing all this time what is the meaning of Sub-section (2). I think the point was raised quite properly, but we must wait until we get to the Sub-section before actual Amendments can be suggested.
§ Mr. CHIOZZA MONEYWith regard to the three years' averaging, Members who have spoken on it have really been attacking the three years' averaging system. That system may be good or bad, but, at any rate, the question was examined before the recent Income Tax Committee, and the verdict went in favour of the averaging system. Personally, I am opposed to the averaging system, because when profits have been made, whether large or small, in the previous year the taxpayer is in the best condition to be taxed upon them. That point, however, cannot be raised now. In this connection we must tax on the same income. I do not know whether Members are aware how many persons are taxed on over £5,000 a year already. According to the Inland Revenue Report, about 800 persons are taxed as individuals on over £5,000 a year in respect to trade—that is, not mixed incomes—while another 950 firms—that is, containing partners—are taxed on over £10,000 a year. So that probably there are something like 1,500 persons engaged in trade, either as individuals or as partners, without reference to mixed incomes taxable for Super-tax. That being the case, it would manifestly be absurd to tax them in two different ways—that is to say, at fourteenpence on the average of three years, and then for Super-tax on the income either of the current or of the previous year. We must do either one thing or the other.
§ Earl WINTERTONThe system proposed in this Clause is quite different from 81 anything we have had to deal with before. It would not be in order to discuss whether the present system is good or bad, but it is ridiculous to say that the proposal in regard to Super-tax is the same as under the existing Income Tax. The great objection to making this tax in any way retrospective is that the Super-tax is altogether a novel proposal. The man taxed under it has to consider altogether the whole question of his expenditure for the year. This, as it seems to me, is altogether a novel proposal, and is not, as the hon. Member for North Paddington suggests, merely an extension of the present rule. I think it is exceedingly undesirable that this tax should be retrospective. There is no emergency to-day that requires it. There is also a great objection to making this tax retrospective, as it is as the Clause stands, because it affects the whole question of a man's expenditure, and I do not think the State ought to interfere in the way suggested with the owner of an income.
§ Mr. SAMUEL ROBERTSI simply want to ask the Chancellor of the Exchequer to adopt the suggestion of the Noble Lord the Member for Marylebone (Lord R. Cecil). I was going to make the same suggestion before the Noble Lord arose. I have an Amendment on the Paper much to the same effect. It says: "For the purposes of the Super-tax, if within, or within twelve months after, the year of assessment any person charged to the Super-tax, whether he shall have computed his profits or gains on the amount thereof in the preceding year or on an average of years, shall find and prove to the Special Commissioners that his profits and gains during the year for which—"
The CHAIRMANWhat has that got to do with it? I do not see why we should have it raised now. It is discussing these things twice over.
§ Mr. SAMUEL ROBERTSIt gets over the present difficulty. The point is this—
The CHAIRMANYes; but the point is raised on another Amendment handed in by the hon. and learned Gentleman the Member for Dublin University (Sir Edward Carson).
§ Mr. AUSTEN CHAMBERLAINI must confess that I had not understood altogether what is the Chancellor's intention. He says that where a three years' average is employed for calculating the normal income, 82 the three years' average is to be employed for calculating the Super-tax. That I understand to be his general statement. The method of calculating income for the Super-tax will be exactly the method employed for calculating income for ordinary Income Tax purposes. Take the case of a man who derives his income or a portion of it from shares in industrial companies. His income pays ordinary Income Tax before it reaches him, because the company takes the average profit of three years, and makes its return to the Commissioners, and pays Income Tax on whatever is the amount at which they are assessed. Very well. Now the income comes into the hands of an individual or individuals, one of whom is liable to the Super-tax. Is he to pay the Super-tax on the income which he actually receives in whatever year you choose for the assessment, or is he to pay Income Tax on the average of the income that he received from such sources during three years?
§ Mr. LLOYD-GEORGEHe will pay the Super-tax in respect of that amount of his income that exceeds that which has paid ordinary Income Tax, and the three years' average would be taken into account. Supposing he pays one year on £120, that is taken into account in the Super-tax. Perhaps in the previous years he has paid upon £150. That, too, would be taken into account. It is purely the amounts in respect of which he pays ordinary Income Tax that are to be woven into the general account for the Super-tax.
§ Mr. AUSTEN CHAMBERLAINI think I understand. An individual will not be permitted to average his receipts of the Schedule D character for three years, but it will be assumed, whatever those receipts were, in so far as he pays Income Tax on what he received from the company, that this represents a three years' average?
§ Mr. LLOYD-GEORGE assented.
§ Mr. AUSTEN CHAMBERLAINYes, but what is divided amongst shareholders by no means represents a three years' average. The profits of a company may be divided partly between the reserve fund and dividend. The average is on the whole. The tax is on the whole. The Chancellor of the Exchequer thinks he is getting the same assessment. He is really getting a quite different assessment by this method. As I understood him at the very commencement of the 83 Budget discussion, you could not apply the system which you apply to the normal Income Tax to the Super-tax, because the normal tax was collected on institutions and trading firms' profits as a whole, and not upon individuals, whereas this tax is going to be collected upon individual incomes. For the purpose of assessment and collection of the normal tax you have nothing to do with the distribution of profits. It is quite true that the distribution of profits may give rise to subsequent claims for repayment, but for the purpose of the assessment and collection you have nothing to do with the distribution of the profits. For the purpose of the Super-tax it is of no assistance to you to know how much profit there is made. What you want to know is what profit went to every individual, and what other income he has from all sources. Under those circumstances I think you have got into an extraordinarily complicated piece of draftsmanship and a complicated piece of machinery, and to attempt to apply the Super-tax by the machinery of the normal tax will make the matter, complicated and difficult though it be to understand, more difficult and more complicated to work.
§ Mr. A. FELLThere seems to be a misconception about the matter, and it arises, I think, from the fact that firms and businesses are assessed on the three years' principle, the three years' average, and that a private individual is not assessed in that way, but on an estimate of the income which he will receive for the current year. I do not think this point has been apprehended by the Committee. I
§ think if it had been the Chancellor of the Exchequer would not have maintained his attitude. The Chancellor of the Exchequer's chief argument that a business would not make up its account till the end of the year, and that it would be impossible to estimate what the year's profits are until the end of that year. May I say that a private individual is in the month of July or August called upon to fill up a form giving his estimate for that current year? On that return he pays Income Tax. He makes it generally in August, and pays about Christmas or soon after. The Chancellor of the Exchequer, I believe, has slightly mixed up the question of firms and businesses and private individuals.
§ Mr. JOYNSON-HICKSI want to join the appeal made by the hon. Baronet the Member for Prestwich (Sir F. Cawley) that the Chancellor of the Exchequer should make the date of his three years' average from the present time. It is not a part, as the hon. Member for North Paddington suggested, of the principle of three years which—
§ Mr. JOYNSON-HICKSOn a point of Order. I was simply joining an appeal which you allowed the hon. Baronet the Member for Prestwich to make; but I will not press it now.
§ Question put: "That the word proposed to be left out stand part of the Clause."
§ The Committee divided: Ayes, 200; Noes, 84.
85| Division No. 682.] | AYES. | [7.45 p.m. |
| Abraham, W. (Cork, N.E.) | Bowerman, C. W. | Cullinan, J. |
| Adkins, W. Ryland D. | Bramsdon, Sir T. A. | Curran, Peter Francis |
| Agnew, George William | Brunner, J. F. L. (Lancs., Leigh) | Dalziel, Sir James Henry |
| Alden, Percy | Burns, Rt. Hon. John | Davies, Ellis William (Eifion) |
| Allen, A. Acland (Christchurch) | Burnyeat, W. J. D. | Dewar, Arthur (Edinburgh, S.) |
| Allen, Charles P. (Stroud) | Burt, Rt. Hon. Thomas | Dilke, Rt. Hon. Sir Charles |
| Ashton, Thomas Gair | Buxton, Rt. Hon. Sydney Charles | Dobson, Thomas W. |
| Atherley-Jones, L. | Byles, William Pollard | Duncan, J. Hastings (York, Otley) |
| Baker, Sir John (Portsmouth) | Carr-Gomm, H. W. | Dunn, A. Edward (Camborne) |
| Baker, Joseph A. (Finsbury, E.) | Causton, Rt. Hon. Richard Knight | Dunne, Major E. Martin (Walsall) |
| Balfour, Robert (Lanark) | Cawley, Sir Frederick | Edwards, Sir Francis (Radnor) |
| Barker, Sir John | Chance, Frederick William | Erskine, David C. |
| Barlow, Sir John E. (Somerset) | Cherry, Rt. Hon. R. R. | Essex, R. W. |
| Barnard, E. B. | Cleland, J. W. | Everett, R. Lacey |
| Barran, Rowland Hirst | Clough, William | Findlay, Alexander |
| Barry, Redmond J. (Tyrone, N.) | Clynes, J. R. | Fuller, John Michael F. |
| Beaumont, Hon. Hubert | Cobbold, Felix Thornley | Fullerton, Hugh |
| Beck, A. Cecil | Collins, Stephen (Lambeth) | Gibb, James (Harrow) |
| Bell, Richard | Collins, Sir Wm. J. (St. Pancras, W.) | Ginnell, L. |
| Bennett, E. N. | Corbett, C. H. (Sussex, E. Grinstead) | Gladstone, Rt. Hon. Herbert John |
| Berridge, T. H. D. | Cory, Sir Clifford John | Glendinning, R. G. |
| Bethell, Sir J. H. (Essex, Romford) | Cotton, Sir H. J. S. | Glover, Thomas |
| Bethell, T. R. (Essex, Maldon) | Cox, Harold | Gooch, George Peabody (Bath) |
| Black, Arthur W. | Craig, Herbert J. (Tynemouth) | Grayson, Albert Victor |
| Boulton, A. C. F. | Crosfield, A. H. | Greenwood, Hamar (York) |
| Gulland, John W. | Lloyd-George, Rt. Hon. David | Rowlands, J. |
| Harcourt, Rt. Hon. L. (Rossendale) | Lundon, T. | Runciman, Rt. Hon. Walter |
| Harcourt, Robert V. (Montrose) | Macdonald, J. M. (Falkirk Burghs) | Russell, Rt. Hon. T. W. |
| Hardie, J. Keir (Merthyr Tydvil) | Mackarness, Frederic C. | Samuel, Rt. Hon. H. L. (Cleveland) |
| Hardy, George A. (Suffolk) | Maclean, Donald | Samuel, S. M. (Whitechapel) |
| Harmsworth, Cecil B. (Worcester) | MacVeagh, Jeremiah (Down, S.) | Seely, Colonel |
| Harmsworth, R. L. (Caithness-shire) | MacVeigh, Charles (Donegal, E.) | Sherwell, Arthur James |
| Haworth, Arthur A. | McKenna, Rt. Hon. Reginald | Shipman, Dr. John G. |
| Hazleton, Richard | M'Laren, H. D. (Stafford, W.) | Sloan, Thomas Henry |
| Hedges, A. Paget | Maddison, Frederick | Smyth, Thomas F. (Leitrim, S.) |
| Henderson, J. McD. (Aberdeen, W.) | Mallet, Charles E. | Soares, Ernest J. |
| Henry, Charles S. | Markham, Arthur Basil | Stanley, Hon. A. Lyulph (Cheshire) |
| Herbert, Col. Sir Ivor (Mon. S.) | Masterman, C. F. G. | Steadman, W. C. |
| Higham, John Sharp | Mond, A. | Stewart, Halley (Greenock) |
| Hobhouse, Rt. Hon. Charles E. H. | Money, L. G. Chiozza | Stewart-Smith, D. (Kendal) |
| Hodge, John | Montgomery, H. G. | Straus, B. S. (Mile End) |
| Hogan, Michael | Morgan, J. Lloyd (Carmarthen) | Strauss, E. A. (Abingdon) |
| Holt, Richard Durning | Muldoon, John | Summerbell, T. |
| Hope, W. H. B. (Somerset, N.) | Myer, Horatio | Tennant, Sir Edward (Salisbury) |
| Horniman, Emslie John | Nicholson, Charles N. (Doncaster) | Thomas, Sir A. (Glamorgan, E.) |
| Howard, Hon. Geoffrey | Nolan, Joseph | Thomasson, Franklin |
| Idris, T. H. W. | Norman, Sir Henry | Tomkinson, James |
| Isaacs, Rufus Daniel | Nuttall, Harry | Travelyan, Charles Philips |
| Jackson, R. S. | O'Brien, Patrick (Kilkenny) | Verney, F. W. |
| Jardine, Sir J. | O'Connor, John (Kildare, N.) | Vivian, Henry |
| Johnson, John (Gateshead) | O'Connor, T. P. (Liverpool) | Wadsworth, J. |
| Jones, William (Carnarvonshire) | O'Donnell, John (Mayo, S.) | Walker, H. De R. (Leicester) |
| Jowett, F. W. | Partington, Oswald | Ward, John (Stoke-upon-Trent) |
| Joyce, Michael | Pollard, Dr. G. H. | Wardle, George J. |
| Keating, M. | Ponsonby, Arthur A. W. H. | Wason, Rt. Hon. E. (Clackmannan) |
| Kekewich, Sir George | Power, Patrick Joseph | Wason, John Cathcart (Orkney) |
| Kilbride, Denis | Radford, G. H. | White, Sir George (Norfolk) |
| King, Alfred John (Knutsford) | Reddy, M. | White, J. Dundas (Dumbartonshire) |
| Laidlaw, Robert | Richards, T. F. (Wolverhampton, W.) | White, Sir Luke (York, E. R.) |
| Lamb, Ernest H. (Rochester) | Ridsdale, E. A. | Whittaker, Rt. Hon. Sir Thomas P. |
| Lambert, George | Roberts, G. H. (Norwich) | Wiles, Thomas |
| Lamont, Norman | Roberts, Sir J. H. (Denbighs) | Wilkie, Alexander |
| Layland-Barratt, Sir Francis | Robertson, Sir G. Scott (Bradford) | Wilson, P. W. (St. Pancras, S.) |
| Lea, Hugh Cecil (St. Pancras, E.) | Robinson, S. | Wilson, W. T. (Westhoughton) |
| Lehmann, R. C. | Robson, Sir William Snowdon | |
| Lever, A. Levy (Essex, Harwich) | Roch, Walter F. (Pembroke) | TELLERS FOR THE AYES.—Mr. Joseph Pease and Captain Norton. |
| Levy, Sir Maurice | Rogers, F. E. Newman | |
| Lewis, John Herbert | Rose, Sir Charles Day | |
| NOES. | ||
| Acland-Hood, Rt. Hon. Sir Alex. F. | Fletcher, J. S. | Magnus, Sir Philip |
| Anson, Sir William Reynell | Forster, Henry William | Mason, James F. (Windsor) |
| Balcarres, Lord | Foster, P. S. | Mildmay, Francis Bingham |
| Baldwin, Stanley | Gardner, Ernest | Oddy, John James |
| Balfour, Rt. Hon. A. J. (City, Lond.) | Gooch, Henry Cubitt (Peckham) | Parker, Sir Gilbert (Gravesend) |
| Banbury, Sir Frederick George | Gordon, J. | Pease, Herbert Pike (Darlington) |
| Banner, John S. Harmood- | Gretton, John | Peel, Hon. W. R. W. |
| Beach, Hon. Michael Hugh Hicks | Guinness, Hon. R. (Haggerston) | Pretyman, E. G. |
| Beckett, Hon. Gervase | Haddock, George B. | Randles, Sir John Scurrah |
| Bowles, G. Stewart | Hamilton, Marquess of | Ratcliff, Major R. F. |
| Bridgeman, W. Clive | Harris, Frederick Leverton | Rawlinson, John Frederick Peel |
| Bull, Sir William James | Harrison-Broadley, H. B. | Renton, Leslie |
| Butcher, Samuel Henry | Hay, Hon. Claude George | Roberts, S. (Sheffield, Ecclesall) |
| Carlile, E. Hildred | Hill, Sir Clement | Ronaldshay, Earl of |
| Carson, Rt. Hon. Sir Edward H. | Hills, J. W. | Rutherford, Watson (Liverpool) |
| Cave, George | Hope, James Fitzalan (Sheffield) | Salter, Arthur Clavell |
| Cecil, Evelyn (Aston Manor) | Hunt, Rowland | Sheffield, Sir Berkeley George D. |
| Chamberlain, Rt. Hon. J. A. (Worc'r.) | Joynson-Hicks, William | Smith, Hon. W. F. D. (Strand) |
| Channing, Sir Francis Allston | Keswick, William | Stanier, Beville |
| Clyde, J. Avon | Kimber, Sir Henry | Starkey, John R. |
| Coates, Major E. F. (Lewisham) | King, Sir Henry Seymour (Hull) | Walker, Col. W. H. (Lancashire) |
| Courthope, G. Loyd | Lambton, Hon. Frederick William | Warde, Col. C. E. (Kent, Mid) |
| Craig, Captain James (Down, E.) | Lee, Arthur H. (Hants, Fareham) | Willoughby de Eresby, Lord |
| Craik, Sir Henry | Lockwood, Rt. Hon. Lt.-Col. A. R. | Wilson, A. Stanley (York, E. R.) |
| Dickson, Rt. Hon. C. Scott | Long, Col. Charles W. (Evesham) | Winterton, Earl |
| Douglas, Rt. Hon. A. Akers | Lonsdale, John Brownlee | Younger, George |
| Duncan, Robert (Lanark, Govan) | Lowe, Sir Francis William | |
| Faber, George Denison (York) | Lyttelton, Rt. Hon. Alfred | TELLERS FOR THE NOES.—Mr. Walter Guinness and Mr. Felt. |
| Faber, Captain W. V. (Hants, W.) | M'Arthur, Charles |
§ Mr. JOYNSON-HICKS moved, in Subsection (1), after the word "the" ["In addition to the Income Tax charged at the rate of one shilling and twopence under this Act there shall be charged, levied, and 86 paid for the year beginning on the sixth day of April nineteen hundred and nine, in respect of the income of"] to insert the word "separate."
§ This Amendment raises the question 87 whether for the purposes of the Super-tax a husband and wife should be considered as one or should be treated separately. Under the present Income Tax the income of the husband and wife is added together for the purposes of that tax, and if a similar course is pursued with regard to the Super-tax it will lead to a very considerable hardship. In the Act of 1842 a clause was put in which undoubtedly rendered the position of the husband and wife and a married woman different from what it is now. For the purposes of securing a better return of the wife's income and a proper estimate of the tax to be put upon it a clause was put into the Act of 1842 enacting that the wife's income should be inserted with the husband's, and that the husband should make a dual return. In the Finance Act of 1894 a general exemption was made when the joint income was under £500. If the two incomes together were less than £500 it was permitted by what I consider an advance in modern law that the husband and wife should have a higher basis. I have never been able to see why that provision should not be extended to all incomes. I am not proposing, to argue that at the present time. I am proposing simply to argue the question of separate payment of the income of the husband for the purposes of the Super-tax.
§ As the law now stands the husband and wife for the purposes of Income Tax are treated as one, and thereby the earnings of the husband and wife, who may be both earning small incomes, are added together for the purposes of assessing Income Tax. I need not go very much into this subject, because the Chancellor of the Exchequer had a letter the other day from Mrs. D'Oyley Carte giving some cases of great hardship inflicted upon the husband and wife because they were married, and pointing out that this is really a tax upon matrimony rather than a tax upon bachelors. The present position is undoubtedly a considerable hardship on the husband and wife, and the hardship is increased now when the graduation of the Income Tax is increased, and when this new principle of Super-tax is added to the existing taxes. The object of the Super-tax is to place relatively high taxes upon all men with large spendable incomes. The idea is that a man with an income of £5,000 a year or upwards to spend has an income not absolutely necessary to the existence of life, and, therefore, you have a right to place a higher tax upon that income, because it is an income a man may spend for 88 his own purposes and may be used for the purpose of luxury. It is really very hard in the case of professional men and business men, who work hard and earn their incomes of £2,500 or £3,000, where they would be entitled to the small rate of Income Tax, that if he happen to marry a woman with money of her own that he should be regarded as the possessor of unearned income. If such a man marries a woman who has money he is charged Super-tax upon the total of both, which includes his earned income. Surely it is not the desire of the Government to penalise, as it undoubtedly does penalise, earned income. The object of the Liberal party, I take it, has been to place a higher tax upon unearned income, and, to an extent, the Finance Bill of this year does so; but here you are trying because a man has contracted matrimony to place a tax of 6d. in the £ upon a considerable part of his earned income. I cannot see the slightest justification for that.
§ 8.0 P.M.
§ Last week in this House we were discussing the question of the husband and wife being treated separately for the purposes of Legacy Duties and as one for the purpose of Estate Duties. The Chancellor of the Exchequer said he was not responsible for that. I then ventured to suggest that before this week was out he would have an opportunity of defining his responsibility by making the matter effective in one direction or the other. It cannot be fair to take a husband and wife as separate persons for Legacy Duty when one is dead, and to treat them as one and the same person for the purpose of Super-tax when one is alive. Since the Women's Property Act was passed I never heard it disputed that the married woman is not able to look after her own property and to spend what she likes, and to prevent even her husband knowing what she spends if she likes. There was a remarkable letter in "The Times" a fortnight ago from a remarkable lady. I wish she were a Member of the House, in order that she might put her views before the Committee. She could put very clearly the extraordinary hardship of treating the income of the wife the same as the husband's, where the wife has no possibility of sending a representative to Parliament in order that her case might be put with the force with which she could put it before the Committee. I am not going to drag in the case of woman suffrage, but it does seem to me, without expressing any opinion, an important subject. It is an injustice to the husband and to the wife, but it is a double injustice to 89 the wife, because she is taxed in this matter while she is deprived of the slightest representation in this House. I have spoken in the early part of my remarks from the point of view of the husband whose income is increased above the limit by the wife's income. What of the case where the wife's pin-money of £400 or £500 a year has to pay a Super-tax, and she has not the slightest control whatever in the matter? The husband has very little control nowadays over the income of his wife, but the wife has no control over the income of the husband. If it is hard that the husband's income should bear Super-tax because of his wife's income being joined to it, it is harder that the wife, who has no representation in this House, should be charged a Super-tax because of the income of her husband. I think this is a point upon which we might remedy an injustice. I am not asking the Government to differentiate in regard to joint incomes, but where you are putting this new Super-tax on I do say there is a good deal of justice behind a proposal not to perpetuate the injustice of the Act of 1842. When you are putting on a new tax, you should realise the new conditions of modern society, and you should treat these incomes separately instead of jointly.
§ The POSTMASTER-GENERAL (Mr. Sydney Buxton)Whatever may be the merits of this question as regards the Income Tax as a whole, it certainly ought not to be dealt with as a matter primarily affecting the Super-tax. There is a new Clause upon which the merits of this question can be discussed. The argument up to now has always been that in the case of small incomes the husband and wife's income should not be put together for the purposes of the Income Tax. That has nearly always been considered to be a hardship on the small incomes. The hon. Gentleman is not proposing to get rid of that anomaly, but he is proposing that on the larger incomes up to £5,000 the system in regard to the smaller incomes should be reversed and the larger incomes should be left free. As far as the Government is concerned, if this disqualification is to exist at all, and if it can be defended upon its merits, it would be much better defended as regards the Super-tax than as regards the lower scales of the Income Tax. In the case of incomes of £5,000 or £6,000, or even up to £20,000, I do not think this principle can be considered to 90 be a great hardship. The amount of additional taxation will not be great, and certainly, in proportion to the income, it would be far less felt than in the case of persons who come under the lower scale of income. I am not now discussing the general question on its merits, because that would be out of order, and I presume we shall have another opportunity of doing so. I admit this is a very arguable question as a general proposition as to whether the income of the husband and wife should be separated. It is a question which has been most carefully considered by successive Chancellors of the Exchequer. The other day, in connection with the Death Duties, the Chancellor of the Exchequer stated that the difficulty in regard to this proposal was that it would lead to evasion, because it would lead to the dividing of the income of husband and wife in order to escape taxation. That is the conclusion come to by every Chancellor of the Exchequer, and that is the position which the Government still maintain, and which they are prepared to defend when the question is raised on its merits. At all events, it is quite clear there is no particular reason for allowing this concession in regard to the Super-tax, which does not prevail to a far greater degree in the case of those smaller incomes at the lower scale of the Income Tax. The argument used by the hon. Gentleman in regard to the representation of women applies really far more effectively to the lower scale of the Income Tax than it does to the case of the Super-tax.
Mr. BALFOURThe right hon. Gentleman says that if there be a hardship in this proposal it is greater in the case of the smaller incomes than with the larger ones. I am rather inclined to agree with that proposition—at all events I would like to see it threshed out. My instinct is that the Postmaster-General is right. The Government have created in this Bill a new-hardship. It may be a small one, but it is a new one. For this reason I think the Government are bound to give some defence of their policy. If that defence includes the smaller incomes, well and good; then we shall know how to deal with the smaller incomes when we come to them. But if we follow the advice of the right hon. Gentleman and pass this proposal by, we shall not be able to argue the question unfettered at a later stage. The right hon. Gentleman will then be able to turn round and say, "Why did you not raise this point during the discussion of the earlier part of 91 this Clause?" We have already agreed as to the proper way of dealing with the large incomes, and I would like the right hon. Gentleman to show me any difference in principle in regard to this matter between the large and the small incomes. Does the right hon. Gentleman say there is a distinction? The right hon. Gentleman admits that the principle is the same when we are dealing with the aggregate income of husband and wife up to £5,000, as in the case of the smaller incomes. This is the first time the question comes up, and, therefore, my hon. Friend is perfectly justified in raising it. I think my hon. Friend has grounds for complaint in regard to the right hon. Gentleman's reply that when the time comes for discussing another tax the Government will rely upon that as the occasion upon which to deal with the question of its merits. Because this is the smaller grievance the Government have no right to pass it by without offering a single argument in its defence. That is an entirely novel method of dealing with a Finance Bill. I think the only Member of the Government who has been spared by his colleagues, and has spared us in regard to this Finance Bill, is the First Lord of the Admiralty. We have now had the Postmaster-General. We have had all the legal representatives of the Government, we have had the Chancellor of the Duchy of Lancaster, in fact we have had the whole gamut of ability on the Treasury Bench, and everybody has spoken on this Bill except the Secretary for the Treasury and the First Lord of the Admiralty. We are told on the first occasion when this question of principle comes up "we will not discuss this matter on its merits now but we will wait until it comes up in another form." The Government will not now condescend to give us the reasons they rely upon for defending their policy.
§ Mr. RIDSDALEIt seems to me there is an essential difference between the case of husband and wife in regard to the Super-tax and the ordinary Income Tax. In one case it is to the interests of both parties to try and get the abatement, but in the other case the Government have got to enforce their tax upon two people, and I do not see how the husband is to find out from his wife what her income is if she does not choose to tell him. In the first case obviously it is to the interest of both parties to tell the other what their respective incomes are in order to obtain from the Government the abatement they both desire, 92 but when both parties know that this principle means so much money to be taken out of their pockets, I can conceive that each party, however devoted they may be to each other in their ordinary married life, will at once button up all sources of information. The only person who will profit by this is the Government. It seems to me that there is a most essential difference, and I hope the Government will not take up this non-possumus attitude, and say this is not the proper place to discuss it.
§ Mr. RAWLINSONYear after year the joining together of incomes for the purpose of Income Tax has been attacked in this House, but no answer has ever been given from the Treasury Bench. The difficulties of finding the money have been put forward. Year by year I have raised the point, and the arguments have been kept back for the last two or three years. There has never been an attempt to defend the principle of joining together the incomes of husband and wife for the purposes of the Income Tax. The Government have now gone further on this evil course. They certainly ought not to extend the injustice unless they can defend their proposal. They have not attempted to do that by argument to-night, or upon any previous occasion. If we lose this Amendment, the Government, when we come to the new clause standing in my name dealing with this point, will surely at once say that the Committee decided there was no injustice in the matter at all, and, if the husband and wife are to be taken as one for the purpose of the Super-tax, then they ought to be taken as one for the purpose of the other tax as well. We ought for that reason to press this upon the attention of the Government. Since I brought the matter before the House on a previous occasion various people have written to me upon the subject, and it has really been a revelation to me to learn of the possibilities of the future. I have had in my professional capacity a certain amount of experience in matrimonial disputes, but, even with that knowledge, I have been perfectly surprised at the cases laid before me during the past year showing the general ignorance of the husband as to the income of the wife. I can give cases where the husband has literally gone so far as to refrain from asking his wife the amount of her income sooner than give the information in order to apply for the exemption.
§ Mr. RIDSDALEPerhaps they lived separately.
§ Mr. RAWLINSONNo, they were not separated. There is a separation of income for all purposes except for the purpose of taxing them. I ask the Government to deal justly in this case, and I think a strong case has been made for not extending the present injustice.
§ Mr. ALFRED LYTTELTONI think the point raised by the hon. Member for Brighton (Mr. Ridsdale) deserves an answer from the Government. I derive my information on this matter almost entirely from a letter that appeared in "The Times" from Lady MacLaren, in which she dealt with this question with great knowledge and an apparent wide source of information from other ladies. The point made in that letter was that made by the hon. Member opposite very strongly. It was that a duty is cast upon the husband by the present Bill to return his wife's income for the purpose of ascertaining whether the aggregation of the two incomes renders them subject to the Super-tax, whereas there is no reciprocal obligation on the part of the wife to return, and therefore to ascertain her husband's income. I understand the fact that the husband conceals the amount of his income from his wife and the wife has no opportunity of concealing her income from the husband, is a source of great indignation and grievance to a part of a numerous section of the community. It is said that the wife is often induced to sacrifice the entirety of her income for the common good, whereas the husband, enjoying a much larger income, conceals the amount, and spends the greater portion of it on himself. I express no opinion as to whether this practice is largely extended or not. I understand from those who know a good deal about it that it is not very uncommon, but, whether it be common or uncommon, it is certainly a matter which requires the consideration of the Government, and, I think, an answer by its representative now—certainly, at any rate, so far as this matter is concerned. How are you going to enforce the obligation upon the husband to return his wife's income? You impose upon the husband a statutory obligation, not merely to return his own income of which he has knowledge, but also his wife's income of which he may have no knowledge. I see no answer to the problem put by the hon. Gentleman opposite. Notwithstanding the utmost devotion and tenderness existing between the pair, the wife may, out of that very devotion to the husband, say: "Most certainly I shall not tell 94 you what the amount of my income is, because, by telling you, I might make you as well as myself and my children suffer." The Postmaster-General, from his knowledge lately acquired upon this subject, may give us information as to how they are going to prevent this Statute becoming ridiculous by the steady refusal of wives to impart that information to their husbands, which it is the husband's statutory obligation to impart to the tax-gatherer.
§ Mr. WALTER GUINNESSOne of the arguments used by the Postmaster-General was that this was a small amount, and that the additional taxation would not be great. The greatest hardship will arise in the case of those couples who have incomes only just above the Super-tax limit. If one partner has £2,000 and another £3,000, it is very hard, just because they are married, that they should pay an extra tax of £50 a year. After all, they do not get the full benefit of the joint incomes. They benefit, no doubt, to some extent in household expenses, but that only applies to husband and wife living together. If they are separated, I believe, there is no possible redress, and they will still be looked upon as one for the purpose of the Income Tax, and presumably also for the purpose of the Super-tax. Surely, if it is fair to lump the incomes of husband and wife together for the purpose of the Income Tax, you ought to lump the incomes of brother and sister when they live together. As it is at the present time it is a very great discouragement of marriage. The partners have their own private expenditure—the husband perhaps on sport and business, and the wife on dress—and I do not see that it can be argued in any way that the other partner gets any benefit. Unquestionably the bachelor living alone is very much better off than a married couple, if he has the same income, and it seems to me this is a direct discouragement of marriage. I think it is most inadvisable to continue this punishment. I can only imagine the Government foresee that Radical finance is going to land half the population in the workhouses, and that it is a good thing to keep the population down. We have had no answer as to how the Revenue authorities are going to enforce this new duty on the husband. Surely if the wife becomes a passive resister, and refuses to tell the husband, it would be most unjust to have the husband up and fine him £50, and also £50 for every day he fails to produce the return. I think it would be so unjust to 95 do that that no court would impose the fine, and the whole provision would become a farce. You may get cases where possibly a man's whole income will be absorbed in paying the Super-tax on his wife's income. If he has only £150, and if, owing to his wife's income, they are subject to the Super-tax, how are you to get the wife to pay? Presumably the obligation will be upon the husband, and there will be no way of getting it back from the wife. The right hon. Gentleman stated that this was not a new point, that it had been brought forward for many years, and therefore it might be allowed to continue a little longer as an old standing grievance, but I think there is a far greater case made out for dealing with it now. It is a very much heavier tax which is now being imposed.
§ Mr. CAVEI do not think the Postmaster-General has quite correctly represented the attitude taken up last week by my right hon. Friend the Member fox East Worcestershire (Mr. A. Chamberlain), who suggested that the incomes of husband and wife should either be treated as one for all purposes or as separate for all purposes. He was in favour of making them one for all purposes, both Income Tax and Legacy Duty. But if you make a wife pay Death Duties on a legacy from her husband you greatly strengthen the argument for making the incomes separate for all purposes. I hope we shall get an answer to our question on its merits. I do not look on this as a question of the rights of women. It is really a question of the rights of man. The husband does not receive his wife's income, yet he may be called upon to pay Super-tax in respect of it. He may never touch that income. And yet he is to pay the tax upon it? He may be unable to recover a farthing from his wife, who may have £5,000 income, whereas his income is only £500. Surely it would be far better to make the incomes separate for all purposes. I quite understood from the Postmaster-General that the Government have an open mind on this question.
§ Mr. BUXTONIf so, I am afraid I gave a wrong impression to the hon. Gentleman. This is a question of very considerable magnitude. It is a question of such complexity that really any Amendment of the law should not be introduced here. I am sorry if I have in any way misrepresented 96 the view of the Chancellor of the Exchequer. What I did say was that the right hon. Gentleman had emphasised the view that there was great objection to the proposal to divide the incomes instead of aggregating them. I quite agree that the proposal with regard to Death Duties has made it somewhat more difficult to do that. Our real object is that if you have a joint household, that household shall be taxed on the whole income. That is really the most important object, and if you allow a separate system, there is nothing to prevent incomes being divided between husband and wife in order to reduce or escape Income Tax. The hon. Member asked this question: Supposing husband and wife each have a separate income, the two together being above £5,000? The income of the husband, being very much below, he returns his own income, and the wife—out of wifely affection—declines to give him any information with regard to her income. He therefore returns the income as under £5,000 instead of over. No difficulty whatever would arise in such a case. The Inland Revenue authorities, if they were aware of it, as no doubt they would be, would assess the husband at what they considered to be the joint income, and, if he declined to pay, and declared that the joint income was below £5,000, he would have to give proof of it. If it were shown that it was below, of course he would be free; but, on the other hand, he would be called upon to pay the tax and a fine. That is the real remedy and that is the answer to the hon. Gentleman.
§ Mr. RAWLINSONI put the perfectly honest case of the husband who was unable to obtain from his wife information as to her income: How can he get it?
§ Mr. BUXTONIf the two incomes together are, in the opinion of the Inland Revenue authorities, above £5,000, they assess him at that amount, and the onus of proof lies with him to show that it is below. If he is unable to show that, the assessment stands. There may be a certain number of cases in which it is not possible to give such proof; but, as a fact, these conundrums solve themselves, and the Commissioners believe that under the ordinary system they will be able to obtain the proper information.
§ Mr. PRETYMANI sympathise with the Postmaster-General in the position in which he finds himself. He cannot answer the question put to him. That question 97 was: What means can possibly be taken to force a husband to make a return of his wife's income when she refuses to say what it is?
§ Mr. BUXTONAssess him.
§ Mr. PRETYMANOn what?
§ Mr. BUXTONOn what they believe to be the joint income. Then the onus of proof rests with him.
§ Mr. PRETYMANHow can he prove it? He honestly returns his own income at £2,000 a year. He does not know what his wife's income is. I cannot imagine that any proposal to assess him at over £5,000 would be supported in a court of law. It is an extraordinary situation in which to put a man. He honestly says, "My income is £2,000 a year. I do not know what my wife's income may be." If you assess him beyond £5,000 who is to pay the Super-tax?
§ Mr. BUXTONOn the present Amendment no question of partnership income is raised. As I have said, it is open to the Income Tax Commissioners to fix the amount, and the man can appeal against the amount at which they have assessed him. These difficulties have not arisen in the past, although the husband's and wife's incomes have been aggregated together, and I have very great doubts indeed whether they will arise in the future; if they do the House has given full powers to the Commissioners to settle the matter satisfactorily.
§ Mr. PRETYMANThe right hon. Gentleman's own answer has shown that there are difficulties which have arisen. He said that a difficulty had arisen in cases in which the husband did not know his wife's income. If these cases have arisen in the past therefore they may arise again.
§ Mr. BUXTONWhat I had in my mind was that the man returns his income and then he is assessed, and he pays on the assessment. Then I had in my mind one special case in which a husband did return his own income, but declined to give that of his wife. He was assessed on the two, however, and ultimately paid the two.
§ Mr. PRETYMANThose were cases where doubt had arisen under the present law, where a man has to return his income in order to obtain an abatement. In, this case the matter is different, because if a man returns his income he is super-taxed, and it does seem to me a curious point of 98 view to take that the Committee cannot deal with this point this year because the Super-tax is being imposed this year. If next year we raise this question we shall be told that this House has assented to the principle of the matter, and we shall get no redress. This point has created a very strong feeling of indignation at the unfairness throughout the country. Everybody can see that there are a good many injustices in this Bill which are rather difficult to understand, but in this particular case the injustice is perfectly obvious. Here in one and the same Bill you are proposing two new taxes. The first is a Super-tax on households, and for that purpose you treat the household as one and tax everything that goes into it, but if one member of that household dies, the very sum which you have aggregated for the purpose of Income Tax and of Super-tax, under a proposal introduced by this very same Bill, is to be treated as a legacy from one part of the household to the other, and both these proposals are entirely new. That is the gravamen of our charge, and it really is not touching our point at all for the right hon. Gentleman to talk about the position under the existing Income Tax. The point we make is this, that in this particular Bill these two new charges, both taking a diametrically opposite point of view of the income or capital of the household—these two new departures are being made against the subject, and in one case you treat the income as a whole for the purpose of taxing it, and in another case you say if one member of the household dies it is to be treated as separate. It is a new injustice in both cases, and it does not touch the old injustice at all, and because you can show that a subject has suffered in the past, I should say that is a reason for relieving him in the future; but instead of doing that you bring in a new tax which accentuates the vice of the old tax, and makes it a great deal worse.
§ Mr. P. F. CURRANThe hon. Member for North-West Manchester (Mr. Joynson-Hicks), in a most eloquent speech, not only put in a plea for giving women votes, but also for giving them a seat in this House, so that they could speak for themselves when matters of income came up. I earnestly hope that in some dim and distant future his party will take his advice and see that it is carried out. The hon. Baronet the Member for the City of London (Sir F. Banbury) spoke in a highly humorous way, more humorous than usual, 99 on this matter, and while he is an authority on many questions, I do not see why he should be an authority upon wives' incomes, because, I am credibly informed, that he is a bachelor, and, therefore, all that he has said must be purely in an amateurish sense. We on the Labour Benches listen to these discussions with a good deal of amusement. We know our wives' incomes, because they get them from us, and it does not enhance the rich people in our estimation to hear of wives endeavouring to conceal from their husbands the amount of money they have per annum. I feel, as far as I am concerned, that the husband, if he is the Income Taxpayer of the house, ought to know the amount that he is paying that Income Tax for, and in that sense I should say that a woman who has property and who marries a husband who has property and capital, ought to have sufficient confidence in that gentleman, seeing that she has married him, to allow him to understand exactly the amount of money she has as an income, and if she has not that confidence in him why did she marry him? The hon. Member for the City of London says she did not find him out.
§ Sir F. BANBURYNo; I said she might have found him out afterwards.
§ Mr. CURRANThen, again, there is the Divorce Court. We never hear of the Divorce Court, except from the newspapers. You do not hear much about working-class ranks in the Divorce Court, but we do hear of the Divorce Court in regard to the wealthy classes, but that, of course, is nothing to do with the point at issue. My point is this, that when a man and a woman are prepared to join hands for the purpose of bringing forth a rising generation they ought to have sufficient confidence in each other, not only the wife to allow the husband to understand how much income she has, but also the husband to allow the wife to understand how much income he has. Hon. Members above the Gangway say all legalised methods of introducing restrictions are grandmotherly legislation, but I should say it is the essence of grandmotherly legislation to introduce into any statute any law to compel either a woman or a man to reveal their income when they ought to have sufficient confidence in themselves to be prepared to be honest with each other, and if they are not honest with each other they cannot be honest with anyone else.
§ Sir F. BANBURYThe Postmaster-General wound up his speech by saying that the Inland Revenue had no doubts upon the matter. I do not suppose they have. They are not going to pay the Super-tax. All they have to do is to collect it, and they have not any doubt that they will be able to collect it, and the more they collect the better for them. Whether or not the people who have to pay are justly taxed does not matter in the least to them. I think, therefore, that part of the right hon. Gentleman's argument falls to the ground. The right hon. Gentleman never answered the point which was put to him, that if a wife does not choose to tell her husband what her income is, and the Income Tax Commissioners assessed him at an arbitrary amount, how is he to disprove it? The hon. Member (Mr. Curran) says she ought to. We are not legislating for what ought to be done, but for what is done, and we cannot legislate for every one who is perfect. Whether or not a wife ought to tell her husband is a matter between the husband and the wife, and it does not concern anyone else. But does the right hon. Gentleman remember the Married Women's Property Act. For a great number of years steps have been taken to give to the married woman her property absolutely. Before the Married Women's Property Acts were passed the property of a woman when she married became the property of her husband. Then no doubt this Bill would have been of value, but under the Married Women's Property Act her property is her own, just as much as the husband's is his own, and if she likes to say, "It is my property, and I will not allow you be interfere with it," what legal power has the husband to say, "I intend to investigate your property, because the Inland Revenue have assessed me at such and such a sum." He has not the power to prove that the assessment is wrong. The right hon. Gentleman passed over very lightly what is the real gravamen of the wrong-doing of this Clause, and that is that under the Death Duties husband and wife are treated as two separate entities, and under the Income Tax they are treated as one. I defy hon. Members to say that is right. The right hon. Gentleman said he could not make any alteration in this Budget. Why not? The Super-tax is a new tax. If it can be proved that the manner of levying it is wrong, there is no difficulty in altering it. The real answer which the right hon. Gentleman 101 ought to have made, if we had been able to see into his heart, or rather into the heart of the Inland Revenue officials, is that they want to get as much money as they can, and they will get more money if in the Death Duties they treat husband and wife separately, and if they treat them as being one person for the purposes of Income Tax. That is the only answer. Is it possible that any right hon. Gentleman, even in this House of Commons, can attempt to justify a tax which is imposed so as to take the utmost possible farthing out of two people in one case and impose it absolutely in a different way in the other case with the same object of taking the largest amount of money they can extract? The thing will not hold water for a moment. Either the right hon. Gentleman must alter his Death Duties or he must alter this tax. I do not know that we should have very much to say if the two taxes were made similar, but with the two taxes different, it is impossible that they could be passed except by a mechanical majority which will vote anything that they are told to.
I would seriously put to the right hon. Gentleman whether he cannot see his way to give way upon this point. It is really a very serious point, and it is serious because it is so unjust. It is not a question of the payment of the amount, but of the injustice which arises from the two different cases, the Death Duties and the Income Tax, being dealt with in two different ways. There really is nothing to justify it, and the only argument which the right hon. Gentleman put forward, that he could not alter it this year, was absurd on the face of it, because he is imposing the tax, and he can impose it in any kind of way he chooses, and we are still only on the Committee stage, and there is plenty of opportunity to alter it. It is perfectly evident that the cases which have been given by my hon. Friend beside me are almost bound to arise. I do not see how it can be avoided. If the Liberal party wishes it to go forth that where a man has £500 a year, because his wife has £4,600 a year, all of which she keeps to herself, he is to be taxed on £5,000 a year, it is quite possible that we may be gaining a few more votes than hon. Gentlemen opposite expect we shall. Personally, I am not at all sure that I should be very much hurt if the right hon. Gentleman does not remedy the injustice, because I think the more injustice there is in this Bill the better for the country. 102 [Laughter.] Certainly; because it will open the eyes of people to what they are being exposed to by hon. Members opposite. If they can be soothed over by being led to believe that the thing is not so very bad after all, they may be deceived another time, but when the injustice is so flagrant, as in this case, I am rather glad that the right hon. Gentleman has not accepted the Amendment.
§ Mr. SNOWDENMy hon. Friend expressed himself strongly in favour of "votes for women," and even of the right of woman to sit in this House. I am afraid that, notwithstanding the enthusiasm in regard to that question, he does not quite understand what is the motive behind the present agitation for the enfranchisement of women. The motive is that women may belong to themselves, that they may own their property, and they may not be in the eyes of the law economic ciphers. The right hon. Gentleman opposite gave two reasons which he described as strong reasons against the acceptance of this Amendment. The first was that for the purpose of assessing for Income Tax the household is regarded as a unit. I do not think that is the case at all. I have always understood that the Income Tax was a personal tax. It is only where husband and wife are assessed together that Income Tax can be regarded as a household tax. In the case of a son over 21 years of age his income is not taken as that either of the husband or of the wife. The other reason which the right hon. Gentleman gave in support of the present system was that there might be temptation for the husband to divide his property with his wife, and thus evade the tax altogether, or have it assessed at a lower rate. But I do not think that is the ease at all. It is an easy matter for the surveyor of taxes to discover if something of that kind has been done. He has before him the particulars of the woman's income, and he is able to ascertain whether it is derived from a profession or business which is her own, or whether it is derived from investments she has had for a number of years in her own possession. I do not think the reasons given by the Postmaster-General are a sufficient answer against the acceptance of this Amendment. It is not often I agree with the hon. Baronet the Member for the City of London (Sir F. Banbury), but I think he hit the nail on the head when he referred to the Married Women's Property Act. The Postmaster-General said that this system 103 of regarding the wife's income and the husband's income together had been followed since the Income Tax was first introduced. But it should be remembered that at the time it was first introduced a married woman had no right to own property. This system, therefore, is a survival of that principle, and it ought to be repealed. If I could have my way in this matter, I would certainly support an Amendment going further and having the effect on all occasions of treating the income of the wife separately from that of the husband. If the hon. Member divides the Committee on this Amendment, I will go into the Lobby in support of it.
§ 9.0 P.M.
§ Mr. W. PEELThe remarkable thing about the answer of the Postmaster-General is that he has made no attempt whatever to defend the principle of the tax. He gave us two reasons in support of the present system, and why the Amendment should not be accepted, namely, practice and expediency. I agree with the hon. Member for Blackburn (Mr. Snowden) in his objection to this form of assessment. The suggestion of lumping the two incomes together is not so much against the principle of the Married Women's Property Act as it is absolutely against the principle of this tax in itself. It cuts at the root of the whole of the tax, which is that it is an individual tax. It is because it is an individual tax that you have this new system of assessment which involves making a man assess himself. The rest of the tax is collected at the source. Therefore, the contradiction involved in putting together the incomes of husband and wife is not a mere contradiction of expediency or practice, but of the root principle of the whole tax. One of the practical objections stated to the Amendment is that in the case of husband and wife there might be an arrangement by which property could be transferred from one to the other. The suggestion was that there might be fraud. Are you going to lump their incomes together for the purpose of this tax, because there may be fraud? That seems to me to be far too large and broad a reason for supporting the system. In all cases there might be fraud. If there really is a division of property between husband and wife it seems to me that that is not a thing that could be seriously objected to, considering that there is the clear position which women have obtained under the Married Women's Property Act. 104 To say that you object to a genuine dividing of the property because it might reduce the yield of this new tax, is to give a strong argument against the tax altogether. The only reason brought forward in support of this system is that the household should be treated as a unit. The hon. Member for Blackburn has pointed out that that is not a reason at all. There are cases where sister and brother live together in the same household. Yet even in that case if that principle were applied you could lump the whole thing together. Why should you select this particular case as one of a joint household, and say that in that case, in order to avoid fraud, you are going to tax them altogether? The fraud may arise in the same way with brothers and sisters, yet you do not say in that case you are going to lump them together. I have not the slightest doubt that this would never have been enacted in this way if it had not been that the tax had started in a particular way. The Super-tax has grown out of the Income Tax, and if the Income Tax had not started in this form 60 or 70 years ago, when totally different views prevailed as to the relations of man and woman towards each other, this proposal would not be made. It is very much the same kind of principle as that which we heard of in the previous discussion on the licences when the question was whether the premises of the publican should be taken in the assessment, and then we were told that that was to be done because it was started in the year 1825, absolutely forgetting the enormous changes that had taken place in the law of this country during the last 70 years. To say that because this was the state of things in 1842, with a totally different tax under totally different conditions, therefore this is a singularly opportune moment for introducing this change, I feel would require all the ingenuity of the Postmaster-General to defend. It seemed to me—I may be wrong—that his sympathies were really with us, and that he looked upon the proposal as indefensible in principle and only to be defended on the ground of temporary expediences.
§ Mr. EVELYN CECILI want to enforce the arguments which have been addressed to the Government, because I have looked up what the Chancellor of the Exchequer himself said upon his particular matter as recently as last Tuesday. On that occasion we were discussing the relative positions of husband and wife as regards Estate Duty. We pointed out from this 105 side of the House very much the same objections which have been urged upon the Postmaster-General to-night. We urged, as has been urged by my hon. Friends this evening, that it was very unfair that the incomes of husband and wife should be lumped together for the purpose of Income Tax, and that they should be taken separately for the purpose of Legacy and Succession Duty. The Chancellor of the Exchequer said that he was not responsible for the difference that had been made and that he proposed to continue it. But this is quite a different case. Here is the new tax which has been imposed with a new situation which is entirely within the control of the Chancellor of the Exchequer himself, and it is not, therefore, in the least necessary for him to impose this injustice. If he chooses he can perfectly well avoid it. He said: "The hon. Member" (that is myself) "thinks that the wife ought to be exempt from this additional impost on the ground that husband and wife are treated as one person so far as Income Tax is concerned. I agree that on the face of it it does seem unfair that where the State can charge increased Income Tax by treating husband and wife as one it should do so, but where it can, as in the case of Death Duties, get greater taxation by treating them separately then it deals with them in that manner. I quite agree that the State is rather unfair, but I am not responsible for that; I am not making a new law. I am not differentiating for the first time." That may have been a good defence last Tuesday, but it cannot possibly be now, because here the Chancellor is making a new law, and is differentiating for the first time. Under those circumstances I cannot help appealing to my right hon. Friend the Postmaster-General as to whether they are carrying out logically the defence of the Chancellor of the Exchequer of last Tuesday, and whether they are on this occasion differentiating for the first time, because the Chancellor of the Exchequer is really making a new law. I appeal to the Government, in view of the Chancellor of the Exchequer's statement—and I wish that he was here himself to hear me; it would very much assist the Debate—to make this alteration. If they cannot do so on the spur of the moment, because they have not the Chancellor of the Exchequer to consult, I would very humbly suggest that they should send for him. At any rate, it does seem very unsatisfactory to come to a decision on this Debate and to take a Division without the Chancellor of the Exchequer being thoroughly aware 106 that in this matter the defence of last Tuesday is in no way applicable to-day.
§ Mr. JOHN WARDI hope that those who are responsible for the decision with reference to this matter will not take any notice of the appeal that has been made by the hon. Gentleman who has just sat down. While we were debating incomes under £5,000 this afternoon the Motion was carried that the law relating to these incomes shall remain as it has always been, and I suppose the income of the household to be taxed will be treated as one except where there are sons over 21 years of age. But directly we get to the higher degrees of wealth, to incomes over £5,000 a year—because there is no doubt that that is what the Motion is now—we hear the squealing again. We pass without a Division the Clause dealing with incomes under £5,000. [An HON. MEMBER: "On all incomes."] We are dealing now with incomes of over £5,000 a year, and then the squealing begins again. My hon. Friend the Member for Blackburn (Mr. Snowden) was swayed by some sentimental reason with which I sympathise to a very great extent—that is, the wish of women, the greater part of the human race, for economic freedom. I sympathise with that, and I am sure he and the Member for Jarrow, who spoke before, also does. But, at the same time, that sentimental reason is not in the least going to take me into the Lobby with the idea of aiding people whose income is over £5,000 a year by a manipulation or transference of their wealth to another member of the family to escape this tax. It is a mere attempt on the part of the extremely wealthy to evade their tax. I trust, therefore, the Government will not give way on this matter. They have given way quite enough to the wealthy members of our community to-day—a great deal more, I think, than they are justified in doing. I thought they were going to stick to the Budget, but evidently every attack made by the most wealthy portion of our community is met immediately by concessions. I hope, at least on this occasion, at any rate, there will be no further concession.
§ Mr. BUXTON rose in his place, and claimed to move, "That the Question 'That the word "separate" be there inserted,' be now put."
§ Question put, "That the Question be now put."
§ The Committee divided: Ayes, 170; Noes, 82.
109| Division No. 683.] | AYES. | [9.16 p.m. |
| Agar-Robartes, Hon. T. C. R. | Gladstone, Rt. Hon. Herbert John | Norman, Sir Henry |
| Agnew, George William | Glendinning, R. G. | Nuttall, Harry |
| Alden, Percy | Glover, Thomas | O'Brien, Patrick (Kilkenny) |
| Allen, A. Acland (Christchurch) | Gooch, George Peabody (Bath) | O'Connor, T. P. (Liverpool) |
| Allen, Charles P. (Stroud) | Gulland, John W. | Partington, Oswald |
| Ashton, Thomas Gair | Harcourt, Rt. Hon. L. (Rossendale) | Pearce, Robert (Staffs, Leek) |
| Atherley-Jones, L. | Harcourt, Robert V. (Montrose) | Pickersgill, Edward Hare |
| Baker, Sir John (Portsmouth) | Hardie, J. Keir (Merthyr Tydvil) | Pollard, Dr. G. H. |
| Balfour, Robert (Lanark) | Hardy, George A. (Suffolk) | Radford, G. H. |
| Barker, Sir John | Harmsworth, Cecil B. (Worcester) | Rea, Walter Russell (Scarborough) |
| Barran, Rowland Hirst | Harmsworth, R. L. (Caithness-shire) | Richards, T. F. (Wolverhampton, W.) |
| Barry, Redmond J. (Tyrone, N.) | Haworth, Arthur A. | Roberts, G. H. (Norwich) |
| Beck, A. Cecil | Hedges, A. Paget | Robinson, S. |
| Bell, Richard | Henderson, J. McD. (Aberdeen, W.) | Roch, Walter F. (Pembroke) |
| Bennett, E. N. | Henry, Charles S. | Rogers, F. E. Newman |
| Berridge, T. H. D. | Herbert, Col. Sir Ivor (Mon. S.) | Rowlands, J. |
| Bethell, T. R. (Essex, Maldon) | Higham, John Sharp | Runciman, Rt. Hon. Walter |
| Black, Arthur W. | Hobhouse, Rt. Hon. Charles E. H. | Russell, Rt. Hon. T. W. |
| Bottomley, Horatio | Hodge, John | Samuel, Rt. Hon. H. L. (Cleveland) |
| Boulton, A. C. F. | Holt, Richard Durning | Samuel, S. M. (Whitechapel) |
| Bowerman, C. W. | Hooper, A. G. | Schwann, C. Duncan (Hyde) |
| Bramsdon, Sir T. A. | Hope, W. H. B. (Somerset, N.) | Sherwell, Arthur James |
| Brigg, John | Horniman, Emslie John | Shipman, Dr. John G. |
| Brunner, J. F. L. (Lancs., Leigh) | Howard, Hon. Geoffrey | Snowden, P. |
| Burnyeat, W. J. D. | Idris, T. H. W. | Soares, Ernest J. |
| Burt, Rt. Hon. Thomas | Isaacs, Rufus Daniel | Stanley, Hon. A. Lyulph (Cheshire) |
| Buxton, Rt. Hon. Sydney Charles | Johnson, John (Gateshead) | Steadman, W. C. |
| Byles, William Pollard | Jones, William (Carnarvonshire) | Stewart, Halley (Greenock) |
| Carr-Gomm, H. W. | Jowett, F. W. | Stewart-Smith, D. (Kendal) |
| Causton, Rt. Hon. Richard Knight | Kekewich, Sir George | Straus, B. S. (Mile End) |
| Cawley, Sir Frederick | King, Alfred John (Knutsford) | Strauss, E. A. (Abingdon) |
| Cherry, Rt. Hon. R. R. | Laidlaw, Robert | Summerbell, T. |
| Cleland, J. W. | Lamb, Ernest H. (Rochester) | Thomas, Sir A. (Glamorgan, E.) |
| Clough, William | Lambert, George | Thomasson, Franklin |
| Clynes, J. R. | Lamont, Norman | Thompson, J. W. H. (Somerset, E.) |
| Collins, Stephen (Lambeth) | Layland-Barratt, Sir Francis | Tomkinson, James |
| Collins, Sir Wm. J. (St. Pancras, W.) | Lea, Hugh Cecil (St. Pancras, E.) | Toulmin, George |
| Corbett, C. H. (Sussex, E. Grinstead) | Lehmann, R. C. | Trevelyan, Charles Philips |
| Cory, Sir Clifford John | Lever, A. Levy (Essex, Harwich) | Verney, F. W. |
| Cotton, Sir H. J. S. | Levy, Sir Maurice | Vivian, Henry |
| Cox, Harold | Lewis, John Herbert | Walker, H. De R. (Leicester) |
| Craig, Herbert J. (Tynemouth) | Lloyd-George, Rt. Hon. David | Ward, John (Stoke-upon-Trent) |
| Crosfield, A. H. | Macdonald, J. M. (Falkirk Burghs) | Wardle, George J. |
| Curran, Peter Francis | Maclean, Donald | Wason, Rt. Hon. E. (Clackmannan) |
| Dalziel, Sir James Henry | MacVeagh, Jeremiah (Down, S.) | Wason, John Cathcart (Orkney) |
| Davies, Ellis William (Eifion) | MacVeigh, Charles (Donegal, E.) | White, Sir George (Norfolk) |
| Dewar, Arthur (Edinburgh, S.) | McKenna, Rt. Hon. Reginald | White, J. Dundas (Dumbartonshire) |
| Dobson, Thomas W. | M'Laren, H. D. (Stafford, W.) | White, Sir Luke (York, E. R.) |
| Duncan, J. Hastings (York, Otley) | M'Micking, Major G. | Whittaker, Rt. Hon. Sir Thomas P. |
| Dunn, A. Edward (Camborne) | Maddison, Frederick | Wiles, Thomas |
| Edwards, Sir Francis (Radnor) | Mallett, Charles E. | Wilkie, Alexander |
| Essex, R. W. | Markham, Arthur Basil | Wilson, Hon. G. G. (Hull, W.) |
| Everett, R. Lacey | Mond, A. | Wilson, P. W. (St. Pancras, S.) |
| Fiennes, Hon. Eustace | Money, L. G. Chiozza | Wilson, W. T. (Westhoughton) |
| Findlay, Alexander | Morgan, J. Lloyd (Carmarthen) | |
| Fuller, John Michael F. | Muldoon, John | TELLERS FOR THE AYES.—Mr. Joseph Pease and Captain Norton. |
| Fullerton, Hugh | Myer, Horatio | |
| Gibb, James (Harrow) | Newnes, F. (Notts, Bassetlaw) |
| NOES. | ||
| Acland-Hood, Rt. Hon. Sir Alex. F. | Craik, Sir Henry | Hill, Sir Clement |
| Arkwright, John Stanhope | Dickson-Poynder, Sir John P. | Hills, J. W. |
| Barcarres, Lord | Douglas, Rt. Hon. A. Akers | Hope, James Fitzalan (Sheffield) |
| Baldwin, Stanley | Duncan, Robert (Lanark, Govan) | Joynson-Hicks, William |
| Banner, John S. Harmood- | Faber, George Denison (York) | Keswick, William |
| Baring, Capt. Hon. G. (Winchester) | Fell, Arthur | Kimber, Sir Henry |
| Beach, Hon. Michael Hugh Hicks | Fletcher, J. S. | King, Sir Henry Seymour (Hull) |
| Beckett, Hon. Gervase | Forster, Henry William | Lambton, Hon. Frederick William |
| Bridgeman, W. Clive | Foster, P. S. | Lockwood, Rt. Hon. Lt.-Col. A. R. |
| Bull, Sir William James | Gardner, Ernest | Lonsdale, John Brownlee |
| Butcher, Samuel Henry | Gooch, Henry Cubitt (Peckham) | Lowe, Sir Francis William |
| Carlile, E. Hildred | Gordon, J. | Lyttelton, Rt. Hon. Alfred |
| Carson, Rt. Hon. Sir Edward H. | Gretton, John | M'Arthur, Charles |
| Cave, George | Guinness, Hon. W. E. (B. S. Edm'ds.) | M'Calmont, Colonel James |
| Chamberlain, Rt. Hon. J. A. (Worc'r.) | Haddock, George B. | Magnus, Sir Philip |
| Clive, Percy Archer | Hamilton, Marquess of | Mason, James F. (Windsor) |
| Clyde, J. Avon | Hardy, Laurence (Kent, Ashford) | Meysey-Thompson, E. C. |
| Coates, Major E. F. (Lewisham) | Harris, Frederick Leverton | Mildmay Francis Bingham |
| Courthope, G. Loyd | Harrison-Broadley, H. B. | Morpeth, Viscount |
| Craig, Captain James (Down, E.) | Helmsley, Viscount | Oddy, John James |
| Parker, Sir Gilbert (Gravesend) | Renton, Leslie | Thomson, W. Mitchell- (Lanark) |
| Parkes, Ebenezer | Roberts, S. (Sheffield, Ecclesall) | Walker, Col. W. H. (Lancashire) |
| Pease, Herbert Pike (Darlington) | Ronaldshay, Earl of | Warde, Col. C. E. (Kent, Mid) |
| Peel, Hon. W. R. W. | Rutherford, John (Lancashire) | Willoughby de Eresby, Lord |
| Powell, Sir Francis Sharp | Rutherford, Watson (Liverpool) | |
| Pretyman, E. G. | Salter, Arthur Clavell | |
| Randles, Sir John Scurrah | Sheffield, Sir Berkeley George D. | TELLERS FOR THE NOES.—Sir |
| Ratcliff, Major R. F. | Stanier, Beville | F. Banbury and Mr. Evelyn Cecil |
| Rawlinson, John Frederick Peel | Starkey, John R. |
§ Question put accordingly.
110§ The Committee divided: Ayes, 87; Noes, 176.
111| Division No. 684.] | AYES. | [9.25 p.m. |
| Acland-Hood, Rt. Hon. Sir Alex. F. | Foster, P. S. | Oddy, John James |
| Arkwright, John Stanhope | Gardner, Ernest | Parker, Sir Gilbert (Gravesend) |
| Balcarres, Lord | Gooch, Henry Cubitt (Peckham) | Parkes, Ebenezer |
| Baldwin, Stanley | Gordon, J. | Pease, Herbert Pike (Darlington) |
| Banbury, Sir Frederick George | Gretton, John | Peel, Hon. W. R. W. |
| Banner, John S. Harmood- | Guinness, Hon. W. E. (B. S. Edmunds) | Powell, Sir Francis Sharp |
| Baring, Capt. Hon. G. (Winchester) | Haddock, George B. | Pretyman, E. G. |
| Beach, Hon. Michael Hugh Hicks | Hamilton, Marquess of | Randles, Sir John Scurrah |
| Beckett, Hon. Gervrase | Hardy, Laurence (Kent, Ashford) | Ratcliff, Major R. F. |
| Bowles, G. Stewart | Harrison-Broadley, H. B. | Rawlinson, John Frederick Peel |
| Bridgeman, W. Clive | Helmsley Viscount | Renton, Leslie |
| Bull, Sir William James | Hill, Sir Clement | Ridsdale, E. A. |
| Butcher, Samue Henry | Hills, J. W. | Roberts, S. (Sheffield, Ecclesall) |
| Carlile, E. Hildred | Hope, James Fitzalan (Sheffield) | Ronaldshay, Earl of |
| Carson, Rt. Hon. Sir Edward H. | Keswick, William | Rutherford, John (Lancashire) |
| Cave, George | Kimber, Sir Henry | Rutherford, Watson (Liverpool) |
| Cecil, Evelyn (Aston Manor) | King, Sir Henry Seymour (Hull) | Salter, Arthur Clavell |
| Chamberlain, Rt. Hon. J. A. (Worc'r) | Lambton, Hon. Frederick William | Sheffield, Sir Berkeley George D. |
| Clive, Percy Arthur | Lane-Fox, G. R. | Snowden, P. |
| Clyde, J. Avon | Lockwood, Rt. Hon. Lt.-Col. A. R. | Stanier, Beville |
| Coates, Major E. F. (Lewisham) | Long, Col. Charles W. (Evesham) | Starkey John R. |
| Courthope, G. Loyd | Lonsdale, John Brownlee | Thomson, W. Mitchell- (Lanark) |
| Craig, Captain James (Down, E.) | Lowe, Sir Francis William | Walker, Col. W. H. (Lancashire) |
| Craik, Sir Henry | Lyttelton, Rt. Hon. Alfred | Warde, Col. C. E. (Kent, Mid) |
| Dickson, Rt. Hon. C. Scott | M'Arthur, Charles | Willoughby de Eresby, Lord |
| Douglas, Rt. Hon. A. Akers- | M'Calmont, Colonel James | |
| Duncan, Robert (Lanark, Govan) | Magnus, Sir Philip | |
| Faber, George Denison (York) | Mason, James F. (Windsor) | TELLERS FOR THE AYES.—Mr. Joynson-Hicks and Mr. Leverton Harris. |
| Fell, Arthur | Meysey-Thompson, E. C. | |
| Fletcher, J. S. | Mildmay, Francis Bingham | |
| Forster, Henry William | Morpeth, Viscount | |
| NOES. | ||
| Abraham, W. (Cork, N.E.) | Clough, William | Grayson, Albert Victor |
| Agar-Robartes, Hon. T. C. R. | Clynes, J. R. | Gulland, John W. |
| Agnew, George William | Collins, Stephen (Lambeth) | Harcourt, Rt. Hon. L. (Rossendale) |
| Alden, Percy | Collins, Sir Wm. J. (St. Pancras, W.) | Harcourt, Robert V. (Montrose) |
| Allen, A. Acland (Christchurch) | Corbett, C. H. (Sussex, E. Grinstead) | Hardle, J. Keir (Merthyr Tydvil) |
| Allen, Charles P. (Stroud) | Cotton, Sir H. J. S. | Hardy, George A. (Suffolk) |
| Ashton, Thomas Gair | Cox, Harold | Harmsworth, Cecil B. (Worcester) |
| Atherley-Jones, L. | Craig, Herbert J. (Tynemouth) | Harmsworth, R. L. (Caithness-shire) |
| Balfour, Robert (Lanark) | Crosfield, A. H. | Haworth, Arthur A. |
| Barker, Sir John | Cullinan, J. | Hedges, A. Paget |
| Barran, Rowland Hirst | Curran, Peter Francis | Henderson, J. McD. (Aberdeen, W.) |
| Barry, Redmond J. (Tyrone, N.) | Dalziel, Sir James Henry | Henry, Charles S. |
| Beck, A. Cecil | Davies, Ellis William (Eifion) | Herbert, Col. Sir Ivor (Mon. S.) |
| Bell, Richard | Dewar, Arthur (Edinburgh, S.) | Higham, John Sharp |
| Bennett, E. N. | Dilke, Rt. Hon. Sir Charles | Hobhouse, Rt. Hon. Charles E. H. |
| Berridge, T. H. D. | Dobson, Thomas W. | Hodge, John |
| Bethell, T. R. (Essex, Maldon) | Duffy, William J. | Holt, Richard Durning |
| Black, Arthur W. | Duncan, J. Hastings (York, Otley) | Hooper, A. G. |
| Bottomley, Horatio | Dunn, A. Edward (Camborne) | Hope, W. H. B. (Somerset, N.) |
| Boulton, A. C. F. | Edwards, Sir Francis (Radnor) | Horniman, Emslie John |
| Bowerman, C. W. | Essex, R. W. | Howard, Hon. Geoffrey |
| Bramsdon, Sir T. A. | Evans, Sir S. T. | Idris, T. H. W. |
| Brigg, John | Everett, R. Lacey | Isaacs, Rufus Daniel |
| Brunner, J. F. L. (Lancs, Leigh) | Fiennes, Hon. Eustace | Johnson, John (Gateshead) |
| Burnyeat, W. J. D. | Findlay, Alexander | Jones, William (Carnarvonshire) |
| Burt, Rt. Hon. Thomas | Fuller, John Michael F. | Jowett, F. W. |
| Byles, William Pollard | Fullerton, Hugh | Kekewich, Sir George |
| Carr-Gomm, H. W. | Gibb, James (Harrow) | King, Alfred John (Knutsford) |
| Causton, Rt. Hon. Richard Knight | Gladstone, Rt. Hon. Herbert John | Laidlaw, Robert |
| Cawley, Sir Frederick | Glendinning, R. G. | Lamb, Ernest H. (Rochester) |
| Cherry, Rt. Hon. R. R. | Glover, Thomas | Lambert, George |
| Cleland, J. W. | Gooch, George Peabody (Bath) | Lamont, Norman |
| Layland-Barratt, Sir Francis | O'Connor, T. P. (Liverpool) | Straus, B. S. (Mile End) |
| Lea, Hugh Cecil (St. Pancrat, E.) | Partington, Oswald | Strauss, E. A. (Abingdon) |
| Lehmann, R. C. | Pearce, Robert (Staffs, Leek) | Summerbell, T. |
| Lever, A. Levy (Essex, Harwich) | Pickersgill, Edward Hare | Thomas, Sir A. (Glamorgan, E.) |
| Levy, Sir Maurice | Pollard, Dr. G. H. | Thomasson, Franklin |
| Lewis, John Herbert | Power, Patrick Joseph | Thompson, J. W. H. (Somerset, E.) |
| Lloyd-George, Rt. Hon. David | Radford, G. H. | Tomkinson, James |
| Lundon, T. | Rea, Walter Russell (Scarborough) | Toulmin, George |
| Macdonald, J. M. (Falkirk Burghs) | Richards, T. F. (Wolverhampton, W.) | Trevelyan, Charles Philips |
| Maclean, Donald | Roberts, G. H. (Norwich) | Verney, F. W. |
| MacVeagh, Jeremiah (Down, S.) | Robinson, S. | Vivian, Henry |
| MacVeigh, Charles (Donegal, E.) | Roch, Walter F. (Pembroke) | Walker, H. De R. (Leicester) |
| McKenna, Rt. Hon. Reginald | Rogers, F. E. Newman | Ward, John (Stoke-upon-Trent) |
| M'Laren, H. D. (Stafford, W.) | Rose, Sir Charles Day | Wardle, George J. |
| M'Micking, Major G. | Rowlands, J. | Wason, John Cathcart (Orkney) |
| Maddison, Frederick | Runciman, Rt. Hon. Walter | White, Sir George (Norfolk) |
| Mallet, Charles E. | Russell, Rt. Hon. T. W. | White, J. Dundas (Dunbartonshire) |
| Markham, Arthur Basil | Samuel, Rt. Hon. H. L. (Cleveland) | White, Sir Luke (York, E. R.) |
| Mond, A. | Samuel, S. M. (Whitechapel) | Whittaker, Rt. Hon. Sir Thomas P. |
| Money, L. G. Chiozza | Schwann, C. Duncan (Hyde) | Wiles, Thomas |
| Morgan, J. Lloyd (Carmarthen) | Sherwell, Arthur James | Wilkie, Alexander |
| Muldoon, John | Shipman, Dr. John G. | Wilson, Hon. G. G. (Hull, W.) |
| Myer, Horatio | Smyth, Thomas F. (Leitrim, S.) | Wilson, P. W. (St. Pancras, S.) |
| Newnes, F. (Notts, Bassetlaw) | Soares, Ernest J. | Wilson, W. T. (Westhoughton) |
| Norman, Sir Henry | Stanley, Hon. A. Lpulph (Cheshire) | |
| Nuttall, Harry | Steadman, W. C. | TELLERS FOR THE NOES.—Mr. Joseph Pease and Captain Norton. |
| O'Brien, Patrick (Kilkenny) | Stewart, Halley (Greenock) | |
| O'Connor, John (Kildare, N.) | Stewart-Smith, D. (Kendal) |
§ Mr. JOYNSON-HICKS moved, in Subsection (1), after the word "the" ["in respect of the income"], to insert the word "unearned."
§ I think I ought to have a good deal of sympathy from hon. Members on bath sides of the House for this Amendment. This is not the case, as the hon. Member for Stoke (Mr. John Ward) said on the last. Amendment, of the rich squealing, though it is quite possible we may have the same kind of appeal to the mob on this Amendment as we had on the last, not that that will have much effect. This raises the question whether it is desirable to tax at the same rate the man who by his energy, brain power, and exercise of capital, is able to make a considerable income at the same rate as the man who simply lives on unearned income. I know there are differences of opinion with regard to the distinction to be drawn between earned and unearned incomes. I know there are differences how to distinguish between that which is in the ordinary acceptation of the term unearned and that which represents the savings of prior earned incomes. That point does not arise on this Amendment. This Amendment seeks, and I think rightly, to exempt from Super-tax the man who is earning an income of £5,000 by the sweat of his own brain. [Laughter.] I have often laid traps for public meetings, and they have often fell into them, but I did not think that would happen here. No one suggests it should; only those who work with their hands. I venture to suggest that men who work with their brains work just as hard as men who work with 112 their hands, and that while the man who works with his hands is entitled to consideration, the man who works with his brains is entitled to the same consideration. While I am prepared to give every consideration to those who work with their hands, I, as a brain worker, claim the same consideration. There seems, again, to be some difference of opinion as to whether the work of a lawyer is that of a brain worker. I do suggest the work of any brain-worker, the big physician who devotes his life to the well-being of the community, or the head of a large business organisation, that such men deserve well of the country. The men who could, if they liked, stop earning four or five thousand, but are prepared to go on extending their business and employ more men, and, incidentally, make a large income. I venture to suggest that those men should be undertaxed and not overtaxed. While there may be something to be said in favour of a Super-tax on large unearned incomes, there is no justification whatever for a Super-tax on earned incomes, even though they rise to £5,000, £10,000, or £20,000. The bigger they are the better for the country, because they must employ large numbers of men.
§ Mr. HOBHOUSEThis is a practical Amendment, which has obtained practical support, and I think it requires only a practical reply. The reason why small incomes are exempted from the higher rate of Income Tax is that their possessors may be in a position to put by something considerable for the support of their families. 113 I do not think anybody who is enjoying an income of over £5,000 can be said to be in such a position that he is not able to put something by for the support and maintenance of those who come after him. Five thousand pounds is an income which is envied by many and possessed by comparatively few; but I think the margin of saving possible in such an income is so great that there is no special need to exempt such cases from the operation of the Super-tax.
§ Mr. JAMES HOPEWill official incomes be aggregated to private incomes for the purpose of the Super-tax?
§ Mr. HOBHOUSECertainly.
§ Mr. JOYNSON-HICKSHaving heard the explanation of the right hon. Gentleman, and knowing the impossibility of carrying a Division, I ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Mr. SAMUEL ROBERTS moved, in Sub-section (2), after the word "the" ["the total income of any individual"] to insert the word "net." My object in putting down this Amendment was to exclude the Income Tax itself of 14d. before the Super-tax is calculated, so that a man who is paying the ordinary Income Tax should pay the Super-tax only on the balance. I am told, however, that there are certain legal payments included in the term "net" which might give my Amendment a wider significance than I originally intended. Why should a man have to pay Super-tax on a tax? Under this Clause he will have to pay Super-tax at 6d. on the amount which has been taken at 14d. I do not think that that is fair. The hon. Member for Mansfield (Mr. Markham) said that he did not know what his income was. A man's bank pass-book will generally tell him what his income is. It is quite a simple thing for a man to make a return from his bank pass-book, but it would be a very different thing to take the items from your pass-book and have to add what has been deducted for ordinary Income Tax at 14d. In fact, the difficulties are so great that I think the Chancellor of the Exchequer will accept my Amendment. I referred to the fact that there are certain legal obligations which come under the term "net." I do not know exactly what they are. I believe that interest on an overdraft at the end of the year would be one; but that where a man had arranged 114 the interest on a loan with his bank that would not be included. At all events, I think the word "net" ought only to include that income which is received, and it is in that sense that I move the Amendment.
§ Mr. HOBHOUSEThe hon. Member raised the point whether interest on an overdraft was included within the scope of the Income Tax while interest on a loan was not. The answer is quite clear that interest on an overdraft which is not arranged for any time is not deducted, while you are entitled to recover Income Tax upon any interest paid upon a loan which is running for any time. The hon. Member has moved this Amendment in order to find out whether or not it would be possible to deduct from the net amount of income that amount which has been paid for Income Tax at 1s. 2d. in the £. I do not think that that would be so. A man would have to pay on the gross amount of income, and it would not be possible to allow that deduction. The amount assessable for the purpose of the Super-tax would have to include the 1s. 2d. That, as far as my information goes, is at present the case with regard to the Super-tax, and I do not think it will be possible to accept the proposal of the hon. Gentleman.
§ Mr. AUSTEN CHAMBERLAINWhen the right hon. Gentleman concludes his speech by saying that, as far as his information goes, that at present is the case with regard to the Super-tax, one wonders what he means. At present there is no Super-tax; therefore there is nothing applicable to the Super-tax. If the right hon. Gentleman refers to the fact that the Committee have already passed three or four lines of this Sub-section, it is still in the power of the Committee to modify that decision by any abatements that it thinks just, and it is even possible for the Committee to come to the conclusion, before we have done with it, that this Clause really is an unworkable Clause, and that it should be rejected as a whole. But, putting that on one side, let me come to the substance of the matter. It is divided into two parts. The first part of the hon. Gentleman's speech was a confirmation of the fact of the existence of what I think everyone must agree to be an anomaly, not an anomaly created by the right hon. Gentleman opposite, I freely admit, but an anomaly which I cannot explain the origin of. If I go to my banker at the beginning 115 of the year and ask for the loan of £1,000 for the year I may deduct interest, let me say of £50, which he charges for the loan of that money for the year.
§ Mr. HOBHOUSEThere must be securities deposited against the loan.
§ Mr. AUSTEN CHAMBERLAINIf I lodge securities, and the banker deducts the tax from my securities, one payment of the tax frees the whole transaction. If, on the other hand, I take an overdraft without security, which, in other words, is on my personal security, I am taxed twice over. I am taxed on my dividends, and he is taxed on the profit which he makes. The point my hon. Friend specifically wished to raise was the question: on what are you going to charge the Super-tax? Is it on an income received by a man, or is it on that income (plus the tax) which the individual has never received? I put this to the Government, not as a matter of justice, because as a matter of justice I can see that you may assume that the income a man has is the gross figure before he has paid any of his tax, or the net income after he has paid them all. I put it as a matter of convenience to the taxpayer, and I think of some convenience to the Inland Revenue, because, where a matter really serves the convenience of the taxpayer and facilitates his return, you may be sure it will facilitate the operations of the Inland Revenue Commissioners. Where you have to exact from the taxpayer something that is complicated and in many cases is a matter of some difficulty to get out, you will force the Commissioners to verify calculations which will frequently otherwise in perfect good faith be inaccurate. I urge it further on the Government on the ground that whilst it will tend to simplicity and tend to avoid friction, it will not affect very much the revenue. I am not now thinking of a case of a private firm or of a private trader who draws his income wholly from that source and declares the whole of it, and has it assessed as a whole for the purpose of the normal Income Tax, and has nothing to do for the purposes of the Super-tax but to transfer from one column of one return to another column of another return. I take the case of the ordinary individual taxpayer—a great number of taxpayers, almost everyone of whom will be affected by this tax. They will receive a great portion of their income from income from which the normal tax has already been deducted. Nominally receiving a £, they 116 only receive 18s. 10d. Take the ordinary person: what are you asking of him—the ordinary person suspect of having an income of over £5,000? I refer to not merely the person who has it. You have to ask three—I believe that is the lowest return for everyone you tax. The late Chairman of the Board of Inland Revenue, I think, puts the figure as high as 10. You demand returns as to their income from these in order to find the one who is taxable. What are you going to ask these 10 persons to do? You are going to ask them to take every dividend which they have received, and add it to their income for the purpose of a tax which was deducted before they received the income! I do not pretend to be clever at figures, but I do not think I am more of a fool at a simple arithmetical calculation than most of my fellow countrymen. I have had to make calculations of that kind recently, and they are really very troublesome. The Inland Revenue suspect me of being a person with £5,000 a year. You are going to ask me, and others, to make these calculations. Among those people there will be a great number who cannot do it, and the Inland Revenue officials will have to check every one of the calculations to see whether what the people have returned has been in fact—as most of them will think it their duty to return—all those who are not business people and who do not follow our discussions—what they believe they really have to return—that is, what they receive. Then the Inland Revenue will have to ask those people, "Did you really receive 1s. 2d. in the pound more?" and they will have to point out that to the other 18s. 11d. that they received there would have to be added this 1s. 2d. I submit that that is to make your tax quite unnecessarily unpopular. It will be quite unpopular enough without adding to its unpopularity by circumstantial details of this kind. If you really follow this up and undertake to investigate in each case whether you have got this tax of 1s. 2d. which has already been taken you will spend as much in the Inland Revenue in calculating machines and reckoners as you will ever get from the tax itself. I put it to the Chancellor of the Exchequer—this is one of those proposals which, whatever be its logic and whatever arguments you adduce in favour of it, is not worth the trouble and irritation and expense, and I ask him would he not be better advised to accept the Amendment of my hon. Friend in the spirit if not in the words. It is not worth while to cause 117 every taxpayer to make this calculation as to what his income would have been if he had not paid upon this tax.
§ Mr. LLOYD-GEORGEThis is not a question of logic—it is a question of cash. I want the Committee to realise that this is not quite so trivial a matter as the right hon. Gentleman very ingeniously tried to demonstrate to the Committee. It is a matter of £150,000.
§ Mr. AUSTEN CHAMBERLAINWhat is that among so many?
§ Mr. LLOYD-GEORGEYes, but I am constantly pressed to accept Amendments making reductions of £50,000, or £150,000, or £500,000, but all that comes to a considerable sum of money, and I conceive a concession could be used much more usefully than by cutting off this £150,000 in a concession such as the right hon. Gentleman asks for. I do not think this is such a very complicated question as he represents it to be. An hon. Member behind him said it represented five decimal three recurring. There is a simpler matter than that. Why not call it five and one-third—
§ Mr. LEVERTON HARRISIt is not five and one-third. It is 5.3 recurring of a £.
§ Mr. LLOYD-GEORGEI am dealing with the point purely that five with decimal three recurring sounds very complicated, but when you put it into vulgar fractions it comes out to be very simple.
§ Mr. AUSTEN CHAMBERLAINIn addition to the difficulty of calculation you have to go back to find out what your income would have been if this sum was not deducted.
§ Mr. LLOYD-GEORGEI was coming to that, but I must deal with one difficulty at a time. I have now got rid of the recurring decimals. The difficulty of the right hon. Gentleman is that you have to go backward to see what you would have received. There is no difficulty once you find the figure with which you have to operate. There is only one figure that applies to the whole. The right hon. Gentleman seems to imagine that if you get three separate dividends that you have one to which this recurring decimal applies, another to which another figure applies, and so on over the whole of your bank-book. Not at all. They have the whole of their dividend, and all they have to discover is the figure by which you want to multiply them by. If it is this year it is 118 in the receipts and dividends of this year, and it is 1s. 2d. If the right hon. Gentleman asks me now at once whether it is five and a third or five and a half or five and four-fifths I could not give him the figure, but there is no difficulty about it. He could turn on a clerk in his office at a moment. When the figure is discovered it will appear in the Press; everybody will know it, and all difficulty vanishes. The whole point really is this, whether it is worth our while giving away £150,000, not to redress any real anomaly or real grievance, but to get rid of a small clerical difficulty. If the right hon. Gentleman wishes to press for the remission of some item in the Budget I should have thought he might find a much better subject on which to spend £150,000 than by getting rid of it in this way. The difficulty is really not a great one. The people affected have all clerical staffs or managers to do this for them. There are very few people who have over £5,000 a year who have not got clerks or a secretary or manager.
§ 10.0 P.M.
§ Mr. PRETYMANWhat about the people who have not got £5,000, but who are suspect of having £5,000 a year? [An HON. MEMBER: "The great majority of them."]
§ Mr. LLOYD-GEORGEI agree to this extent that men with incomes somewhere approaching £5,000 a year may be called on for a return, but as a matter of fact it is well-known who are the people who are likely to be affected by this tax. Notices will not be showered upon every man who has a £5 note. Sir Henry Primrose pressed that point. Men supposed only to be exceptionally well off will be notified, but you must operate within that area. Surely all men in that category can afford to keep a private secretary or agent, and if they have not got a private secretary or agent then they are men of leisure, and a little sum of this sort would not do them any harm in the world as mental exercise. It is not mental exercise that they would have to indulge in every year. Once they understand this sum it would last them for a lifetime To make this concession would mean £150,000 in cash, and surveying the whole field, and seeing the other claims that have been pressed upon us from time to time, I do not think I would be justified in making any such concession.
§ Sir HENRY KIMBERThe Chancellor of the Exchequer has met us with the usual argument, "I want the cash." He 119 says he does not object to the righteousness of our principle. The Prime Minister used the same argument on a celebrated public occasion recently when he thought he was answering Lord Rosebery. The Chancellor of the Exchequer says it would cost him £150,000 to do this small item of justice, but what is the principle upon which the Super-tax is levied? It is that, after paying and discharging all liabilities and duties to the State, a man has still something left above £5,000. I will assume that I am approached by the Commissioners with a notice requiring me to state the whole of my income for the purposes of assessment. What is the natural thing I am entitled to do? It is to draw a line at the taxes I have paid up to £5,000, and make a new profit and loss statement showing how much income I have left on which the 6d. duty is chargeable. Here the Secretary to the Treasury has raised another more important point, because he draws a distinction between the interest upon a loan from a banker and the interest upon an overdraft. It do not know what an overdraft from a banker is if it is not a loan. I think on this point the right hon. Gentleman gives an additional argument for this Amendment. Clearly it is only the commonest justice that a man before he pays Income Tax upon his income should be allowed to deduct the interest he pays to earn that income, and there is no distinction in that case between that and the interest on a loan. There are many other charges below the level of £5,000 which have to be submitted to the tax collector, but which are, nevertheless, real payments out of income. Take, for example, those items disallowed to any landowner under Schedule A. In Schedule A and Schedule D there are many payments made by the landowner which he is not allowed to deduct when paying his Income Tax on the revenue from his land which the ordinary business man is allowed to deduct under Schedule D. Before he has levied upon him a Super-tax of 6d. in the £ after paying other taxes, he ought to be allowed in a profit and loss account to charge the payments he has actually made under Schedule A, but which he has not been allowed under that Schedule. I could quote some concrete examples of landowners whose income from land amounts to £2,000 or £3,000 a year. In such a case the landlord's disbursements on Schedule A will be as much as £1,500, and I could quote cases in which the amount comes up 120 to the full £3,000 of the income. In paying Income Tax on that £3,000 he is allowed certain deductions, and the Chancellor of the Exchequer has told us he intends to allow us something more. May I point out that the landlord is not allowed all the deductions on Schedule D, and those deductions disallowed under Schedule A amount to so much that it will sweep away the whole of his income over £5,000, and in that case he ought not to pay any tax upon a surplus which does not really exist. For these reasons I think this Amendment should be supported, and it ought to be conceded by the Chancellor of the Exchequer in bare justice. It is unconscionable that we should be met in regard to all these propositions with the argument, "I want the cash." That is what I believe an old friend in "Dick Turpin" said to the men in the coach.
§ Mr. T. G. ASHTONI hope the Chancellor of the Exchequer will reconsider this question. It is only a matter of five or six per cent. difference to him if he gives way upon this point. When you consider what an advantage it is in matters of taxation that you should levy taxes in a way that causes the least friction and the least irritation I feel the Government would be doing a wise thing if they gave way on this point and levied this tax upon the net amount instead of upon the gross amount. The Chancellor of the Exchequer talks of this proposal merely as a matter of adding up a sum and applying the tax to it, but that is not entirely the case. I know from personal experience there are items in my bank-book from which the Income Tax has not been deducted at all, and you will have to find out those items, and that is not always a very easy thing. We have heard from the hon. Member for Mansfield (Mr. Markham) that he does not even know what the amount of his annual income is. He knows it is large enough to have to pay the Super-tax, but he says he does not know how much it is. Every man with £5,000 a year income does not always keep books, and he does not always know the total amount of his income. The point raised by the right hon. Gentleman the Member for East Worcestershire (Mr. Austen Chamberlain) from the point of view of the Inland Revenue itself is' a very strong one. I believe it will be easier for the Inland Revenue to investigate accounts if they have to deal only with the net amount.
§ Mr. WALTER GUINNESSThe Mover of the Amendment dealt with the comparatively 121 small point as to whether the Super-tax was to be paid on the income after paying the ordinary Income Tax or not. I think the word "net" raises a very larger question than that. It raises a question which would have been raised under the Amendment of the hon. Member for Hitchin (Mr. J. Bertram): whether Super-tax is to be paid on the whole income or on the free and unencumbered income. I want to say a word about the injustice which will result to encumbered estates unless the Chancellor of the Exchequer does something to meet that case. There are a great many cases where the apparent income is very much larger than the real income, where the owner of an estate, not from his own free will, but owing to covenants and mortgages, gets very much less than his apparent income. Is he to pay on the gross income or on the income that he receives after the deduction of these charges from which he cannot in any way escape? The right hon. Gentleman shakes his head, but I am afraid that under the Bill as it stands people will have to pay.
§ Mr. LLOYD-GEORGEThey do not now.
§ Mr. WALTER GUINNESSI am glad to hear they will not have to pay on mortgages.
§ Mr. LLOYD-GEORGEThe hon. Member is quite wrong. Income Tax is not paid on mortgages at present, and it will not be under the Bill.
§ Mr. WALTER GUINNESSI quite agree that mortgages are deducted now. The Income Tax is deducted from the recipient of the interest on mortgages, but it does not follow it will be the case with the Super-tax. I am glad to learn that it will be so, and I hope the right hon. Gentleman will make it plain. Then we come to the question of insurance premiums, which are not premiums paid by the owner of an estate of his own free will, but from the necessity of his having inherited an encumbered estate. The right hon. Gentleman stated that insurance premiums could be deducted before paying the Super-tax, but if he will look at Clause 54 of the Income Tax Act of 1853 I think he will see he is wrong. It is there expressly laid down that insurance premiums are not to be brought in for the purpose of abatements of Income Tax. The words are: "Nor shall any such deduction or abatement entitle any such person to claim total exemption or any relief from the duty 122 on the ground of his profits and gains being thereby reduced below £100 or £150, as the case may be." Of course, the limit of exemption has been raised since then, but under that Clause it is quite clear insurance premiums are not deducted from income when claiming abatements, and I think that is a point which arises on "net income," and on which we ought to have some answer. Another point I should like to raise is the question of covenants. The right hon. Gentleman has told us it will be all right in the case of mortgages; but what will be the case with regard to covenants? I will not give an imaginary case; I will give a case embodied in a private Act last year—the Tollemache Estate Act. The gross income of that estate was £24,000. £8,000 was paid on interest on mortgage, and, from what the right hon. Getleman says, that will be deducted. Another £8,000 was paid in insurance, and £5,000 was paid under covenants to children. That reduced the £24,000, which was apparently enjoyed by the promoter of the Act, to only £3,000. It would be a very great hardship if the promoter of that Act has to pay Super-tax on the £8,000 paid as insurance premiums, and on the £5,000 paid to children under covenants. If these incumbrances are excepted, if they can be deducted from the gross income before the assessment for Super-tax, the promoter would not pay the Super-tax at all. I say that is a great injustice, and I hope the right hon. Gentleman will give some assurance that cases of this kind where the income is reduced by covenants and insurance will be met.
Mr. P. J. POWERI am well aware that this Super-tax hardly applies to Ireland at all. A great deal of Income Tax is, in fact, paid in Ireland which need not be paid, except that people, to avoid the trouble of correspondence, pay the money. But I want to know whether allowances are made in the case of overdrafts where a promissory note is signed. Surely that ought to be taken into account?
§ Mr. J. McD. HENDERSONIs the Income Tax to be returned upon a loan where there are securities deposited? Take the case where the bank takes the coupon off the security and collects the interest. Would that not be a case of paving twice over? With regard to the Amendment proposed, it would subvert the whole system of Income Tax if a trader or any man is ever allowed to deduct last year's tax and charge it to his disbursements 123 against this year's income. He is bound to pay his Income Tax on his full net income, and he is not entitled to deduct last year's tax, because he might go on deducting it for ever; and if you were to allow the 1s. 2d. to be deducted you would have to allow everybody to deduct, it, whether they had £5,000 or not. You could not allow the man with £5,000 to deduct it and not the man with £1,000. That would be impossible. The case put by the right hon. Gentleman the Member for Worcestershire (Mr. Austen Chamberlain) and my hon. Friend near me as this: What a trouble it would be to look at your bank-book and find an item there, and have to calculate what that was for. I say a man does not deserve to have £5,000 a year if he does not know what his investments are and what they are fetching. Every banker gives his customer the information when he credits his account. All the items are there, and the man has only to put them down and lump them together. [HON. MEMBERS: "No."] Every banker is quite prepared to put in particulars of the gross amounts in the pass-book if the customer likes to ask for them; and I would suggest that any hon. Member who has any trouble should simply ask his banker on every occasion that he makes an entry to show the gross amount and the amount of the tax.
§ Mr. MARKHAMCan the hon. Member tell me how a bank can tell the amount of the tax when the tax is deducted from the amount before it reaches the bank?
§ Mr. McD. HENDERSONAs a matter of fact no coupon is ever paid to the bank unless the tax is shown.
§ Mr. WALTER GUINNESSA dividend warrant does not always show the Income Tax.
§ Mr. McD. HENDERSONI beg the hon. Member's pardon; a Consols dividend warrant shows the tax. I am afraid the hon. Gentleman is not so familiar with these things as I am. There is no dividend warrant that I ever saw which does not give the tax. At all events, it must be admitted that in the great majority of cases it is shown, and therefore that a man with £5,000 a year should make any trouble about knowing what he gets his income from and how he gets it seems to me to be somewhat ridiculous. The great objection to the proposal is that you must allow the 1s. 2d. to be deducted in the case of the small amount just as much as in the case of the large amount.
§ Mr. HICKS BEACHI should be glad if the right hon. Gentleman would clear up one point, that is about the assessment of landowners to the Super-tax. As far as I understand, the landowner will be assessed for Super-tax on the Schedule A assessment with an additional deduction of 5 per cent.
§ Mr. LLOYD-GEORGEThe new proposal will be a deduction of 25 per cent.
§ Mr. HICKS BEACHThat is not in the Bill at present.
§ Mr. LLOYD-GEORGEThat is the new Clause that I propose to put down.
§ Mr. CAVEMay we have an answer to the point about premiums on life assurance policies? What is to be the rule as regards Super-tax?
§ Mr. LLOYD-GEORGEIt will be exactly the same as in the case of the Income Tax. The premium will not be deducted with a view to establishing a claim for exemption from Super-tax, but it will be deducted in order to ascertain the Income Tax to be paid.
§ Mr. LEVERTON HARRISMay I call the Chancellor's attention to an answer given by the Financial Secretary to the Treasury? My question was:—
I desire to ask the Chancellor of the Exchequer whether in calculating income for the purpose of Super-tax a deduction will be made in respect of payment for life assurance premiums.The Financial Secretary's answer was—Yes, Sir.
§ Mr. HOBHOUSEThat is precisely the point with which the Chancellor of the Exchequer has dealt. He has explained that they will not be allowed in the case of exemptions; but, for the purpose of income, they will be allowed.
§ Mr. CHIOZZA MONEYSurely the Amendment will not be pressed to a Division. We have had one proposition from the benches opposite to make Super-tax apply to unearned incomes only. The present proposition is the very reverse of that. If you take the case of a trader trading as an individual making £6,000 a year he will pay Super-tax on the whole of his income, while a man drawing £6,000 from rents or dividends would pay Super-tax at a lower rate under the Amendment of the hon. Member. That is differentiating against earned incomes—the very converse of the proposition which is moved by the hon. Gentleman opposite. Surely that anomaly is sufficient to dispose of the Amendment before the House!
The EARL of KERRYMay I remind the Chancellor of the Exchequer of an answer given to me some time back on this question of insurance premiums? The question was whether in arriving at the total income for the purpose of Super-tax that part which is represented by premiums paid on policies of life insurance would be de-ducible. The answer was "Yes." My object in asking that was to know whether the assessment would be reduced below the Super-tax level. The answer was understood as meaning that the actual assessment for Super-tax would be reduced below the level if there were insurance premiums.
§ Mr. RIDSDALEI think the Amendment could be more conveniently made on Sub-section (2). I hope that, in saying so, my right hon. Friend will not again accuse me of attacking the Government. I cannot see how this tax is going to be fairly applied unless it is done in the way proposed in the Amendment. The hon. Member for North Paddington (Mr. Chiozza Money) seemed to think that it would be an unfair differentiation in favour of the man with an unearned income, but that is not so. If a man has an income of £6,000 he will only be liable for the Super-tax on the difference between £3,000 and £6,000. In the great bulk of cases Super-tax would be charged on incomes derived from accumulated capital. One of the reasons for the Super-tax is that incomes of £5,000 and over are, in many instances, derived from large accumulations of capital. How are you to ascertain what the exact income is for the purpose of making an accurate return? We have learned this evening that the average income of three years is to be taken. Is a husband to review all the items in his pass-book for three years in order to find out on what items Income Tax has been paid? Is he to find out whether the different sums paid into the account were less Income Tax or cum income Tax? Are the entries in the wife's book to be gone through in a similar manner? We have just learned that for the purpose of this tax the husband's income and the wife's income are to be aggregated. If you are to get a return which will put them on a fair footing the only way in which you can do it is by giving them the means of ascertaining what their incomes respectively are. Fancy, in the case of a woman who has become liable for this tax, what a process she has to go through in order to make a return of her 126 income. She has to add up her pass-book and find out whether every pound represents a sovereign, or only 18s. 10d. That is a very complicated process. If there is a single entry which has paid Income Tax, and which she has treated as if it had not, then her whole sum is vitiated. The only possible way of dealing with this matter is to allow the Amendment to be carried. I hope my right hon. Friend will accept it.
§ Mr. CAVEOn the question of premiums the Government are receding from their previous statement. The right hon. Gentleman was asked whether, in arriving at the total income for the purpose of ascertaining whether he is subject to Super-tax, a man could, or could not, deduct life insurance premiums; and the answer he gave to my hon. Friend was quite the opposite of that which he has now given. The answer given to my hon. Friend was that premiums paid on policies of insurance could be deducted. Surely the Government will not recede from their former answer.
§ Mr. LLOYD-GEORGEIt is a question of the interpretation of the Bill, which is perfectly clear. It must be estimated in the same manner as the whole income of all sorts estimated for the purpose of exemption or abatement of Income Tax. I never had any doubt in my mind it ought to be deducted for the purpose of ascertaining the amount which is to be paid, but for the purpose of exemption it is not deducted.
§ Mr. AUSTEN CHAMBERLAINThe Bill may be perfectly clear, but so is the answer which was given on behalf of the Chancellor of the Exchequer. I think he is answering without really appreciating what was said in his name, and, of course, with his approval. The interpretation of a Bill such as that now before the House is a matter of considerable difficulty, even for lawyers. We know that lawyers in this House not infrequently differ upon the probable interpretation of words which are contained in this Bill, and for laymen it is a much more difficult thing. Accordingly, from time to time, Gentlemen put down questions in order to elucidate what is the intention of the Government in the words which they have put into a Bill, and if they get from the Government a statement that their intention is a certain thing, and if afterwards their legal advisers, gentlemen learned in the law, inform them in effect that the Bill is different, they are not dis- 127 appointed, because they say, "The moment we point that out the Chancellor of the Exchequer will make his Bill conform to what he has declared to be his intention"; and what is accepted by every Member of this House, wherever he sits, as being the determining factor is not the words of the Bill as introduced, the meaning of which is often subject to great doubt, but the answers given by the Chancellor of the Exchequer to the statements made by him. I do ask the Chancellor of the Exchequer to notice this question. It was asked on Wednesday, 23rd June, 1909: "The Earl of Kerry—To ask the Chancellor of the Exchequer whether, in arriving at the total income for the purposes of the Super-tax, the part which is represented by premiums paid on policies of life insurance will be deducible if less than one-sixth of the whole?" The governing words are "the total income for the purposes of Super-tax," and the answer is the one word, "Yes." I am quite certain that when the Chancellor of the Exchequer looks at that answer he will not rely on the words of the Bill, but he will say, "The answer which I gave, if not embodied in the Bill, must be embodied in the Bill, and if the Bill does not conform with it now I must make it conform with it, and I stand by the answer given in my name." I do not think that any Minister could do otherwise than that. A case of this kind is perfectly clear. It is susceptible of no doubt, and I hope that the Chancellor of the Exchequer will adhere to it.
§ Sir E. CARSONIn reply to a question put to the Chancellor of the Exchequer, the right hon. Gentleman said they were to arrive at the total taxation after deduction of these premiums on policies of insurance. May I call the right hon. Gentleman's attention to the lines of Section (2): "For the purposes of the Super-tax the total income of any individual from all sources shall be taken." If this is the definition of "total income," then you have to deduct the premiums on policies of insurance.
§ Mr. LLOYD-GEORGEI agree that the point raised by the right hon. Gentleman (Mr. Austin Chamberlain) is one that I should look into. My attention was called to it by the Noble Lord (the Earl of Kerry), and I should like to give it further consideration before giving an answer. But in any event I could not accept the Amendment. At the worst it was not a pledge. It may be that the answer conveyed to the 128 House an interpretation which is not in accordance with the views that the Government take of what it really means. At the same time, I agree with the right hon. Gentleman that it does raise an element which should be taken into serious consideration. With regard to the point raised by the right hon. and learned Gentleman (Sir E. Carson), I have not the slightest doubt about the meaning of the Section, that premiums on policies of insurance are to be deducted for the purpose of arriving at the amount of the tax to be paid, but not for the purpose of ascertaining whether or not a man is liable to pay the tax.
§ Mr. AUSTEN CHAMBERLAINThis question arose—it is a very important issue as a side issue in the middle of another discussion. I think it is distinctly raised on another Amendment, but I quite understand that the Chancellor of the Exchequer should have a little time to consider it.
§ Mr. LLOYD-GEORGEI think an answer was given expressly pointing to the fact that it was to be treated as a matter of deduction. I think it was the answer given by my right hon. Friend the Secretary to the Treasury.
§ Mr. LEVERTON HARRISThe answer to my question was capable of a different interpretation, but about the answer given to the Noble Lord there can be no doubt.
§ Mr. AUSTEN CHAMBERLAINI think what my hon. Friend says is that the answer he received is capable of another interpretation, and that it is not conclusive. All I can say is that I do not think we can settle it at this moment. We must take a Division on this Amendment, the question being whether the income on which the Super-tax is to be levied is to be calculated with the Income Tax already deducted before the recipient got his income added to it, or whether it is to be the income which the recipient actually gets. That is the question on which we are now going to divide. The other question must be reserved for another Amendment, and should not be confused with the point on which we must take a Division, and which was the one originally intended by the Amendment now before the Committee.
§ Mr. E. H. CARLILEI would urge the Chancellor of the Exchequer to accept the Amendment, which is an eminently reasonable one. I do not believe that any man in this country whose income is such as to 129 bring his under this tax would in the least shirk his responsibility, or, in any way, try to evade it. At the same time, I think it is only fair we should ask that, in imposing this new tax, it should be done in a way which is calculated to give least inconvenience to those who have to pay it. It seems to me, if the Chancellor of the Exchequer would accept this Amendment, then those who pay the tax would be relieved of a considerable amount of inconvenience, and a great deal of calculation. I am certain many of those men who will have to pay the tax will find it extremely difficult to make the actual return. The difference is not a serious one. I think the Chancellor of the Exchequer pointed out himself that it would amount to £150,000, and when we consider that next year it will produce 2½ millions, I think really by making this concession he would only be fairly meeting those who would be called on to pay this new tax. There will be all kinds of inaccuracies and difficulties, and the authorities will have to go into the details, and I suppose also examine the bank accounts. There is an inquisitorial side to this tax that does not obtain in any other tax. The Chancellor of the Exchequer might meet us on this occasion, and by accepting my Amendment he will be to some extent removing the impression which obtains largely in the country at the present time that many of the taxes contained in this Finance Bill are of a vexatious and inquisitorial character. It is a very modest request we are making in some respects. We might be expected hardly to press it, because it might be contended that the more objectionable this Finance Bill is as it leaves us the less
§ likely it is to come into law. Notwithstanding that I am sure of this, that hon. Gentlemen sitting on this side of the House have honestly done their level best to improve the Bill.
§ The CHAIRMAN (Mr. Emmott)The hon. Member does not appear to be speaking to the Amendment.
§ Mr. CARLILEI will confine myself to the Amendment before us, and I do urge on the Chancellor of the Exchequer to accept this—
§ The CHAIRMANThe hon. Member is now repeating himself.
§ Mr. CARLILEOn a point of Order. May I ask whether an hon. Member who is addressing the House is not allowed to draw together and focus his remarks by a single sentence from him at the close, with that one object in view at the close of his observations? I would like a ruling on that.
§ The CHAIRMANI warned the hon. Member that he was repeating himself.
§ Mr. ROBERT DUNCANThe calculation of the small details connected with this tax will involve much labour on the part not only of officials of the State, but also of people whose minds ought to be given up to a more productive form of business. Therefore the simpler the method of making up the sum payable, the better for all concerned.
§ Question put, "That the word 'net' be there inserted."
§ The Committee divided: Ayes, 94; Noes, 199.
131| Division No. 685.] | AYES. | [11.0 p.m. |
| Acland-Hood, Rt. Hon. Sir Alex. F. | Duncan, Robert (Lanark, Govan) | Keswick, William |
| Anson, Sir William Reynell | Faber, George Denison (York) | Kimber, Sir Henry |
| Balcarres, Lord | Faber, Captain W. V. (Hants, W.) | King, Sir Henry Seymour (Hull) |
| Baldwin, Stanley | Fell, Arthur | Lambton, Hon. Frederick William |
| Banbury, Sir Frederick George | Fletcher, J. S. | Lane-Fox, G. R. |
| Banner, John S. Harmood- | Forster, Henry William | Lee, Arthur H. (Hants, Fareham) |
| Baring, Capt. Hon. G. (Winchester) | Foster, P. S. | Lockwood, Rt. Hon. Lt.-Col. A. R. |
| Beach, Hon. Michael Hugh Hicks | Gardner, Ernest | Long, Col. Charles W. (Evesham) |
| Beckett, Hon. Gervase | Gooch, Henry Cubitt (Peckham) | Lonsdale, John Brownlee |
| Bowles, G. Stewart | Gordon, J. | Lowe, Sir Francis William |
| Bridgeman, W. Clive | Gretton, John | Lyttelton, Rt. Hon. Alfred |
| Bull, Sir William James | Guinness, Hon. R. (Haggerston) | M'Arthur, Charles |
| Butcher, Samuel Henry | Guinness, Hon. W. E. (B. S. Edmunds) | M'Calmont, Colonel James |
| Carlile, E. Hildred | Haddock, George B. | Magnus, Sir Philip |
| Carson, Rt. Hon. Sir Edward H. | Hamilton, Marquess of | Mason, James F. (Windsor) |
| Cave, George | Hardy, Laurence (Kent, Ashford) | Meysey-Thompson, E. C. |
| Cecil, Evelyn (Aston Manor) | Harrison-Broadley, H. B. | Morpeth, Viscount |
| Chamberlain, Rt. Hon. J. A. (Worc'r.) | Hay, Hon. Claude George | Oddy, John James |
| Clive, Percy Archer | Helmsley, Viscount | Parker, Sir Gilbert (Gravesend) |
| Clyde, J. Avon | Hill, Sir Clement | Parkes, Ebenezer |
| Coates, Major E. F. (Lewisham) | Hills, J. W. | Pease, Herbert Pike (Darlington) |
| Courthope, G. Loyd | Hope, James Fitzalan (Sheffield) | Peel, Hon. W. R. W. |
| Craig, Captain James (Down, E.) | Hunt, Rowland | Powell, Sir Francis Sharp |
| Craik, Sir Henry | Joynson-Hicks, William | Randles, Sir John Scurrah |
| Douglas, Rt. Hon. A. Akers | Kerry, Earl of | Ratcliff, Major R. F. |
| Rawlinson, John Frederick Peel | Sheffield, Sir Berkeley George D. | Willoughby de Eresby, Lord |
| Remnant, James Farquharson | Smith, Abel H. (Hertford, East) | Wilson, A. Stanley (York, E. R.) |
| Renton, Leslie | Smith, Hon. W. F. D. (Strand) | Younger, George |
| Ridsdale, E. A. | Stanier, Beville | |
| Ronaldshay, Earl of | Starkey, John R. | TELLERS FOR THE AYES.—Mr. S. Roberts and Mr. Leverton Harris. |
| Rutherford, John (Lancashire) | Thomson, W. Mitchell- (Lanark) | |
| Rutherford, Watson (Liverpool) | Walker, Col. W. H. (Lancashire) | |
| Salter, Arthur Clavell | Warde, Col. C. E. (Kent, Mid) | |
| NOES. | ||
| Adkins, W. Ryland D. | Gladstone, Rt. Hon. Herbert John | Partington, Oswald |
| Agar-Robartes, Hon. T. C. R. | Glendinning, R. G. | Pearce, Robert (Staffs, Leek) |
| Agnew, George William | Glover, Thomas | Pickersgill, Edward Hare |
| Alden, Percy | Gooch, George Peabody (Bath) | Pollard, Dr. G. H. |
| Allen, A. Acland (Christchurch) | Gulland, John W. | Ponsonby, Arthur A. W. H. |
| Allen, Charles P. (Stroud) | Harcourt, Rt. Hon. L. (Rossendale) | Priestley, Sir W. E. B. (Bradford, E.) |
| Atherley-Jones, L. | Harcourt, Robert V. (Montrose) | Radford, G. H. |
| Balfour, Robert (Lanark) | Hardie, J. Keir (Merthyr Tydvil) | Rea, Walter Russell (Scarborough) |
| Baring, Godfrey (Isle of Wight) | Harmsworth, Cecil B. (Worcester) | Reddy, M. |
| Barker, Sir John | Harmsworth, R. L. (Caithness-shire) | Richards, T. F. (Wolverhampton, W.) |
| Barnes, G. N. | Haworth, Arthur A. | Roberts, G. H. (Norwich) |
| Barran, Rowland Hirst | Hedges, A. Paget | Roberts, Sir J. H. (Denbighshire) |
| Barry, Redmond J. (Tyrone, N.) | Hemmerde, Edward George | Robinson, S. |
| Beaumont, Hon. Hubert | Henderson, J. McD. (Aberdeen, W.) | Robson, Sir William Snowdon |
| Beck, A. Cecil | Henry, Charles S. | Roch, Walter F. (Pembroke) |
| Bell, Richard | Herbert, Col. Sir Ivor (Mon. S.) | Roe, Sir Thomas |
| Bennett, E. N. | Higham, John Sharp | Rogers, F. E. Newman |
| Berridge, T. H. D. | Hobhouse, Rt. Hon. Charles E. H. | Rose, Sir Charles Day |
| Black, Arthur W. | Hodge, John | Rowlands, J. |
| Bottomley, Horatio | Holland, Sir William Henry | Runciman, Rt. Hon. Walter |
| Boulton, A. C. F. | Holt, Richard Durning | Russell, Rt. Hon. T. W. |
| Bowerman, C. W. | Hooper, A. G. | Rutherford, V. H. (Brentford) |
| Bramsdon, Sir T. A. | Hope, W. H. B. (Somerset, N.) | Samuel, Rt. Hon. H. L. (Cleveland) |
| Brigg, John | Horniman, Emslie John | Samuel, S. M. (Whitechapel) |
| Bright, J. A. | Howard, Hon. Geoffrey | Scarisbrick, Sir T. T. L. |
| Brunner, J. F. L. (Lancs., Leigh) | Idris, T. H. W. | Schwann, C. Duncan (Hyde) |
| Burnyeat, W. J. D. | Isaacs, Rufus Daniel | Schwann, Sir C. E. (Manchester) |
| Burt, Rt. Hon. Thomas | Jardine, Sir J. | Soddon, J. |
| Byles, William Pollard | Johnson, John (Gateshead) | Seely, Colonel |
| Carr-Gomm, H. W. | Jones, William (Carnarvonshire) | Sherwell, Arthur James |
| Causton, Rt. Hon. Richard Knight | Jowett, F. W. | Shipman, Dr. John G. |
| Cawley, Sir Frederick | Keating, M. | Smyth, Thomas F. (Leitrim, S.) |
| Channing, Sir Francis Allston | Kekewich, Sir George | Snowden, P. |
| Cherry, Rt. Hon. R. R. | Kilbride, Denis | Soares, Ernest J. |
| Cleland, J. W. | King, Alfred John (Knutsford) | Stanley, Hon. A. Lyulph (Cheshire) |
| Clough, William | Laidlaw, Robert | Steadman, W. C. |
| Clynes, J. R. | Lambert, George | Stewart, Halley (Greenock) |
| Cobbold, Felix Thornley | Lamont, Norman | Stewart-Smith, D. (Kendal) |
| Collins, Stephen (Lambeth) | Layland-Barratt, Sir Francis | Strachey, Sir Edward |
| Collins, Sir Wm. J. (St. Pancras, W.) | Lehmann, R. C. | Strauss, E. A. (Abingdon) |
| Cooper, G. J. | Lever, A. Levy (Essex, Harwich) | Summerbell, T. |
| Corbett, C. H. (Sussex, E. Grinstead) | Levy, Sir Maurice | Tennant, Sir Edward (Salisbury) |
| Cory, Sir Clifford John | Lewis, John Herbert | Thomas, Sir A. (Glamorgan, E.) |
| Cotton, Sir H. J. S | Lloyd-George, Rt. Hon. David | Thomasson, Franklin |
| Craig, Herbert J. (Tynemouth) | Lough, Rt. Hon. Thomas | Thompson, J. W. H. (Somerset, E.) |
| Crosfield, A. H. | Lupton, Arnold | Tomkinson, James |
| Crossley, William J. | Maclean, Donald | Toulmin, George |
| Cullinan, J. | MacVeagh, Jeremiah (Down, S.) | Trevelyan, Charles Philips |
| Curran, Peter Francis | MacVeigh, Charles (Donegal, E.) | Verney, F. W. |
| Dalziel, Sir James Henry | McKenna, Rt. Hon. Reginald | Villiers, Ernest Amherst |
| Davies, Ellis William (Eifion) | M'Laren, Sir C. B. (Leicester) | Vivian, Henry |
| Dewar, Arthur (Edinburgh, S.) | M'Laren, H. D. (Stafford, W.) | Ward, John (Stoke-upon-Trent) |
| Dilke, Rt. Hon. Sir Charles | M'Micking, Major G. | Wardle, George J. |
| Duffy, William J. | Maddison, Frederick | Wason, Rt. Hon. E. (Clackmannan) |
| Duncan, J. Hastings (York, Otley) | Markham, Arthur Basil | Wason, John Cathcart (Orkney) |
| Dunn, A. Edward (Camborne) | Massie, J. | White, Sir George (Norfolk) |
| Dunne, Major E. Martin (Walsall) | Masterman, C. F. G. | White, J. Dundas (Dumbartonshire) |
| Edwards, Sir Francis (Radnor) | Menzies, Sir Walter | Whittaker, Rt. Hon. Sir Thomas P. |
| Erskine, David C. | Mond, A. | Wiles, Thomas |
| Essex, R. W. | Money, L. G. Chiozza | Wilkie, Alexander |
| Evans, Sir S. T. | Montgomery, H. G. | Wilson, Hon. G. G. (Hull, W.) |
| Everett, R. Lacey | Morgan, J. Lloyd (Carmarthen) | Wilson, P. W. (St. Pancras, S.) |
| Ferguson, R. C. Munro | Morrell, Philip | Wilson, W. T. (Westhoughton) |
| Fiennes, Hon. Eustace | Muldoon, John | |
| Findlay, Alexander | Myer, Horatio | |
| Fuller, John Michael F. | Newnes, F. (Notts, Bassetlaw) | TELLERS FOR THE NOES.—Mr. Joseph Pease and Captain Norton. |
| Fullerton, Hugh | Norman, Sir Henry | |
| Gibb, James (Harrow) | Nuttall, Harry |
§ Mr. CHIOZZA MONEYI wish to move an Amendment which, unfortunately, is 132 not on the Paper, but which is, in Sub-section (1), to leave out all the words after 133 the words "five thousand pounds," and to insert instead thereof the words "a Super-tax or additional Income Tax at the following rates—Over £5,000 and under £6,000, twopence in the pound; over £6,000 and under £7,000, threepence; over £7,000 and under £8,000, fourpence; over £8,000 and under £10,000, fivepence; and over £10,000, sixpence."
The rates I suggest are almost precisely similar to the effect of the tax as proposed by my right hon. Friend in this Clause. I have always contended, and I now contend that the rates of the Income Tax should be made as plain as possible. I regret that my right hon. Friend, while giving effect to the desire of so many of us that the Income Tax should be further graded, has chosen the method of having a nominal rate of Super-tax, and then graduating that nominal rate by making deductions of so much of the income—in this case £3,000—and levying the tax upon the balance. To discover what the amount which is to be subject to the tax may be, each taxpayer has to deduct £3,000 from his income and has to pay sixpence in the pound upon the balance. The result is this. If we take an income of £5,000 to £6,000 the real rate of Super-tax ranges from 2¼d. to 2⅓d. and up to 3d. in the pound, and if we take an income of £10,000 the rate is 4¼d. I appeal to my right hon. Friend to adopt this plainer method of grading the Super-tax. The old argument with regard to the graduation of the In come Tax used to be that the graduation by plain rates was impossible. Of course, that does not apply to the Super-tax, because you are here demanding personal declarations from those with large incomes, and as they have a definite amount of income in their possession there is no reason why you should not levy a perfectly plain rate of taxation.
§ Mr. LLOYD-GEORGEI think I have reason to complain of an Amendment of this magnitude being moved in manuscript. After all, it is a proposal which requires very careful consideration. I do not know what its effect will be. If it produces an increase it will probably be out of Order, and, therefore, it must either involve a decrease or produce exactly the same amount. How am I to say what it will produce? It is an Amendment which will require the most careful investigation. If I were disposed on behalf of the Government to substitute this scale at all I should like to know exactly what it means. I cannot even accept the responsibility of expressing an opinion upon its effect 134 unless I have some better opportunity of considering it. My hon. Friend will realise that it is quite an unusual thing to call upon me straight away to express an opinion upon a proposal of this magnitude, and I hope he will withdraw his Amendment.
§ Mr. CHIOZZA MONEYUnder the circumstances, I ask leave to withdraw my Amendment. With regard to the Chancellor of the Exchequer not having seen my Amendment before, I am sorry he has not received the letter I sent to him explaining my Amendment.
§ Amendment, by leave, withdrawn.
§ The CHAIRMANThe next Amendment standing in the name of the hon. Member for Blackburn (Mr. Snowden)—to leave out of Sub-section (1) from the word "pound" to the end of the Sub-section—is not in order, because it is outside the scope of the Resolution.
§ Mr. JOYNSON-HICKS moved, in Subsection (1), to leave out the word "three" ["three thousand pounds"], and to insert instead thereof the word "five." Under the Clause as it stands an income of £5,001 would have to pay a considerable sum as a Super-tax, amounting to £50 in respect of that £1. We have admitted the theory of a Super-tax, and that it is right to make a very rich man pay a higher sum by way of Super-tax than a man who is not so rich. Having selected £5,000 as the limit, it is not fair on the first pound over that limit to take the huge lump sum which is provided for under the Clause.
§ Mr. LLOYD-GEORGEThis Amendment would make a very serious inroad upon the revenue to be raised by this tax. It means that a man with an income of £5,001 would only pay 6d., whereas now he pays 6d. in the £ on the difference between £3,000 and £5,000. That would alter the whole scale very considerably. I could not tell the Committee what the loss to the revenue would be, but it would be very considerable, and probably would beat least one-third of the amount we propose to raise. Consequently, I cannot assent to the proposal.
§ Amendment negatived.
§ Mr. EVELYN CECIL moved to insert at the end of Sub-section (1) the following words, "Provided always that the Super-tax shall only be chargeable to such an extent as shall not reduce the income below £5,000." The object of my Amendment 135 is simply this: If a man has £5,010 he is subject to the Super-tax of 6d. on £2,010, which equals £50 5s. If the sum of £50 5s. is deducted from £5,010, it will leave £4,949 15s. That will make him a poorer person than the man whose income is exactly £5,000, and who pays no Super-tax. I think the Chancellor of the Exchequer will appreciate that point, and will not penalise the man whose income is £5,010 for being honest over a man whose income is exactly £5,000. The whole object of this proviso, which I should like to move, if I am in order, is to obviate that unfairness, and so arrange this Clause that any man who has an income just over £5,000 should not be penalised by the Super-tax so as to render him a poorer man than the man who has just £5,000 and therefore pays no Super-tax.
§ The CHAIRMANI do not think I can allow that. It seems to me that is covered by the word "net."
§ Mr. AUSTEN CHAMBERLAINMay I very respectfully submit that is not the ease. The arguments on the word "net" are at once wider and narrower than on this Amendment. It would have affected a great number of cases which are not touched by this Amendment, and, quite conceivably, a great number of cases would be touched by this Amendment which were not affected by the proposal to introduce the word "net." The object of this Amendment is that, whilst every man with more than £5,000 shall be subject to the Super-tax, no man shall be worse off by reason of the Super-tax, and of his having over £5,000 than the man who has just £5,000. It really is, if I may respectfully say so, a point quite distinct from any we have had raised during the discussions to-day.
§ Mr. LLOYD-GEORGEI agree there may be a shade of difference in the presentation, but I submit that substantially it is the same point, and the word "net" really covered all these cases.
§ Mr. AUSTEN CHAMBERLAINThe Chancellor of the Exchequer has not really understood the point. The proposal under the word "net" was that the Super-tax should be taken on the income after the normal tax had been paid.
§ The CHAIRMANI need not trouble the right hon. Gentleman further. I am not quite clear that the actual 6d. Super-tax was discussed on the last Amendment, and therefore, although we cannot go over 136 the ground of the last Amendment, I will allow it.
§ Mr. AUSTEN CHAMBERLAINThis is really, I think, the most justifiable form of the graduation of the tax you can have. You fix a datum line, below which the tax is not due. The moment the income passes that line, the tax becomes due. You necessarily take an arbitrary point, if you do not accept the Amendment, and the result will be that there will be incomes slightly over £5,000, which, after the tax is paid, will be of less value than £5,000 to the owner. If he has just £5,000 he does not pay the tax, but if he has just over £5,000 he actually pays, and may thereby reduce his income to less than £5,000. My hon. Friend proposes that in this case he shall pay so much tax as will not bring him below £5,000, and he will not in that case be worse off than the man whose income is exactly £5,000. There are both moral and practical arguments to be adduced in support of this Amendment. If you have an arbitrary line of this kind the taxpayer will naturally try to bring himself below it.
§ Mr. LLOYD-GEORGEThe right hon. Gentleman must see that the same argument applies at all stages—it is equally true where you draw the line between 9d. to 1s., or between 1s. and 1s. 2d. Undoubtedly it is an inducement for a man when he arrives at that point to make his income a little lower. This is a proposal really to charge a man the Super-tax only when his income reaches £5,050. But at whatever point you fix it it cannot matter, for it will always be worth the while of a man to bring himself under limit, and thus avoid the Super-tax. I do not think that an ingenious arrangement of this kind will meet the difficulty.
§ Mr. WALTER GUINNESSThe fact that there has been very great injustice under the existing system of graduation seems to me to be no answer in this instance. Graduation is apparently a new principle. I think it is time something was done to meet cases such as we are discussing. There is a very small amount involved—not more than £5,000 or £6,000. Surely the right hon. Gentleman can well afford to make this concession. It is perfectly absurd that a man with a nominal income of £5,001 should be £49 odd worse off than a man with an income of £1 less. I do think it is an injustice, and it is no answer whatever to say that in former cases of graduation, when we had very little experience in the matter, this point was overlooked.
§ Question put, "That those words be there inserted."
138§ The Committee divided: Ayes, 89; Noes, 188.
139| Division No. 686.] | AYES. | [11.30 p.m. |
| Acland-Hood, Rt. Hon. Sir Alex. F. | Foster, P. S. | Morpeth, Viscount |
| Anson, Sir William Reynell | Gardner, Ernest | Parkes, Ebenezer |
| Balcarres, Lord | Gooch, Henry Cubitt (Peckham) | Pease, Herbert Pike (Darlington) |
| Baldwin, Stanley | Gordon, J. | Peel, Hon. W. Robert Wellesley |
| Banbury, Sir Frederick George | Gretton, John | Randles, Sir John Scurrah |
| Banner, John S. Harmood- | Guinness, Hon. R. (Haggerston) | Ratcliff, Major R. F. |
| Baring, Capt. Hon. G. (Winchester) | Haddock, George B. | Rawlinson, John Frederick Peel |
| Beach, Hon. Michael Hugh Hicks | Hamilton, Marquess of | Remnant, James Farquharson |
| Beckett, Hon. Gervase | Hardy, Laurence (Kent, Ashford) | Renton, Leslie |
| Bowles, G. Stewart | Harris, Frederick Leverton | Renwick, George |
| Bridgeman, W. Clive | Harrison-Broadley, H. B. | Roberts, S. (Sheffield, Ecclesall) |
| Brotherton, Edward Allen | Hay, Hon. Claude George | Ronaldshay, Earl of |
| Bull, Sir William James | Helmsley, Viscount | Rutherford, John (Lancashire) |
| Burdett-Coutts, W. | Hill, Sir element | Rutherford, W. W. (Liverpool) |
| Carlile, E. Hildred | Hills, J. W. | Salter, Arthur Clavell |
| Carson, Rt. Hon. Sir Edward H. | Hope, James Fitzalan (Sheffield) | Sheffield, Sir Berkeley George D. |
| Cave, George | Hunt, Rowland | Smith, Abel H. (Hertford, East) |
| Chamberlain, Rt. Hon. J. A. (Worc'r.) | Joynson-Hicks, William | Smith, Hon. W. F. D. (Strand) |
| Clive, Percy Archer | Kerry, Earl of | Stanier, Beville |
| Clyde, James Avon | Keswick, William | Starkey, John R. |
| Coates, Major E. F. (Lewisham) | King, Sir Henry Seymour (Hull) | Walker, Col. W. H. (Lancashire) |
| Courthope, G. Loyd | Lambton, Hon. Frederick Wm. | Warde, Col. C. E. (Kent, Mid) |
| Craig, Captain James (Down, E.) | Lane-Fox, G. R. | Willoughby de Eresby Lord |
| Craik, Sir Henry | Lee, Arthur H. (Hants, Fareham) | Wilson, A. Stanley (York, E. R.) |
| Dickson, Rt. Hon. C. Scott | Lockwood, Rt. Hon. Lt.-Col. A. R. | Wodehouse, Lord |
| Douglas, Rt. Hon. A. Akers- | Long, Col. Charles W. (Evesham) | Younger, George |
| Duncan, Robert (Lanark, Govan) | Lonsdale, John Brownlee | |
| Faber, George Denison (York) | Lowe, Sir Francis William | |
| Faber, Capt. W. V. (Hants, W.) | Lyttelton, Rt. Hon. Alfred | TELLERS FOR THE AYES.—Mr. Evelyn Cecil and Mr. Walter Guinness. |
| Fell, Arthur | M'Calmont, Colonel James | |
| Fletcher, J. S. | Mason, James F. (Windsor) | |
| Forster, Henry William | Meysey-Thompson, E. C. | |
| NOES. | ||
| Adkins, W. Ryland D. | Cotton, Sir H. J. S. | Henderson, J. McD. (Aberdeen, W.) |
| Agar-Robartes, Hon. T. C. R. | Cox, Harold | Henry, Charles S. |
| Agnew, George William | Craig, Herbert J. (Tynemouth) | Herbert, Col. Sir Ivor (Mon. S.) |
| Allen, A. Acland (Christchurch) | Crosfield, A. H. | Higham, John Sharp |
| Allen, Charles P. (Stroud) | Crossley, William J. | Hobhouse, Rt. Hon. Charles E. H. |
| Ashton, Thomas Gair | Cullinan, J. | Hodge, John |
| Balfour, Robert (Lanark) | Dalziel, Sir James Henry | Holland, Sir William Henry |
| Baring, Godfrey (Isle of Wight) | Davies, Ellis William (Eifion) | Holt, Richard Durning |
| Barker, Sir John | Davies, Timothy (Fulham) | Horniman, Emslie John |
| Barran, Rowland Hirst | Dewar, Arthur (Edinburgh, S.) | Howard, Hon. Geoffrey |
| Barry, Redmond J. (Tyrone, N.) | Dilke, Rt. Hon. Sir Charles | Idris, T. H. W. |
| Beaumont, Hon. Hubert | Duncan, J. Hastings (York, Otley) | Isaacs, Rufus Daniel |
| Beck, A. Cecil | Dunn, A. Edward (Camborne) | Jardine, Sir J. |
| Benn, W. (Tower Hamlets, St. Geo.) | Dunne, Major E. Martin (Walsall) | Johnson, John (Gateshead) |
| Bennett, E. N. | Edwards, Sir Francis (Radnor) | Jones, William (Carnarvonshire) |
| Berridge, T. H. D. | Erskine, David C. | Jowett, F. W. |
| Black, Arthur W. | Essex, R. W. | Kekewich, Sir George |
| Bottomley, Horatio | Evans, Sir Samuel T. | Kilbride, Denis |
| Boulton, A. C. F. | Everett, R. Lacey | King, Alfred John (Knutsford) |
| Bowerman, C. W. | Falconer, James | Laidlaw, Robert |
| Bramsdon, Sir T. A. | Ferguson, R. C. Munro | Lamb, Ernest H. (Rochester) |
| Brigg, John | Fiennes, Hon. Eustace | Lambert, George |
| Bright, J. A. | Findlay, Alexander | Lamont, Norman |
| Brunner, J. F. L. (Lancs., Leigh) | Fuller, John Michael F. | Layland-Barratt, Sir Francis |
| Buxton, Rt. Hon. Sydney Charles | Fullerton, Hugh | Lehmann, R. C. |
| Byles, William Pollard | Gibb, James (Harrow) | Lever, A. Levy (Essex, Harwich) |
| Carr-Gomm, H. W. | Gladstone, Rt. Hon. Herbert John | Levy, Sir Maurice |
| Causton, Rt. Hon. Richard Knight | Glendinning, R. G. | Lewis, John Herbert |
| Cawley, Sir Frederick | Glover, Thomas | Lloyd-George, Rt. Hon. David |
| Channing, Sir Francis Allston | Gooch, George Peabody (Bath) | Lough, Rt. Hon. Thomas |
| Cherry, Rt. Hon. R. R. | Grey, Rt. Hon. Sir Edward | Lupton, Arnold |
| Cleland, J. W. | Gulland, John W. | Maclean, Donald |
| Clough, William | Harcourt, Rt. Hon. L. (Rossendale) | MacVeagh, Jeremiah (Down, S.) |
| Clynes, J. R. | Harcourt, Robert V. (Montrose) | M'Kenna, Rt. Hon. Reginald |
| Cobbold, Felix Thornley | Harmsworth, Cecil B. (Worcester) | M'Laren, H. D. (Stafford, W.) |
| Collins, Stephen (Lambeth) | Harmsworth, R. L. (Caithness-shire) | M'Micking, Major G. |
| Collins, Sir Wm. J. (St. Pancras, W.) | Haworth, Arthur A. | Markham, Arthur Basil |
| Cooper, G. J. | Hedges, A. Paget | Massie, J. |
| Corbett, C. H. (Sussex, E. Grinstead) | Helme, Norval Watson | Masterman, C. F. G. |
| Cory, Sir Clifford John | Hemmerde, Edward George | Menzies, Sir Walter |
| Mond, A. | Roch, Walter F. (Pembroke) | Taylor, Austin (East Toxteth) |
| Montgomery, H. G. | Roe, Sir Thomas | Tennant, Sir Edward (Salisbury) |
| Morgan, J. Lloyd (Carmarthen) | Rogers, F. E. Newman | Thomasson, Franklin |
| Worrell, Philip | Rose, Sir Charles Day | Thompson, J. W. H. (Somerset, E.) |
| Muldoon, John | Rowlands, J. | Tomkinson, James |
| Myer, Horatio | Runciman, Rt. Hon. Walter | Toulmin, George |
| Newnes, F. (Notts, Bassetlaw) | Russell, Rt. Hon. T. W. | Trevelyan, Charles Philips |
| Nicholson, Charles N. (Doncaster) | Rutherford, V. H. (Brentford) | Verney, F. W. |
| Norman, Sir Henry | Samuel, Rt. Hon. H. L. (Cleveland) | Villiers, Ernest Amherst |
| Partington, Oswald | Samuel, S. M. (Whitechapel) | Ward, John (Stoke-upon-Trent) |
| Pearce, Robert (Staffs, Leek) | Scarisbrick, Sir T. T. L. | Wason, Rt. Hon. E. (Clackmannan) |
| Pickersgill, Edward Hare | Schwann, C. Duncan (Hyde) | Wason, John Cathcart (Orkney) |
| Pollard, Dr. G. H. | Schwann, Sir C. E. (Manchester) | White, Sir George (Norfolk) |
| Ponsonby, Arthur A. W. H. | Seddon, J. | White, J. Dundas (Dumbartonshire) |
| Priestley, Sir W. E. B. (Bradford, E.) | Seely, Colonel | Whittaker, Rt. Hon. Sir Thomas P. |
| Radford, G. H. | Sherwell, Arthur James | Wiles, Thomas |
| Rea, Walter Russell (Scarborough) | Smyth, Thomas F. (Leitrim, S.) | Wilkie, Alexander |
| Reddy, M. | Snowden, P. | Wilson, Hon. G. G. (Hull, W.) |
| Rendall, Atheistan | Stanley, Hon. A. Lyulph (Cheshire) | Wilson, P. W. (St. Pancras, S.) |
| Richards, T. F. (Wolverhampton, W.) | Steadman, W. C. | Wilson, W. T. (Westhoughton) |
| Roberts, G. H. (Norwich) | Stewart, Halley (Greenock) | |
| Roberts, Sir J. H. (Denbighs) | Stewart-Smith, D. (Kendal) | TELLERS FOR THE NOES.—Mr. Joseph Pease and Captain Norton. |
| Robinson, S. | Strachey, Sir Edward | |
| Robson, Sir William Snowdon | Summerbell, T. |
§ Mr. CAVEI beg to move in Sub-section (2) to leave out the words "for the previous year" ["from all sources for the previous year"].
This is a very simple Amendment, arising out of the previous discussion. The effect of the Bill as it stands is that in stating your income for the purpose of the Super-tax this year you take it at last year's income, and on the average of the previous three years, so that you must go back four years in order to ascertain your income for the present year. The right hon. Gentleman said that the Government did not intend that to be the effect of the Bill, and he said that he would deal with the matter sooner or later. We have already discussed the matter, and I do not propose to repeat the arguments. I think the best way to deal with it will be to leave out the words "for the previous year."
§ Mr. LLOYD-GEORGEI am very much afraid of the leaving of these words out because the Amendment might have an effect which neither the hon. and learned Gentleman nor the Government has in view. I think the hon. and learned Gentleman agrees, at any rate, that for the purpose of this Amendment, the income must be on the basis of last year and not the current year.
§ Mr. CAVE was understood to indicate dissent.
§ Mr. LLOYD-GEORGEIt would be obviously out of order to raise the other question now. The point raised by the hon. Member is a totally different point. He was contending that it was unnecessary to insert the words "previous year," inasmuch as the income of the previous year would be the basis on which the Income Tax would be raised.
§ Mr. CAVETake the income of the present year on the average of the last three years, but I want it to be the income of the last three years, and not of the three years before last year.
§ Mr. LLOYD-GEORGEYes; but the hon. and learned Member has forgotten for a moment that Schedule D is only a very small part of the income, and that is the only part of the income to which the three years' average applies. I want to make the other schedules for the previous year, and not for the present year, for the simple reason that if you wait until the end of the current year you will never get any tax this year at all. Therefore I would like Schedules A, B, C and E for the previous year and not for the current year, as otherwise there would be no Super-tax at all to be paid the present year. That is why I cannot at this stage accept the omission of these words, because I can quite conceive that the hon. Member wants to go much further than I do. I shall be prepared, perhaps, to agree that it is desirable that the last three years should be taken in arriving at an average, but he does not agree with me that in the other schedules the income of the previous year must be taken into account. For that reason I could not at this stage agree to the omission of these words; but if he wishes to limit it to the point which he put to me we could easily find words. But I am afraid that the omission of these words would be dangerous.
§ Mr. AUSTEN CHAMBERLAINI understand the right hon. Gentleman to say that in the case of the three years' average it is to be the average of the last three years, and that he will find words to make it the last three years.
§ Mr. CAVEPerhaps I had better not press the point now as the Government wall deal with it later on.
§ Amendment, by leave, withdrawn.
§ Mr. ARTHUR A. HAWORTH (for Mr. H. Nuttall) moved in Sub-section (2), after the word "year" ["all sources for the previous year"] to insert the words "excluding any portion thereof retained or used for trade or business purposes."
§ The object of my hon. Friend's Amendment is this. The Bill discriminates between private firms and limited companies. Supposing a limited company has made a profit of £10,000, and a private firm with a similar capital has also made £10,000, and each decides only to distribute £5,000, retaining in the business £5,000 for extensions. In each case for the purpose of Income Tax they would pay exactly the same, but the individual shareholders, be they many or be they few, would only pay their Income Tax on the £5,000 distributed, and when you come to the Super-tax, in the case of the shareholders of the company, they would only pay on their part of the £5,000 contributed in the limited company; but in the case of the private firm the individual's Income Tax is to be reckoned on the whole of the £10,000. Therefore, the private firm is handicapped to this serious extent compared with the limited company. The Amendment of my right hon. Friend proposes to place private firms simply in the same position as the shareholders of any limited company would be placed in under this Bill. Unless this Amendment be made, it will be penalising private firms, and I do not thank that anybody, whatever may be the merits or demerits of limited companies, desire to penalise private firms. It does seem to me that there is an obvious, simple, and clear inequality and injustice against private firms.
§ Mr. LLOYD-GEORGEI think the Amendment a very complicated one, which may involve far-reaching consequences. It might have been put upon the Paper instead of being sprung upon us in manuscript, so that hon. Members might have had an opportunity of considering it. As far as I understand the proposal, it would simply mean that a private firm, so long as it places its profits to reserve, or sinks them in business extensions, would not pay any Super-tax at all. That is, obviously, very unfair. I do not agree with my 142 hon. Friend that private firms are at a disadvantage. As a matter of fact, when you convert these concerns into a limited liability company, as a rule probably more money is distributed in dividends than is desirable. Private firms very often sink their profits in business extensions, and frequently do not distribute one-third of their profits. In a case of that kind they would not pay any Super-tax at all. It is impossible, therefore, to accept my hon. Friend's Amendment.
§ Mr. JOYNSON-HICKSI feel bound to support the Amendment of the hon. Member for Stretford (Mr. Nuttall), who, I believe, is one of my own constituents, and I think it is the duty of a Member to support a constituent. There is more in the Amendment than the Chancellor of the Exchequer has suggested. It really is to prevent a very unfair discrimination between private firms and limited liability companies. I do not think the Chancellor of the Exchequer realises the great difference between private firms and limited liability companies. There are in Manchester a considerable number of private limited companies and private firms. A man, say, converts his business into a private limited company, and that company makes £10,000 profit. That is the profit upon which he pays Income Tax. He does not pay the whole £10,000 in dividends, but leaves £5,000 for depreciation, reserve, and so forth. He only divides £5,000, and that may all go to one person, who may be the only real shareholder in the company. Though the limited company pays its Income Tax on £10,000, the one shareholder, or the five or ten, will only pay Super-tax, not on the £10,000 profit, but on the £5,000 dividend. If the same man, instead of converting his business into a private limited company continues to run it as a private firm, he would pay his Income Tax on the £10,000 and the Super-tax, as well, on the £10,000. I do not think the Chancellor of the Exchequer has really appreciated the unfairness of the difference between the private firms and the private company. The hon. Member has moved it in a very clear speech, which demands more attention than it has received. From the point of view of revenue this would not make a very large inroad on the proceeds of the Super-tax, and it would be fair to the man who continues his business as a private firm with all the advantages to the workpeople of a private firm, rather than if the man converts 143 it into a private limited company and ceases all that close association between master and men, which happily still exists in the case of private firms. If my hon. Friend goes to a division I shall support him very strongly as a protest against the way in which the Chancellor of the Exchequer has treated this, emanating as it does from a large body of commercial men in Manchester.
§ Mr. MARKHAMI hope the Chancellor of the Exchequer will really reconsider this. I am the owner of two collieries with which, unfortunately, I am bound to trade as a private owner, because the landlord having had security from my grandfather has always refused to accept the security of a limited company, thinking he had better security from individuals. Assuming that the profits of these two collieries are £1,000 per year each—I see that the Chancellor smiles—but as a matter of fact one has not paid a dividend for twenty years. My grandfather (who was a Member of this House) took one of those collieries for purposes of his constituency; that is sixty years ago. At all events, so far as that colliery is concerned, it has not paid a dividend for sixty years. The effect of this Amendment is that all private owners trading as private companies are to be penalised, whereas the moment an owner turns his concern into a limited liability company he escapes the tax. What will happen in my case if this Amendment is rejected? I shall immediately form a company, under some such name as the "Catch Me if You Can Company," and then I shall be exempt. If a man who has a private business is a Member of this House he is disqualified from taking a Government contract, but that restriction is removed the moment he turns his business into a limited company.
To place these disqualifications upon private firms and private owners is unfair, and is, in a way, giving a bonus to large limited companies and trusts. The whole tendency of these large concerns is to divide employers and workmen. The shareholders in large limited liability companies never come into contact with their workmen, whereas a private owner is in daily touch with his employés. Why should he be penalised? In my own case, why should I be penalised because my landlords want my security for their leases in preference to that of a limited company? So far as the justice of this tax is concerned, I 144 can meet it by turning my concern into a limited company. The landlords are the Ecclesiastical Commissioners, the largest landlords in the country. I fail to understand the argument of the Chancellor of the Exchequer. He said that a private company might put half its profits to reserve. Why should it not? Some limited companies do not divide 10 per cent. of their profits; others divide too much. The Chancellor of the Exchequer surely wants to encourage commerce. ["No."] I believe that this is his object, and it is proved by all the concessions he has made. It is to the benefit of trade and of employment that employers should put as much money as they possibly can into their concerns, and thereby find more employment for their workmen. If an employer makes £10,000 out of his concern, and puts £5,000 to reserve, employing more labour by so doing, he ought surely not to be prejudiced or put in a worse position than the man who divides the whole £10,000 in the way of dividends. I hope the Chancellor of the Exchequer will see his way to meet this Amendment; otherwise he will put me to the expenditure of a few shillings in going to a lawyer and forming a limited company to get over the difficulty.
§ 12.0 P.M.
§ Mr. HAWORTHI am sorry the Chancellor of the Exchequer feels he has not had full notice of this Amendment. It is only fair to say that there was on Friday on this very point a deputation which I understand was exceedingly favourably received. I believe also that my hon. Friend (Mr. Nuttall) wrote to the right hon. Gentlemen. It is not quite fair to assume that private firms would evade the Super-tax in this way. Because there are perfectly genuine firms holding large quantities and machinery, and that machinery has to be renewed just as much as that of a limited company has. It is a fact that at the present moment limited company shareholders do not become liable for Super-tax on amounts not distributed, whereas a member of a private trading concern does become liable for all amounts, whether he has actually received them or they are left in the business. That is a perfectly clear issue. If the Chancellor of the Exchequer does not see his way to make a statement on the subject at the present time, I trust that he will give us some hope that the favourable reception of the deputation on Friday afternoon on this point will tend to some statement on a future occasion.
§ Mr. AUSTEN CHAMBERLAINThe right hon. Gentleman the Chancellor of the Exchequer said that this Amendment struck at our whole Income Tax system. For the purpose of the ordinary Income Tax the private trader and the limited liability companies were treated alike. They are charged Income Tax on their profits, whether they are divided or undivided. In the case of the Super-tax the Chancellor has created a distinction between the two classes. I am sure there is no equity in the distinction. Their position is the same in the long run; the Treasury has nothing to lose by recognising the position. If they will treat the private manufacturer or trader in the same way as the limited liability company, if he puts a fair or large proportion of his profits to reserve, and probably therefore into his business, the Government will get their tax when he thinks it wise to divide his profits. The Chancellor of the Exchequer is wrong in saying that the Amendment—really moved from the other side of the House—would strike at the root of the Income Tax system, or introduce any anomaly into it. I hope the hon. Member will go to a Division, and if he does I shall certainly vote with him.
§ Mr. EBENEZER PARKESI think the reply of the Chancellor of the Exchequer on this Amendment shows he does not fully appreciate the point made, and I sincerely hope he will give the Amendment further consideration. It is well known that many great private concerns of this country still carry on their business, and I do not see why anyone should try to discourage the existence of private enterprise. No doubt some of these are in certain respects limited liability companies, and if a tax like this is insisted on it will simply result in private firms turning themselves into limited companies. I quite sympathise with the Chancellor when he says he has not had sufficient notice of this Amendment. Therefore, I appeal to the right hon. Gentleman to defer it to some future stage of the Bill, and I think when the right hon. Gentleman does look into it he will appreciate the justice of the matter.
§ Mr. HARMOOD-BANNERIt must have been a principle of the Super-tax, based upon this Clause, that it would give an enormous preference to limited liability companies as against private traders. The effect of it is absolutely plain. Those who know the case of the limited liability 146 companies know that this is the first step towards supporting the principle of allowance for wasting assets, because it creates this position, that immediately the company makes up its balance sheets—and I do not agree with the Chancellor that that is done in a careless manner; it is done by most of the limited companies with the greatest care—they make their calculations of profits based upon proper provision for wasting assets and for the necessary reserves of business, and they divide the remainder. That is why you so frequently see profits amounting to £60,000 or £70,000, and merely a sum of £35,000 distributed. The remainder has been put to wasting assets. The sum of £35,000 is the sum upon which the Super-tax will have to be paid, and nothing will have to be paid on the other sum put to wasting assets. A private individual under the old system would make no provision for wasting assets. The profit of £70,000 would be divided between the partners, be they many or few. The whole of the £70,000 will have to pay Super-tax. That is so plain upon the face of the Bill that it is astonishing to me that neither the draftsman nor the Chancellor considered it.
I should like to join my hon. Friend in appealing to the Chancellor of the Exchequer that he will not come to a decision upon the point until he has further considered it. It is a matter of immense importance. Of course, it can be avoided if every business will turn itself into a limited liability company, and only pay dividends out of certain sums, but surely it is not the desire of the Government to crush private enterprise by imposing disabilities on it which it does not impose upon limited liability companies. It is perfectly true that it brings to the front the question of providing for wasting assets. It creates this frightful distinction between a limited company and a private individual. It is a great injustice, and I hope the Chancellor of the Exchequer, who throughout these proceedings has desired to deal properly and fairly with the trader, will take this matter into consideration and ascertain whether he can form a basis upon which to establish a fair arrangement between the two. I do not say the terms of this Amendment are exactly what I should like to accept, but the principle of it is right, and we shall be committing a gross injustice on private individuals if we pass 147 the Clause in its present shape. The difficulties in dealing with this Clause has been immense, because very often we had to put down our Amendments in the form of new clauses. The rulings of the Chair have also swept away a great many of the points which ought to have been raised in the course of these Debates. For these reasons I appeal to the Chancellor of the Exchequer to take this question into consideration and not give a decided negative to this Amendment now.
§ Mr. LYTTELTONI thought there would have been some response from the Treasury Bench to the appeals which have been made from both sides of the House. There is the case of the colliery company with one more year's coal in the colliery. It has been decided that the £5,000 which has been produced from the colliery in the previous year shall be taken to be the profits and the Income Tax to be paid on that amount, although any prudent manager would set aside a large sum to meet the wasting assets. I think it is a distinct disadvantage in this case if you take the prudent management of a colliery into consideration. Surely, it is still more unbusinesslike to place a heavy additional burden upon an individual firm, carrying on a business as distinct from a company. I cannot see that any attempt has been made to answer the argument put forward. I agree with my hon. Friend behind me, that, speaking broadly, it is desirable to keep as many private firms in close relation with their employés as possible, and if that be so, why should private firms be penalised to such a very heavy extent as regards the Super-tax as compared with a limited company. I am afraid I cannot enforce the argument any further than it has been already made with absolute clearness, but I think we are entitled to some answer. The Chancellor says he has given an answer, but I must point out that the whole basis of his answer was an appeal ad misericordiam, because it was a manuscript Amendment and took him by surprise, whereas, as a matter of fact, correspondence had taken place.
§ Mr. LLOYD-GEORGEThe right hon. Gentleman cannot possibly have listened to what I said. That was the first observation I made. I went on afterwards with what I considered to be a good answer. After all, a private firm could easily get out of the Super-tax by paying part of its profits to reserve. That may or may not 148 be a sufficient answer, but I have at any rate given it.
§ Mr. HARMOOD-BANNERA private firm might do it; but, as a matter of fact, the Income-tax Commissioners would not let them.
§ Mr. MARKHAMI quite see the point of the right hon. Gentleman that an individual might try to escape the tax by putting to reserve; but is he aware that a private company is treated for the purpose of the Income Tax qua company. In collieries each company is taken on the five years' average and treated qua collieries. It would therefore be impossible for these evasions to take place. I hope the Chancellor will consider the point before the Report stage.
§ Mr. LLOYD-GEORGEThere are two ways of considering it. One is to consider it from the point of view of the private owner, and the other is to consider it from the point of view of the revenue. I have absolutely no doubt at all on the question whether the private firm ought to escape. With regard to the other case put by the hon. Member, it may be argued whether we ought to amend the position, and that I quite agree to consider.
§ Mr. AUSTEN CHAMBERLAINThe Chancellor makes suggestions in a light-hearted way which forces comment from me. If he has said anything, it is that this is a tax upon individuals whose incomes rose above £5,000. If he stands by that, how is he going to apply this to a limited liability company? What is placed to the reserve of a company is not the income of an individual. It may be, the property of the shareholders as a whole. The Chancellor cannot, in my opinion, do what he has just promised to consider. If he did, he would turn this tax inside out and propose a new tax. The discussion will take long enough if he sticks to the taxes as they are. For Heaven's sake do not let him withdraw this and introduce another tax even more objectionable!
§ Mr. ROBERT DUNCANI think a certain amount should be permitted to be placed to reserve for extensions. Otherwise, you remove what makes for the stability of a business and the productive interests of the country.
§ Question put, "That those words be there inserted."
§ The Committee divided: Ayes, 82; Noes, 151.
151| Division No. 687.] | AYES. | [12.22 a.m. |
| Acland-Hood, M. Hon. Sir Alex. F. | Duncan, Robert (Lanark, Govan) | Markham, Arthur Basil |
| Anson, Sir William Reynell | Faber, George Denison (York) | Mason, James F. (Windsor) |
| Arkwright, John Stanhope | Faber, Captain W. V. (Hants, W.) | Meysey-Thompson, E. C. |
| Balcarres, Lord | Fell, Arthur | Oddy, John James |
| Baldwin, Stanley | Forster, Henry William | Parkes, Ebenezer |
| Banbury, Sir Frederick George | Foster, P. S. | Pease, Herbert Pike (Darlington) |
| Banner, John S. Harmood- | Fullerton, Hugh | Randles, Sir John Scurrah |
| Baring, Capt. Hon. G. (Winchester) | Gooch, Henry Cubitt (Peckham) | Ratcliff, Major R. F. |
| Beach, Hon. Michael Hugh Hicks | Gordon, J. | Remnant, James Farquharson |
| Beckett, Hon. Gervase | Gretton, John | Renton, Leslie |
| Bridgeman, W. Clive | Guinness, Hon. W. E. (B. S. Edmunds) | Renwick, George |
| Bright, J. A. | Hardy, Laurence (Kent, Ashford) | Ridsdale, E. A. |
| Brotherton, Edward Allen | Harris, Frederick Leverton | Roberts, S. (Sheffield, Ecclesall) |
| Burdett-Coutts, W. | Harrison-Broadley, H. B. | Ronaldshay, Earl of |
| Carlile, E. Hildred | Hay, Hon. Claude George | Rutherford, John (Lancashire) |
| Carson, Rt. Hon. Sir Edward H. | Helmsley, Viscount | Rutherford, Watson (Liverpool) |
| Cave, George | Hill, Sir Clement | Sheffield, Sir Berkeley George D. |
| Cecil, Evelyn (Aston Manor) | Hope, James Fitzalan (Sheffield) | Smith, Abel H. (Hertford, E.) |
| Chamberlain, Rt. Hon. J. A. (Worc'r) | Hunt, Rowland | Smith, Hon. W. F. D. (Strand) |
| Clive, Percy Archer | Kerry, Earl of | Stanier, Beville |
| Clyde, J. Avon | Keswick, William | Starkey, John R. |
| Coates, Major E. F. (Lewisham) | King, Alfred John (Knutsford) | Walker, Col. W. H. (Lancashire) |
| Corbett, C. H. (Sussex, E. Grinstead) | King, Sir Henry Seymour (Hull) | Warde, Col. C. E. (Kent, Mid) |
| Courthope, G. Loyd | Lambton, Hon. Frederick William | Wilson, A. Stanley (York, E. R.) |
| Craig, Captain James (Down, E.) | Lane-Fox, G. R. | |
| Craik, Sir Henry | Lockwood, Rt. Hon. Lt.-Col. A. R. | |
| Dickson, Rt. Hon. C. Scott | Long, Col. Charles W. (Evesham) | TELLERS FOR THE AYES.—Mr. Haworth and Mr. Joynson-Hicks. |
| Doughty, Sir George | Lyttelton, Rt. Hon. Alfred | |
| Douglas, Rt. Hon. A. Akers | M'Calmont, Colonel James |
| NOES. | ||
| Adkins, W. Ryland D. | Edwards, Clement (Denbigh) | M'Laren, Sir C. B. (Leicester) |
| Agar-Robartes, Hon. T. C. R. | Edwards, Sir Francis (Radnor) | M'Laren, H. D. (Stafford, W.) |
| Agnew, George William | Erskine, David C. | Massie, J. |
| Allen, A. Acland (Christchurch) | Essex, R. W. | Masterman, C. F. G. |
| Allen, Charles P. (Stroud) | Evans, Sir S. T. | Mond, A. |
| Ashton, Thomas Gair | Everett, R. Lacey | Montgomery, H. G. |
| Balfour, Robert (Lanark) | Falconer, J. | Morgan, J. Lloyd (Carmarthen) |
| Baring, Godfrey (Isle of Wight) | Fiennes, Hon. Eustace | Morrell, Philip |
| Barker, Sir John | Findlay, Alexander | Myer, Horatio |
| Barran, Rowland Hirst | Fuller, John Michael F. | Nicholson, Charles N. (Doncaster) |
| Barry, Redmond J. (Tyrone, N.) | Gladstone, Rt. Hon. Herbert John | Norman, Sir Henry |
| Beaumont, Hon. Hubert | Glover, Thomas | Partington, Oswald |
| Beck, A. Cecil | Gooch, George Peabody (Bath) | Pickersgill, Edward Hare |
| Bern, W. (Tower Hamlets, St. Geo.) | Grey, Rt. Hon. Sir Edward | Pollard, Dr. G. H. |
| Bennett, E. N. | Guest, Hon. Ivor Churchill | Ponsonby, Arthur A. W. H. |
| Berridge, T. H. D. | Gulland, John W. | Priestley, Sir W. E. B. (Bradford, E.) |
| Black, Arthur W. | Harcourt, Rt. Hon. L. (Rossendale) | Radford, G. H. |
| Boulton, A. C. F. | Harcourt, Robert V. (Montrose) | Rea, Walter Russell (Scarborough) |
| Bowerman, C. W. | Harmsworth, Cecil B. (Worcester) | Rendall, Atheistan |
| Bramsdon, Sir T. A. | Harmsworth, R. L. (Caithness-shire) | Richards, T. F. (Wolverhampton, W.) |
| Brunner, J. F. L. (Lancs., Leigh) | Hedges, A. Paget | Roberts, G. H. (Norwich) |
| Buxton, Rt. Hon. Sydney Charles | Helme, Norval Watson | Roberts, Sir J. H. (Denbighs) |
| Byles, William Pollard | Hemmerde, Edward George | Robinson, S. |
| Carr-Gomm, H. W. | Henry, Charles S. | Robson, Sir William Snowdon |
| Causton, Rt. Hon. Richard Knight | Herbert, Col. Sir Ivor (Mon. S.) | Roch, Walter F. (Pembroke) |
| Cawley, Sir Frederick | Higham, John Sharp | Roe, Sir Thomas |
| Channing, Sir Francis Allston | Hobhouse, Rt. Hon. Charles E. H. | Rogers, F. E. (Newman) |
| Cherry, Rt. Hon. R. R. | Holland, Sir William Henry | Rowlands, J. |
| Cleland, J. W. | Horniman, Emslie John | Russell, Rt. Hon. T. W. |
| Clough, William | Howard, Hon. Geoffrey | Rutherford, V. H. (Brentford) |
| Clynes, J. R. | Isaacs, Rufus Daniel | Samuel, Rt. Hon. H. L. (Cleveland) |
| Cobbold, Felix Thornley | Jardine, Sir J. | Samuel, S. M. (Whitechapel) |
| Collins, Stephen (Lambeth) | Johnson, John (Gateshead) | Scarisbrick, Sir T. T. L. |
| Collins, Sir Win. J. (St. Pancras, W.) | Jones, William (Carnarvonshire) | Schwann, C. Duncan (Hyde) |
| Cooper, G. J. | Keating, M. | Schwann, Sir C. E. (Manchester) |
| Cory, Sir Clifford John | Laidlaw, Robert | Seddon, J. |
| Cotton, Sir H. J. S. | Lambert, George | Seely, Colonel |
| Cox, Harold | Lamont, Norman | Simon, John Allsebrook |
| Craig, Herbert J. (Tynemouth) | Layland-Barratt, Sir Francis | Smyth, Thomas F. (Leitrim, S.) |
| Crosfield, A. H. | Lehmann, R. C. | Stanley, Hon. A. Lyulph (Cheshire) |
| Crossley, William J. | Lever, A. Levy (Essex, Harwich) | Stewart-Smith, D. (Kendal) |
| Davies, Timothy (Fulham) | Levy, Sir Maurice | Summerbell, T. |
| Dewar, Arthur (Edinurgh, S.) | Lloyd-George, Rt. Hon. David | Tennant, Sir Edward (Salisbury) |
| Dilke, Rt. Hon. Sir Charles | Lough, Rt. Hon. Thomas | Thomasson, Franklin |
| Duncan, J. Hastings (York, Otley) | Lupton, Arnold | Thompson, J. W. H. (Somerset, E.) |
| Dunn, A. Edward (Camborne) | Maclean, Donald | Tomkinson, James |
| Dunne, Major E. Martin (Walsall) | MacVeigh, Charles (Donegal, E.) | Toulmin, George |
| Trevelyan, Charles Philips | White, J. Dundas (Dumbartonshire) | Wilson, W. T. (Westhoughton) |
| Villiers, Ernest Amherst | Wiles, Thomas | |
| Wason, Rt. Hon. E. (Clackmannan) | Wilkie, Alexander | TELLERS FOR THE NOES.—Mr. Joseph Pease and Captain Norton. |
| Wason, John Cathcart (Orkney) | Wilson, Hon. G. G. (Hull, W.) | |
| White, Sir George (Norfolk) |
§ Mr. HOBHOUSE moved, in Sub-section (1), to leave out the words "and a sum for the expenses of management not exceeding 5 per cent. of the annual value of the land," and to insert instead thereof the words, "or on which duty has been repaid under the provisions of this Act relating to the repayment of duty in respect of the cost of maintenance repairs, insurance and management."
§ The preceding words cover the one-eighth abatement which is allowed under the Finance Act, 1894. The words I have read out will cover the other one-eighth which is being given by the new Clause.
§ Mr. AUSTEN CHAMBERLAINThe Government propose to strike out the words alluding to the 5 per cent. for management. How then does the deduction come in at all?
§ Mr. LLOYD-GEORGEIt comes in under the new Clause, which will enable a deduction of 25 per cent. to be made, which includes management. A much larger deduction will be made in the new Clause, not merely from Income Tax but from Super-tax.
§ Mr. CAVEMay not an estate which cannot claim 25 per cent. lose some allowance by striking out these words?
§ Mr. LLOYD-GEORGEI cannot conceive any estate which could not, at any rate, claim an addition to the 12½ per cent. which is made at the present moment. Supposing there was an estate which could only claim 18 per cent. including management, it could claim it under the new deduction which I propose.
§ Amendment agreed to.
§ Further Amendment made: In Sub-section (2) after the word "and" ["and also in the case"] to insert the words "the estimated total income there shall be deducted, and the amount of any fee in respect of which relief from Income Tax may be allowed under Section 54 of the Income Tax Act, 1853, as extended by any subsequent enactment and."—[Mr Hobhouse.]
§ Mr. HICKS BEACHI beg to move in Sub-section (2) to leave out the word "abroad."
152 I suppose the intention of the Subsection is to grant an allowance to officers of the Crown serving abroad. I presume that under this head will be included persons like Ambassadors, Ministers, and General Officers. I think there are various other officers of the Crown whose duties keep them at home, and who are as much entitled to have this allowance made to them as those who are serving abroad. I agree that officers of the Crown serving abroad have to spend a large amount of their income in keeping up the proper status of their offices, but in that matter I do not think there is much distinction between the case of the General in command say at Malta and to an Admiral stationed at Chatham. I may be told that by leaving out the word "abroad" the allowance provided for in the Clause would include Cabinet Ministers. I would not object under the circumstances to the allowance being made to Cabinet Ministers. I do think that General Officers, Admirals, and Judges serving at home are just as much entitled to have this allowance for the proper maintenance of their offices as some of the gentlemen who are serving abroad.
§ Mr. LLOYD-GEORGEI think the hon. Member will see that it is impossible to exempt Cabinet Ministers. The object of the Sub-section is rather to protect Ministers who are serving the Crown abroad, and who have to undertake expenditure in entertaining and other matters incidental to the positions they hold. In charging Super-tax to them I think it is right that this allowance should be made to cover the expenses incidental to the discharge of the functions of office. I think they have a very strong case for the allowance, but I do not think we ought to protect those at home who have to incur expenditure of a similar character. I think the general feeling is that they are not in quite the same position as Ambassadors abroad, who are compelled by the exigencies of their offices to undertake this expenditure. Nominally the money is paid to them by way of salary, but it is really intended that it should be spent in incidental expenses.
§ Mr. HICKS BEACHSurely the right hon. Gentleman will see that General Officers at home have to incur large expenditure in entertaining in the same way as Ambassadors abroad.
§ Mr. LLOYD-GEORGEI do not think their salaries will come under the Super-tax.
§ Mr. HICKS BEACHTheir salaries taken with other sources of income will, I think, come under the Super-tax. When a very large portion of the salary is devoted not to his own personal comfort but to entertaining, some allowance should be made.
§ Question, "That the word proposed to be left out stand part of the Clause," put, and agreed to.
§ Amendment made: To add at the end of the Clause the words "and for which an allowance has not already been made."
§ Mr. SAMUEL ROBERTS moved to add at the end of the Clause the words, "For the purposes of the Super-tax, if within or within twelve months after the year of assessment any person charged to the Super-tax, whether he shall have computed his profits or gains on the amount thereof in the preceding year or on an average of years, shall find and prove to the Special Commissioners that his profits and gains during the year for which the computation was made fell short of the sum so computed, the said Commissioners shall cause the assessment made for such year to be amended and reduced to the amount of the actual profits and gains made during the year for which the computation was made, and in case tax shall have been paid on the sum assessed, the sum overpaid shall be repaid by the Commissioners of Inland Revenue, and in case the amount of the actual profits and gains made during the year for which the computation was made does not exceed £5,000 then no Super-tax shall be payable, and all Super-tax (if any) which has already been paid in respect of such year shall be repaid by the Commissioners of Inland Revenue."
§ The 133rd Section of the Act of 1842, which was repealed by the present Government with regard to ordinary Income Tax in the year 1907, was a most useful section. It provided that where an Income Tax-payer in any year found that his profits did not amount to the assessment for which he was assessed, either on the average of the three years or in the preceding year, he might apply to the Commissioners, and if they were satisfied of the correctness of his statement they might reduce the assessment or order the repayment of the amount overpaid. In assessing this Super-tax, if you have no 154 such provision, and a man happens to have a reduction in his profits, you will make him pay a Super-tax on an income which he did not receive, and which was calculated on the three preceding good fat years. As an Income Tax Commissioner I had experience of this, and when people complained that they were assessed on incomes which they had not received our answer always was, "You can apply under the 133rd Section to get a return," and they were generally satisfied. All I ask now is to revive the powers of the 133rd Section of the Act of 1842.
§ Mr. SYDNEY BUXTONWhat the hon. Member proposes is that the taxpayer, in the event of one year of the average of three falling below the £5,000, he should be able to take that year separately instead of having it assessed on the three years' basis. I do not think it would be fair that the taxpayer should have that additional advantage, and that the State should not have the additional advantage the other way. The object of the three years' average is that the taxpayer should pay on the whole, and during that period he pays as much taxation as he would otherwise have paid if each year had been taken separately. It seems very unjust from the point of view of the State that the individual should be allowed when it suited his purpose to take the three years, but when it was to his disadvantage to take a single year. The 133rd Section was fully discussed in 1907, and the House as a whole entirely agreed with the position taken up by the Government that this Section was unfair to the Exchequer and ought to be repealed. I do not think that the hon. Member has shown any reason why the Section should be revived for the purpose of the Super-tax.
§ Sir F. BANBURYFor sixty-five years this injustice was perpetrated, and no Chancellor of the Exchequer and no person ever complained that an injustice had been done. It was not until 1907, or sixty-five years after this Section was first introduced, that the present Prime Minister came down and repealed it.
§ Mr. LLOYD-GEORGEIt was agreed to without a division.
§ Sir F. BANBURYI strongly protested against it, and I cannot tell why it was not divided upon. I presume I must have been out of the House at the time. I remember that one of the Prime Minister's arguments was that the three years' average righted itself in the long run, and that though there might be an injustice 155 done in one year, yet in all probability, if the business continued, the following two years would right the injustice done before. I put to him the case of a business gradually decaying, and which could not have the good years which would enable it to right itself. The Chancellor then said he practically admitted he could not answer that point, that the question of a failing business was an injustice. Of course he could not meet it, because the only way was to re-enact Section 133. This will cause another injustice, quite apart from the three years' average system, where an income which is derived from investments gave a larger yield last year than it is giving now. The Chancellor of the Exchequer never gave me an answer to that point at all. I asked him what would happen if a person had given away to his son or daughter in a perfectly legitimate way a considerable sum of money last year, reducing his income for this year. I asked him whether he would not be charged on the income of last year, while there might be a reduction in dividend this year over the dividend of last year, but to neither of these questions did he give any answer.
The only way out of the difficulty is to re-enact the provision my hon. Friend wishes to re-enact, so that where a man
§ finds his income is not £5,000 he shall not be charged Super-tax. Does the right hon. Gentleman desire to charge a man on what he has not received? I do not believe even hon. Members below the Gangway would wish to do so. Therefore, unless the right hon. Gentleman accepts this Amendment two things will result. In a failing business injustice will occur, and in the cases such as I have mentioned, where income has decreased, he will be unjustly charged on income he has not received. I believe the only reason why the Chancellor of the Exchequer in 1907 repealed Section 133 was because people were beginning to understand it and take advantage of it. The Inland Revenue was rather afraid. A good deal of revenue would be lost, and therefore the Section was repealed. I fail to see why a Section which for sixty-five years was considered just should now be considered unjust, and at a time when we are largely increasing the Income Tax. Under those circumstances the least that ought to be done is to ensure that people shall only be charged on the incomes they actually receive.
§ Question put, "That those words be there added."
§ The Committee divided: Ayes, 55; Noes, 126.
157| Division No. 688.] | AYES. | [12.55 a.m. |
| Acland-Hood, Rt. Hon. Sir Alex. F. | Craik, Sir Henry | M'Calmont, Colonel James |
| Anson, Sir William Reynell | Dickson, Rt. Hon. Charles Scott | Mason, James F. (Windsor) |
| Arkwight, John Stanhope | Doughty, Sir George | Oddy, John James |
| Balcarres, Lord | Douglas, Rt. Hon. A. Akers- | Parties, Ebenezer |
| Baldwin, Stanley | Duncan, Robert (Lanark, Govan) | Ratcliffe, Major R. F. |
| Banner, John S. Harmood | Fell, Arthur | Remnant, James Farquharson |
| Baring, Capt. Hon. G. (Winchester) | Foster, Philip S. (Warwick, S.W.) | Renwick, George |
| Beach, Hon. Michael Hugh Hicks | Gordon, J. | Ronaldshay, Earl of |
| Beckett, Hon. Gervase | Guinness, Hon. W. E. (Bury St. Edm.) | Rutherford, Watson (Liverpool) |
| Bowerman, C. W. | Hardy, Laurence (Kent, Ashford) | Stanler, Bevilie |
| Bridgeman, W. Clive | Harrison-Broad Icy, H. B. | Starkey, John R. |
| Brotherton, Edward Allen | Hay, Hon. Claude George | Walker, Col. W. H. (Lancashire) |
| Carlile, E. Hildred | Helmsley, Viscount | Warde, Col. C. E. (Kent, Mid) |
| Cave, George | Hill, Sir Clement | Wilson, A. Stanley (York, E. R.) |
| Cecil, Evelyn (Aston Manor) | Hunt, Rowland | Younger, George |
| Clive, Percy Archer | Kerry, Earl of | |
| Clyde, James Avon | King, Sir Henry Seymour (Hull) | TELLERS FOR THE AYES.—Mr. Samuel Roberts and Sir Frederick Banbury. |
| Coates, Major E. F. (Lewisham) | Lamont, Norman | |
| Courthope, G. Loyd | Lockwood, Rt. Hon. Lt.-Col. A. R. | |
| Craig, Captain James (Down, E.) | Long, Col. Charles W. (Evesham) | |
| NOES. | ||
| Agar-Robartes, Hon. T. C. R. | Berridge, T. H. D. | Clynes, J. R. |
| Agnew, George William | Black, Arthur W. | Cobbold, Felix Thornley |
| Allen, A. Acland (Christchurch) | Boulton, A. C. F. | Collins, Stephen (Lambeth) |
| Allen, Charles P. (Stroud) | Bramsdon, Sir Thomas A. | Collins, Sir Wm. J. (St. Pancras, W.) |
| Ashton, Thomas Gair | Brunner, J. F. L. (Lancs., Leigh) | Cooper, G. J. |
| Balfour, Robert (Lanark) | Buxton, Rt. Hon. Sydney Charles | Corbett, C. H. (Sussex, E. Grinstead) |
| Baring, Godfrey (Isle of Wight) | Carr-Gomm, H. W. | Cotton, Sir H. J. S. |
| Barran, Rowland Hirst (Leeds, N.) | Causton, Rt. Hon. Richard Knight | Craig, Herbert J. (Tynemouth) |
| Barry, Redmond J. (Tyrone, N.) | Cawley, Sir Frederick | Crosfield, A. H. |
| Beaumont, Hon. Hubert | Channing, Sir Francis Allston | Crossley, William J. |
| Beck, A. Cecil | Cherry, Rt. Hon. R. R. | Dewar, Arthur (Edinburgh, S.) |
| Benn, W. (Tower Hamlets, St. Geo.) | Cleland, J. W. | Dilke, Rt. Hon. Sir Charles |
| Bennett, E. N. | Clough, William | Duncan, J. H. (York, Otley) |
| Dunn, A. Edward (Camborne) | Jardine, Sir J. | Robinson, S. |
| Dunne, Major E. Martin (Walsall) | Johnson, John (Gateshead) | Robson, Sir William Snowdon |
| Edwards, Clement (Denbigh) | Jones, William (Carnarvonshire) | Rogers, F. E. Newman |
| Edwards, Sir Francis (Radnor) | King, Alfred John (Knutsford) | Russell, Rt. Hon. T. W. |
| Erskine, David C. | Laidlaw, Robert | Samuel, Rt. Hon. H. L. (Cleveland) |
| Essex, R. W. | Lambert, George | Samuel, S. M. (Whitechapel) |
| Evans, Sir Samuel T. | Layland-Barratt, Sir Francis | Scarisbrick, Sir T. T. L. |
| Everett, R. Lacey | Lehmann, R. C. | Seddon, J. |
| Falconer, James | Lever, A. Levy (Essex, Harwich) | Seely, Colonel |
| Fiennes, Hon. Eustace | Levy, Sir Maurice | Simon, John Allsebrook |
| Fuller, John Michael F. | Lough, Rt. Hon. Thomas | Smyth, Thomas F. (Leitrim, S.) |
| Fullerton, Hugh | Lupton, Arnold | Stanley, Hon. A. Lyulph (Chesh.) |
| Gladstone, Rt. Hon. Herbert John | MacVeagh, Jeremiah (Down, S.) | Stewart-Smith, D. (Kendal) |
| Glover, Thomas | M'Laren, H. D. (Stafford, W.) | Summerbell, T. |
| Gooch, George Peabody (Bath) | Markham, Arthur Basil | Thomasson, Franklin |
| Guest, Hon. Ivor Churchill | Massle, J. | Thompson, J. W. H. (Somerset, E.) |
| Gulland, John W. | Mond, A. | Tomkinson, James |
| Harcourt, Rt. Hon. L. (Rossendale) | Montgomery, H. G. | Toulmin, George |
| Harcourt, Robert V. (Montrose) | Morrell, Philip | Trevelyan, Charles Philips |
| Harmsworth, Cecil B. (Worcester) | Partington, Oswald | Villiers, Ernest Amherst |
| Harmsworth, R. L. (Caithness-shire) | Pickersgill, Edward Hare | Wason, Rt. Hon. E. (Clackmannan) |
| Haworth, Arthur A. | Pollard, Dr. | Wason, John Cathcart (Orkney) |
| Hedges, A. Paget | Ponsonby, Arthur A. W. H. | White, J. Dundas (Dumbartonshire) |
| Helme, Norval Watson | Priestley, Sir W. E. B. (Bradford, E.) | Wiles, Thomas |
| Henry, Charles S. | Radford, G. H. | Wilkie, Alexander |
| Herbert, Col. Sir Ivor (Mon., S.) | Rea, Walter Russell (Scarborough) | Wilson, Hon. G. G. (Hull, W.) |
| Higham, John Sharp | Rendall, Atheistan | Wilson, W. T. (Westhoughton) |
| Hobhouse, Rt. Hon. Charles E. H. | Richards, T. F. (Wolverhampton) | |
| Horniman, Emslie John | Roberts, G. H. (Norwich) | TELLERS FOR THE NOES.—Mr. Joseph Pease and Captain Norton. |
| Howard, Hon. Geoffrey | Roberts, Sir J. H. (Denbighs.) |
§ 1.0 A.M.
§ Mr. HARMOOD-BANNER moved to insert at the end of the Clause a new Sub-section: "(3) For the purposes of the Super-tax, in addition to the deductions authorised by the preceding Sub-section, the following deductions shall be permitted—Where the income is derived from capital which has been invested in leasehold property, mines, or other wasting subject matter, there shall be allowed as a deduction (under whatever schedule the said income may be assessed), such a sum as fairly represents the loss or destruction of capital during the year of assessment incident to the wasting nature of the subject matter in which the said capital is invested."
§
I should like to refer to a speech of the Chancellor of the Exchequer in which he said:
As the Prime Minister so well pointed out two years ago, inequalities which cannot be tolerated in a tax designed for the purpose of meeting a temporary emergency are intolerable in a permanent part of our fiscal machinery.
§ I venture to think that this question of wasting assets under this Super-tax, which is to be permanent, is an intolerable burden. It is quite true that the discussion to some extent touched upon this subject when we were dealing with the deductions from the profits of private companies, and therefore I do not propose to amplify the matter to any great extent. I feel, however, that it is important to raise this point of wasting assets, inasmuch as it was mentioned earlier in the Debate on the ordinary Income Tax, and my right hon. Friend the Member 158 for East Worcestershire (Mr. A. Chamberlain) then spoke of the subject as one upon which it would be desirable to have a discussion later on. The question of wasting assets as regards Income Tax has been decided so far against the ordinary Income Tax payer. On what grounds of equity or principle that decision was taken I really cannot understand, because a man's gains or profits represent the amount which he requires over and above his original capital owing to his entering upon trade. It is absolutely essential that he should bring into account the stock of money he has at the commencement of his enterprise and the stock of money he has at the termination of his enterprise.
§ So far as the Income Tax for ordinary purposes is concerned, the Government has not accepted that principle, although I am glad to see we are coming near it, and that in connection with the Super-tax it has been allowed in the difference between private individuals and companies. It is a matter of prime importance for an individual, in the first place, in order to put himself on an equality with limited companies; and, secondly, as an ordinary point of fairness, that you should take into account the wasted assets. You have only to look at the report of the Departmental Committee on Income Tax to find that the question is raised by Sir Henry Primrose and others to a great extent. In none of their reports is there any objection to this principle, except that the Income Tax is not a question of gains and profits but of income to be dealt with in a different 159 way—a distinction I am unable to comprehend. Wasted capital represents all the capital which is put into a business in the shape of the erection of buildings. It represents money put into business in order to start a patent; money which is paid for a leasehold property without a short or long term to run; and it also represents the amount of money paid for guano or phosphorous works abroad, and even for mines in this country of every sort and description—those amounts which are capital having been taken out of the ground and then wasted. They represent a loss to the owner; the difference between what a man has at the commencement and the amount he has at the end of his venture. I ask the Chancellor of the Exchequer to take this into very serious consideration and to accept this Amendment so far as the Super-tax is concerned. It does not affect the principle of limited companies, but it does affect the question of the individuals who are trading on the same basis as limited companies, and who are, as prudent men, equally entitled to make provision for wasting assets in order to protect their property by replacing that which goes out of existence. For instance, a lease has 14 years to run. It becomes 10 years, the 10 years becomes 5, and the 5 lapses into nothing. What is the position of a man who, having paid £5,000 for a leasehold, at the end of the term has nothing whatever to represent the value he originally paid for? That is only one illustration, but it represents the enormous transactions which are going on every day in regard to investment in wasting property. For the purposes of this Super-tax I would even appeal to the Labour Members to consider it as a fair point as between man and man in calculating profits.
§ Mr. HOBHOUSEThe hon. Gentleman has brought this matter to the notice of the Committee in a most reasonable and moderate speech. He quite truly said that it raises a very important question of principle, but I do not suppose he will imagine that at this stage the Government can possibly take into favourable consideration the Amendment which he has put upon the Paper. If the question of wasting capital were introduced in connection with the Super-tax it would be quite impossible not to take it into consideration in the matter of the ordinary Income Tax, and at this period of the Session that could not be attempted. Besides the reason which I have given there are practical considerations 160 which point to the extreme difficulty of dealing with this Question at any time. The apportionment between that capital which may be considered as wasted, or rather that profit which may be considered as capital which is wasted, and that portion of the profit which may be considered as profit truly earned, would involve a very close examination of accounts. It would also involve a close and careful scrutiny of all the transactions of the companies concerned. If that were to be carried out it would, as everybody will recognise, require a very large addition to the staff of the Inland Revenue. Therefore the Committee will see that from the purely practical point of view there are considerable difficulties in the way of adopting the Amendment, and those difficulties may not have occurred to the hon. Gentleman. At the present moment, very largely, I think, on the recommendation of the Committee to which the hon. Gentleman has referred, there is an allowance in respect of the wear and tear of machinery, but that allowance is strictly confined to questions of machinery only. I do not propose to argue the question at any length at this hour of the morning, but I can assure the hon. Gentleman that there are considerable practical difficulties in the way of the acceptance of his Amendment, and I hope he will not press it to a division.
§ Mr. AUSTEN CHAMBERLAINI agree with one observation which fell from the hon. Gentleman opposite, namely, that this is a very difficult subject to deal with. It is difficult from the point of view of obtaining theoretic justice, and difficult also from the point of view of practical administration. At the same time, I think the hon. Gentleman may have over-exaggerated the difficulties, for, as he has reminded us, what is here proposed is allowed already in the case of machinery, and the Commissioners will have to make in the case of machinery the same class of inquiries as they would have to make in this case. Indeed, I think the inquiries that will have to be made in respect of some of the deductions which are provided for will be even more difficult than they would be in many of the cases covered by the Amendment of my hon. Friend.
I have never thought that the old Income Tax law was satisfactory on this point. I hoped when I was Chancellor of the Exchequer that I should have further guidance and assistance on the matter from the committee which I appointed to inquire into the working of the Income 161 Tax laws, but I do not think they were very much impressed by the importance of it. I have never thought it right that you should force a man to treat his property for taxing purposes in a manner contrary to every sound business principle and instinct. Suppose a man has a lease of a property for which he has paid £14,000 and which has fourteen years to run. The Income Tax Commissioners say that he may not write any part of that capital expenditure off his profits, and yet, as every business man knows, if he does not do so he is on the high road to bankruptcy. The lease is to expire in 14 years—it may very easily be rendered valueless in less than 11 years—and the least he can do is to write off one-fourteenth of his capital expenditure upon it. Any prudent man would do more than that, and would try to write off the whole amount in less than the fourteen years. If he is in any bind of fiduciary position as a director of a company or anything of that kind he may find himself in great peril from the bankruptcy laws for having declared profits which he has not made. Yet he is branded as a fraudulent person, who is avoiding his duty to the tax-gatherer if he does not treat it as profits when he makes his return to the Income Tax Commissioners. I think the Committee will agree that the system is not right, and, as he is now making a change, I would press the Chancellor of the Exchequer very strongly to deal with the matter. We are putting a new Income Tax
§ on the top of the old, and for the new tax we have to have a new system, which is embodied in the Bill. I do not see why we should perpetuate in the new tax an injustice we committed under the old tax, and I do not see why we should introduce into the new tax an anomaly which I do not think anybody could defend in connection with the old tax. Although this is a wasting investment, the annual return is higher, because it includes both capital and interest, and yet you treat it as though the whole were interest. That will result in a special class of hardship in relation to this tax. Not merely will it unduly swell the Super-tax of many people who ought to pay the Super-tax, but it will make liable to Super-tax a great many people who ought not to be liable at all, and who certainly ought not to be liable on the basis on which this tax is defended, because they have not the money to spend. We are all anxious at this hour of the morning to bring this discussion to a close as quickly as we can, but the right hon. Gentleman must not on that account expect that we should refrain from calling attention to so important and, as I think, so unjust an anomaly as that which my hon. Friend is trying to remove, and if my hon. Friend goes to a division, as I hope he will, I shall feel bound to support him.
§ Question put, "That those words be added."
§ The Committee divided: Ayes, 52; Noes, 121.
163| Division No. 689.] | AYES. | [1.24 a.m. |
| Acland-Hood, Rt. Hon. Sir Alex. F. | Craik, Sir Henry | Mason, James F. (Windsor) |
| Anson, Sir William Reynell | Dickson, Rt. Hon. Charles Scott | Oddy, John James |
| Arkwright, John Stanhope | Doughty, Sir George | Parkes, Ebenezer |
| Balcarres, Lord | Douglas, Rt. Hon. A. Akers- | Ratcliffe, Major R. F. |
| Baldwin, Stanley | Duncan, Robert (Lanark, Govan) | Renwick, George |
| Banbury, Sir Frederick George | Foster, Philip S. (Warwick, S.W.) | Roberts, S. (Sheffield, Ecclesall) |
| Baring, Capt. Hon. G. (Winchester) | Gordon, J. | Ronaldshay, Earl of |
| Beach, Hon. Michael Hugh Hicks | Guinness, Hon. W. E. (Bury St. Edm.) | Rutherford, Watson (Liverpool) |
| Bridgeman, W. Clive | Hardy, Laurence (Kent, Ashford) | Stanler, Seville |
| Brotherton, Edward Allen | Harrison-Broadley, H. B. | Starkey, John R. |
| Carlile, E. Hildred | Hay, Hon. Claude George | Walker, Col. W. H. (Lancashire) |
| Cave, George | Helmsley, Viscount | Warde, Col. C. E. (Kent, Mid) |
| Cecil, Evelyn (Aston Manor) | Hill, Sir Clement | Wilson, A. Stanley (York, E. R.) |
| Chamberlain, Rt. Hon. J. A. (Wore.) | Hunt, Rowland | Younger, George |
| Clive, Percy Archer | Kerry, Earl of | |
| Clyde, James Avon | King, Sir Henry Seymour (Hull) | |
| Coates, Major E. F. (Lewisham) | Lockwood, Rt. Hon. Lt.-Col. A. R. | TELLERS FOR THE AYES.—Mr. Harmood-Banner and Mr. Remnant. |
| Courthope, G. Loyd | Long, Col. Charles W. (Evesham) | |
| Craig, Captain James (Down, E.) | M'Calmont, Colonel James | |
| NOES. | ||
| Agar-Robartes, Hon. T. C. R. | Barry, Redmond J. (Tyrone, N.) | Bowerman, C. W. |
| Agnew, George William | Beaumont, Hon. Hubert | Bramsdon, Sir Thomas A. |
| Allen, A. Acland (Christchurch) | Beck, A. Cecil | Brunner, J. F. L. (Lancs., Leigh) |
| Allen, Charles P. (Stroud) | Benn, W. (Tower Hamlets, St. Geo.) | Buxton, Rt. Hon. Sydney Charles |
| Ashton, Thomas Gair | Bennett, E. N. | Carr-Gomm, H. W. |
| Baring, Godfrey (Isle of Wight) | Black, Arthur W. | Causton, Rt. Hon. Richard Knight |
| Barran, Rowland Hirst (Leeds, N.) | Boulton, A. C. F. | Cawley, Sir Frederick |
| Channing, Sir Francis Allston | Harmsworth, R. L. (Caithness-shire) | Rendall, Atheistan |
| Cherry, Rt. Hon. R. R. | Haworth, Arthur A. | Richards, T. F. (Wolverhampton) |
| Cleland, J. W. | Hedges, A. Paget | Roberts, G. H. (Norwich) |
| Clough, William | Helme, Norval Watson | Robinson, S. |
| Clynes, J. R. | Henry, Charles S. | Robson, Sir William Snowdon |
| Cobbold, Felix Thornley | Herbert, Col. Sir Ivor (Men., S.) | Rogers, F. E. Newman |
| Collins, Stephen (Lambeth) | Higham, John Sharp | Russell, Rt. Hon. T. W. |
| Collins, Sir Wm. J. (St. Pancras, W.) | Hobhouse, Rt. Hon. Charles E. H. | Samuel, Rt. Hon. H. L. (Cleveland) |
| Cooper, G. J. | Horniman, Emslie John | Samuel, S. M. (Whitechapel) |
| Corbett, C. H. (Sussex, E. Grinstead) | Howard, Hon. Geoffrey | Scarisbrick, Sir T. T. L. |
| Cotton, Sir H. J. S. | Johnson, John (Gateshead) | Seddon, J. |
| Craig, Herbert J. (Tynemouth) | Jones, William (Carnarvonshire) | Seely, Colonel |
| Crossley, William J. | Keating, Matthew | Simon, John Allsebrook |
| Dewar, Arthur (Edinburgh, S.) | King, Alfred John (Knutstord) | Smyth, Thomas F. (Leitrim, S.) |
| Dilke, Rt. Hon. Sir Charles | Laidlaw, Robert | Stanley, Hon. A. Lyulph (Cheshire) |
| Duncan, J. H. (York, Otley) | Lambert, George | Stewart-Smith, D. (Kendal) |
| Dunn, A. Edward (Camborne) | Lament, Norman | Summerbell, T. |
| Dunne, Major E. Martin (Walsall) | Layland-Barratt, Sir Francis | Thomasson, Franklin |
| Edwards, Clement (Denbigh) | Lehmann, R. C. | Thompson, J. W. H. (Somerset, E.) |
| Edwards, Sir Francis (Radnor) | Lever, A. Levy (Essex, Harwich) | Tomkinson, James |
| Erskine, David C. | Levy, Sir Maurice | Toulmin, George |
| Essex, R. W. | Lloyd-George, Rt. Hon. David | Trevelyan, Charles Philips |
| Evans, Sir Samuel T. | Lupton, Arnold | Villiers, Ernest Amherst |
| Everett, R. Lacey | MacVeagh, Jeremiah (Down, S.) | Wason, Rt. Hon. E. (Clackmannan) |
| Fiennes, Hon. Eustace | Markham, Arthur Basil | Wason, John Cathcart (Orkney) |
| Fuller, John Michael F. | Massle, J. | White, J. Dundas (Dumbartonshire) |
| Fullerton, Hugh | Mond, A. | Wiles, Thomas |
| Gladstone, Rt. Hon. Herbert John | Morrell, Philip | Wilkie, Alexander |
| Glover, Thomas | Partington, Oswald | Wilson, Hon. G. G. (Hull, W.) |
| Gooch, George Peabody (Bath) | Pickersgill, Edward Hare | Wilson, W. T. (Westhoughton) |
| Guest, Hon. Ivor Churchill | Pollard, Dr. | |
| Gulland, John W. | Ponsonby, Arthur A. W. H. | |
| Harcourt, Rt. Hon. L. (Rossendale) | Priestley, Sir W. E. B. (Bradford, E.) | TELLERS FOR THE NOES.—Mr. Joseph Pease and Captain Norton. |
| Harcourt, Robert V. (Montrose) | Radford, G. H. | |
| Harmsworth, Cecil B. (Worcester) | Rea, Walter Russell (Scarborough) |
§ Mr. YOUNGER moved to add at the end of the Clause the words "and also in the case of any person who is a tenant for life, or has a limited interest in any inimical royalties, such part of the income from such royalties as is not available for his personal use."
§ I am only moving this Amendment in order to bring under the Chancellor of the Exchequer's notice a point of some considerable importance, which he will perhaps be good enough to consider between now and the Report. It is well known to the Chancellor of the Exchequer that in the case of certain estates a considerable portion of the income from mining royalties is obliged to be treated as capital. The tenant for life gets no benefit whatever out of that part of the income except such interest as he gets on the money, and in the case of glebes and church lands no portion whatever goes to the tenant for life, and it seems perfectly ridiculous to charge a Super-tax on income of that kind which is no income at all. There is a very strong case for consideration, though I do hot know whether the Chancellor of the Exchequer agrees, because he does not want to exempt anything, the principle of the tax being to rope in everything, whether the individual enjoys it or not. I do not press this Amendment at this stage, but I merely raise it in order that the right hon. Gentleman may be able to give it consideration.
164§ Mr. LLOYD-GEORGEOf course, I will undertake to consider very carefully any representation made by the hon. Member, but I really do not see that there is any substantial difference between this—in principle, at any rate—and the Amendment of which we have disposed. The reason why the tenant for life is obliged to make some sort of arrangement of this kind is because it is a wasting capital, and he is not entitled by the terms of his trust to take it as income; and, after all, it is regarded by those who are responsible for the administration of the trust as something in the nature of capital and not of income. That seems to be the same principle. I agree there is a good deal to be said for considering the whole question of wasting securities, but I do not see how I could draw a distinction between the case of a tenant for life and the other case. It is substantially the same case. It is purely a wasting security, and you are treating something which may be exhausted in the course of 20 years as if it were a permanent income derived from something which is lasting. That is the real principle which underlies it. In the case of a mineral royalty the thing is more obvious, but there may be hardships in other cases. I will, however, consider whether there is any distinction between this case and the other.
§ Mr. AUSTEN CHAMBERLAINThe case we were discussing just now in the absence of the Chancellor of the Exchequer was also the case of a wasting capital, and though there was no doubt that any prudent man would replace the asset as it wasted, it was within the individual's option to do so or not. In the case put by my hon. Friend it is not an option, but the law compels the tenant for life to set apart a portion of the annual rent, and in some cases even the whole.
§ Mr. MARKHAMNo.
§ Mr. YOUNGERThe case of church lands in Scotland.
§ Mr. MARKHAMNot otherwise.
§ Mr. AUSTEN CHAMBERLAINWhy say in no case if you admit it in the case of church lands? My hon. Friend has asked that the case may be raised at a later stage, and, therefore, all that I wish is to call the attention of the Chancellor of the Exchequer to what I conceive to be the difference between this case and the other case. I thought the other case was a fair one, but this is a stronger case, because here a man is bound by law not to treat this as income, and he is restrained by law if he attempts it. I think, therefore, this is a special case for consideration.
§ Mr. MARKHAMThe case quoted by the hon. Member opposite requires a little further consideration. Many tenants for life who apply for the sanction of the court are allowed to derive the whole of the income because the court puts a very wide construction upon the matter.
§ Amendment, by leave, withdrawn.
§ Question proposed, "That the Clause, as amended, stand part of the Bill."
§ Mr. HICKS BEACHI do not think it is quite proper that an entirely new tax of this description should be passed sub silentio even if the hour is late. The Select Committee appointed two years ago reported that graduation by a Super-tax was practicable, but that is a very different thing from saying or for thinking that in addition to the Death Duties now existing you should impose a further additional Super-tax. I think it is only fair, in discussing this question, that the Committee should consider one or two paragraphs in the Select Committee's report in which they refer to the bearing which the Death Duties have upon the graduation and differentiation of Income Tax. Sir 166 Henry Primrose and Mr. Mallet submitted to us various calculations of the effect of a special additional Income Tax on the incomes of estates which are liable to Estate Duty. And then they go on to state:—
Sir Henry Primrose calculates that if the State had levied a special additional Income Tax on the income of estates which are liable to Estate Duty with the object of raising in each year the average amount of revenue which has been annually received from the duty during the ten years 1896–1905, and that Income Tax had been graduated as the Estate Duties are, the tax so imposed would have ranged from 6d. in the £ on estates yielding an income of from £40 to £400 a year to 1s. in the £ on estates yielding an income of from £4,000 to £6,000 a year, and 1s. 3¾d. in the £ on estates yielding an income of £40,000 and upwards a year.And then there is another calculation. Sir Henry Primrose considered that an estate yielding an income of from £40 to £400 a year the Estate Duties were equivalent to an Income Tax of 9d. in the £ per annum during the life of the inheritor; an estate yielding an income of £4,000 to £6,000 a year of 1s. 6d. in the £; and an estates yielding an income of £40,000 a year and upwards of 2s. in the £.These calculations were based at a time when the Death Duties were comparatively small; but if these calculations were made up-to-date it would be shown that instead of the duties becoming equivalent to an Income Tax of 1s. 3¾d. in the £, at the present time they amount to an Income Tax of 2s. 6d. in the £. And on the other table, which showed that on estates of £40,000 a year it amounted to 2s. in the £, it will be shown that there is existing now what is equivalent under Estate Duties alone to a Super-tax of 3s. 9d. in the £. That is only on the Estate Duties; it takes no account whatever of the incidence of the Legacy and Succession Duties. And, therefore, if these are taken into account, it can be shown that there is levied at the present moment a Super-tax very much greater than 2s. or 3s. 9d. in the £, and my Noble Friend, the Member for the Horncastle Division of Yorkshire (Lord Willoughby de Eresby) was not very far wrong when he said that the total equivalent of Income Tax now levied on very large incomes was not far short of 6s. in the £. What in 1906 was the attitude of the Inland Revenue officials as regards the desirability of imposing a Super-tax? Sir Henry Primrose, the Chairman of the Board of Inland Revenue, gave some very important evidence before the Committee, and I think I am justified in quoting one or two passages. They will be found on page 194 of the report. He estimated that the total 167 number of people with incomes over £5,000 a year as 12,000. He declined to go into figures as to the people with incomes of £2,000 a year and upwards. He said:—
Seeing that I am convinced that it would be beyond our powers effectively to levy a Super-tax even on persona with incomes in excess of £5,000 a year, it seems useless to explore further the incomes between £2,000 and £5,000.With regard to the question of the number of people to whom it would be necessary to send out forms, Sir Henry said that he agreed with Mr. Gayler's estimate that in order to get at 10,000 people with incomes of over £5,000, they might have to send out forms of inquiry to no less than 100,000 people. Then as regards the mode of the inquiry Sir Henry Primrose said:—It has been suggested in the course of the inquiry that the Super-tax return would so far resemble the returns now made by traders under Schedule D, that there is no good reason why it should be more distasteful than they are. But the difference is immense, and is a difference not of degree only, but of kind. As already explained, the Schedule D return is of gross income only, and avoids all enquiry into the distribution of the income. Moreover, where there is investigation of details, the details investigated are mostly of an impersonal character, and relate to matters of business and of the proper reading of the law as regards deductions and so forth. The Super-tax return will be for the purpose of ascertaining net personal income, and must of necessity enter into details in regard to individual and family obligations of the most intensely personal and private nature. Full disclosure will be necessary in all cases, for although a taxpayer might be willing to overstate his income rather than disclose obligations, it would be against the interests of the Revenue to allow him to do so, because it might thereby lose what would afford a valuable clue to other taxable incomes.Then as regards the verification of these returns, Sir Henry pointed out that it would be necessary to go through the list of shareholders of practically every company in the United Kingdom, and also to undertake the examination of the instruments constituting the charges, mortgages, settlements, contracts, etc. Further, that a very large increase in the staff of the Board of Inland Revenue would be required, and finally Sir Henry said (on page 196):—Having regard to all these objections, it would seem clear that a Super-tax ought not to be attempted, unless it offered a prospect of an increase of revenue of really substantial amount, sufficient to outweigh its many manifest drawbacks. I am unable myself to see any such prospect.That is pretty damning evidence on the part of the Chairman of the Board of Inland Revenue against the desirability of imposing an additional Super-tax on people with large incomes, and I do wish to emphasise the point that this tax is being proposed absolutely contrary to the official evidence given at the inquiry. This does introduce, for the first time, a most un-pleasant 168 form of inquisition into the personal income of a large number of people, and this inquisition is imposed not for the purpose of giving some benefit to the person of whom the inquiry is made, as in the case of people with incomes under £700 for the purpose of abatement, but this is a very different matter, being for the purpose of imposing upon the person approached an additional burden of taxation, and this is very much emphasised when 90,000 people, according to the official estimate, have got to make these returns simply for the purpose of proving to the Inland Revenue that their incomes do not come within the sum to which the Super-tax is to be applied. And these returns are to be of a most abstruse and mathematical kind. I cannot help thinking that the financial result from this tax will be remarkably small. The Chancellor of the Exchequer estimates an additional £500,000 this year, and I think he puts the total additional yield of this Super-tax to the Exchequer at 2½ millions.I should be very much surprised indeed if the estimate of the Chancellor of the Exchequer is anywhere near realised. I cannot help feeling that a great many people will evade this tax in a perfectly legitimate manner. It is a very simple thing to transfer a certain amount of capital to some of your children for the purpose of bringing your income below £5,000 a year. That is a perfectly legitimate thing to do. There are undoubtedly cases of men who have made large sums of money themselves, and those are the people who object to this Super-tax more than anybody else. They do not see why they should be taxed to an additional amount simply because they have been successful in business and made money for themselves. A lot of people possessing, so to speak, superfluous capital which they have been accustomed to invest in the securities of this country and by so doing have added to the economic wealth of the country, will be constrained or induced to transfer a great many of their investments abroad and leave them to be reinvested there.
For that reason I cannot help thinking that the total net yield to the Exchequer of this Super-tax will be a comparatively small amount. You will not in the first place get the total amount of Super-tax upon the total incomes of these people who have over £5,000 a year, on account of its being transferred abroad; and, secondly, you will lose on the ordinary Income Tax you are now receiving on the money which 169 is invested here and which naturally will be invested abroad. When you combine in this tax the maximum of irritation to a very large number of people with a comparatively small yield to the Exchequer, I say it is an undesirable tax for the Chancellor of the Exchequer to introduce into his Budget this year. When you take into account the ultimate effect of the Death Duties, I think you must admit that at the present moment an indirect Super-tax is already imposed on large incomes which is quite sufficient to meet the ordinary case of fairness and justice.
§ Mr. STEPHEN COLLINS rose in his place, and claimed to move "That the Question be now put."
§ The DEPUTY-CHAIRMAN (Mr. Caldwell) rose to put the Question.
§ Mr. AUSTEN CHAMBERLAINIt must have escaped your notice, Sir, that only one speech has been made on the Question "That the Clause stand part of the Bill." This is a proposal in the Budget which has received very little consideration. I certainly do not propose to delay the Committee at any length, but I think it would be an unheard of thing that the Clause should be put after a single speech from the Opposition, and without even a single speech from the Government.
§ The DEPUTY-CHAIRMANI understand that it has been very fully debated. The question of principle was debated.
§ Mr. AUSTEN CHAMBERLAINMay I remind you, Sir, that the Chairman has ruled on his Clause, as on so many others, that we might not move to omit the first Sub-section, because that raised the whole principle of the tax, which, he said, we must discuss on the Question "That the Clause stand part of the Bill."
§ The DEPUTY-CHAIRMANcalled upon
§ Sir HENRY CRAIKFor the first time we are discussing a principle entirely new in the practice of English finance. [Interruption.] I know quite well I am speaking against what is enthusiastically supported by hon. Members below the Gangway, and, from feelings of generosity, supported by many Members on this side of the House, but surely when we are beginning a new thing in English finance we may be permitted to ask some explanation of the grounds upon which it is put forward. The hon. Member who has just spoken (Mr. Hicks Beach) pointed out 170 very clearly the complications and difficulties in the operation of the tax and the small amount of money which, for the present year at all events, can come from it. I ask, is it not open to other objections? We are all willing on this side of the House that taxation should fall on the luxuries of the rich, but what we do ask is: Is this the best way to put it upon them? Is it not the way which will interfere most seriously with liberty, and is it not establishing a most serious inquisition against which a great feeling will be aroused throughout the country? My hon. Friend (Mr. Hicks Beach) has quoted evidence from the Departmental Committee to show that the strongest part of the financial evidence is against this taxation. We have only to go a few years back and we find that not a single financier of repute in this country would ever propose such a tax. We are now to start upon what has hitherto been considered a heresy and an unwarranted novelty in finance, and to do so silently.
2.0 A.M.
There is one man more often quoted by hon. Members than any other—John Stuart Mill. What did he say of such a proposal? That it was a mild form of robbery. Hon. Members opposite are not only superior to authority; they are superior to logic. We are told as regards the object of the tax that it is to equalise the burdens imposed on all citizens. Is that the case? Will hon. Gentlemen opposite give me an answer to this question? A man has £10,000 a year. You may put a Super-tax of 15s. in the £ and leave him more able to bear the burden than I am. Are hon. Members willing to do so? That is the logical outline of the tax you are now imposing. I am unwilling to go into other arguments against the tax—there are arguments in abundance which it is hard to urge upon an impatient House at this hour of the morning. I can only say that were I a Socialist I should look upon this tax as the main instrument to propagate my faith. I am perfectly certain that in a few years time it will be found that this is an instrument that you are giving to hon. Members below the Gangway—an instrument which will be carried further than any bon. Members opposite would like to see. We know quite well that this proposal, like many others in this Budget, is defended from very different motives by different sections of the party that supports Ministers upon the Front Bench. We have the moderate section, expressed in the speech at Bingley Hall, but the Bingley Hall speech does not please 171 the hon. Member for Merthyr Tydvil (Mr. Keir Hardie). He wants some higher note. He not only calls the tune; he wishes to control the pitch at which it is to be played. Hon. Members who have supported this as a moderate, a temperate, and a very gentle graduation of the tax, which is merely to afford a little ease to the poor man and to put a slightly larger burden on the rich man, will find that the proposal is now being pressed with very different objects by hon. Members below the Gangway, and will be used in future in a very different way by those hon. Members whose desire is to put an end to the private ownership of property. I feel it is impossible for me to give a silent vote on a subject of this sort, because I believe that the Government are for the first time entering on a new and dangerous principle. You are telling a man that so much of his income as does not exceed £5,000 he may hold, and be taxed in respect of it on general principles, but in regard to all your income above that amount we say we have a right to depart from general principles. That is the position which the Committee has to face, and I hope the importance of the question will be fully realised when the Division is taken.
§ Mr. LLOYD-GEORGEI cannot agree with the hon. Member (Sir H. Craik) that the principle of the tax has never been discussed at all. The Committee will recollect that it was discussed on the Budget Resolution with regard to the Income Tax, and, if I mistake not, was discussed at some length. At any rate, it is wrong to say that it has not been discussed at all. I must say that I do not think the hon. Member had any novel argument to bring before the Committee. His last argument appears to be that the proposal introduces some new principle of a revolutionary character, which would eventually end in the complete destruction of property. He said: "If you discriminate between incomes of £5,000 and incomes under £5,000 there is the beginning of a very drastic discrimination." I would ask him: Is there no discrimination at the present moment? Take incomes of £800 and £500—is there no discrimination there? Take £500 and £200. Take £200 and £100. I say it is a graduated scale at the present moment. It is true that you do not graduate up to £5,000. We propose to do so. We propose, that is to say, to carry the graduation still further. The hon. Member says 172 that this is putting an instrument in the hands of hon. Members below the Gangway which they can use later on for the purpose of exterminating the private ownership of property. Nothing of the kind. The Income Tax would be just as ready an instrument. What is the difference? Really if you wanted to exterminate property the way to do it is not by raising the Super-tax but by raising the Income Tax to 20s. in the £.
I should have thought the hon. Member would indeed have seen that the Income Tax is the most effective weapon you could have for such a purpose. But, after all, what does his argument amount to? You might as well say, "Here you are charging 9d. in the £ for Income Tax. That is only a beginning. Somebody else will come along and raise it to 1s. 2d. Somebody else will raise it to 2s., and then it will go up to 5s." The idea is absurd. The hon. Member scents Socialism in this proposal. After all, a tax is pro tanto a transference of property from the pocket of the individual to the pocket of the community. Every tax is. You may say that you socialise the property of the individual. Every tax is a socialisation of the property of the individual as far as it goes. It is argued that this is the thin end of the wedge of Socialism. The thin end—it is really becoming very thin indeed. In the course of the discussion we have heard it stated that the tax will not produce the money we expect to get from it, that there will be enormous difficulties in the way of its collection, that it will not work, and so on. Sir Henry Primrose's name has been quoted. There have been able men at the head of the Inland Revenue since Sir Henry Primrose. They certainly did not take that view, and it was not the view taken by the Committee. And, remember, that was not a Committee of Socialists. There were men on that Committee as anti-Socialist as the hon. Member for Glasgow University (Sir Henry Craik) or the hon. Baronet the Member for the City of London (Sir F. Banbury). I do not think I can go much further than that. Hon. Members opposite must surely recognise that those who constituted the committee were practical and sensible men. Yet, after seeing Sir Henry Primrose and hearing his views, they came to the conclusion that this was a practicable scheme, and recommended it. [HON. MEMBERS: "No, no."] I think they did. There was no discussion at all among them on the point.
§ Mr. HICKS BEACHThey said it was practicable, but they did not recommend it.
§ Mr. LLOYD-GEORGEThat is a condemnation then of the views of Sir Henry Primrose. But let us leave that question. I repeat that this is purely an extension of the principle of graduation, and what is more, a very fair one. I do not agree with the hon. Member for Tewkesbury (Mr. Hicks Beach) when he says that business men will regard it as unfair. I do not think they do.
§ Mr. HICKS BEACHI said some people.
§ Mr. LLOYD-GEORGEThere are some men who object to taxation in any shape or form. It does not matter what taxes you put on others, but the moment you impose a tax which they themselves have to bear, they object to it. They tell you, and they will always tell you, that they object to it in principle. But, as a matter of fact, I do not believe that business men object to this tax. I think the hon. Member (Mr. Hicks Beach) will agree with me that if the whole Budget had been confined to the Super-tax the business men would not have made the fuss about it that they are doing. That does not quite confirm the view of the hon. Member that they have a great deal of objection to the Super-tax, and I do not believe they have. What I hear in the City is that they do not object to the Super-tax. They do object to other parts of the Budget. For instance, there are men who object to the Death Duties, and complain that we did not put a heavier charge on the Super-tax, which they do not regard as unfair. If a man has an income of £5,000, I think he may very well be asked to make a larger contribution to the revenue of the country than the man who is making £1,500 or £2,000, or even £3,000. Therefore I think it is a perfectly fair tax, and I believe it is regarded as such by the vast majority of people.
§ Sir F. BANBURYMay I ask the right hon. Gentleman if he has read the speech of the hon. Member for Merthyr Tydvil (Mr. Keir Hardie) on Saturday, in which he approved of the Super-tax and the Land Duties on the ground that they would tend to the total absorption of all unearned incomes, whether accruing from land or whether from capital. That is what we are afraid of when we find a man like the hon. Member for Merthyr Tydvil, who has considerable influence below the Gangway, and, some of us think, considerable influence on the other side of the House, openly saying he is in favour of 174 this Super-tax because he believes it is going to make for the total absorption of all unearned incomes from capital; then naturally those of us who regard the keeping of capital in this country as being very necessary, both for working men and for capitalists, look on this tax with some fear. I object to the tax for the reason which I have just given—that I believe it would be used later on as a weapon to enforce these Socialistic doctrines which I believe would ruin the country, but which some hon. Gentlemen think would have the reverse effect. I object for another reason, and that is that it is penalising thrift and industry. I have always thought that thrift and industry should be encouraged, and I have always thought that the larger the amount of capital in this country the better for the country. Now this Budget comes along, and it says: "If you have been hard-working, if you have been industrious, if you have been saving and not extravagant, and have so arranged that you have managed to have an income in excess of £5,000 a year; because you have that £5,000, and because a great many people have not got it and would like to have it, therefore we are going to take away from your superfluity what we consider right."
May I ask the right hon. Gentleman why 6d., why £5,000? Why not 1s., why not £4,000? It is because we believe that this is a fatal doctrine and will lead to expansion that we are opposed to it. To my mind this is a very dangerous innovation, and it is advocated on very wrong grounds. The Chancellor of the Exchequer told us that he saw no reason why a man with £5,000 a year should not pay more than a man with a lesser amount. What we say is that he should pay more but should only pay in proportion; that there is no reason why he should pay a larger proportion because he has been hard-working, more industrious, or more able. Therefore we object to this tax. There are a great number of people whose opinions I value who disagree with the Chancellor of the Exchequer, and believe, with me, that this is an extremely bad tax. Had the right hon. Gentleman put 3d. in the £ on the Income Tax he would have raised nine millions, whereas by this proposal he is only going to raise 4½ millions. I venture to say that had he made the Income Tax 3d. higher there would have been far less objection to his Budget than there is now. I myself should have been only too glad to have paid 3d. more as would large numbers of people.
§ Mr. J. R. CLYNESI would not intervene at this stage but for the repeated allusions to a few of us who are present in this part of the House. May I say, with what pleasure I now hear that hon. Members above the Gangway are beginning to fear the hon. Member for Merthyr Tydvil? I have observed, in connection with these discussions, that not one of the various ways for raising revenue for national purposes, proposed in this Finance Bill, is acceptable to hon. Gentlemen above the Gangway. Not one of the plans proposed in this Bill would appear to be the right one. The first few lines are, I think, a conclusive answer to all the objections which have been raised as to the harmful character of this particular Clause. The first Sub-section declares that where an income exceeds £5,000 an additional duty, at the rate of 6d. per every pound of the amount by which the total income exceeds £3,000, shall be paid. How hon. Members can rise and allege that that is to be destructive of industry, and that it is to be beyond the ability to pay of men in receipt of, let us say, an income of a million, passes one's comprehension. It would appear that on the one hand the tax is a crushing tax which the rich cannot carry, and that on the other hand it is so small and trifling that it will scarcely yield anything whatever. I think we ought to have some attempt to reconcile those absolutely opposite statements. We cannot overcome these serious claims for national revenue by merely repeating, in this House or out of it, the word "Socialism." I would warn hon. Members that they are assisting in the propagation of Socialism by familiarising the people with the real meaning and understanding of the term.
There are two ways, so far as I can see, of raising national revenue in this country at the present time. You must either raise your revenue from the rich people who, I submit, can afford it, or you must seek to try and squeeze more from the poor people, who obviously cannot afford it. A third way just now suggested is one that cannot be referred to at this stage, but one that in another place and at the right time no one will shrink from dealing with. The Germans have recently shown their inability to raise their revenue by taxing the foreigner, and the Americans have found it similarly impossible. If we in this country were capable of devising means of raising our revenue by taxing the foreigner, surely the Germans and Americans would show themselves as cute 176 and capable as ourselves, and be able to find a revenue from the same source. We have given pensions for the aged poor, and rich men who possess, as I believe them to possess in this House, the sense of British independence, should rather despise the idea of dipping into the pockets of the Germans or other foreigners for the purpose of raising our revenue to pay old age pensions to the British poor. There is this remaining fact against what is said in opposition to this plan for raising the tax, that the incomes of the richer classes grow greater than the taxes upon them. The Chancellor of the Exchequer, in outlining his Budget to this House, made a statement which has never been questioned—namely, that if the whole of the taxes proposed in this Budget were doubled, the richer classes would still enjoy greater incomes to-day than they enjoyed five years ago. We believe, then, that a good sound principle with respect to national taxation is that you should tax classes in our country to the degree of their ability to pay taxes. This particular Clause goes to the level of meeting that principle.
§ Mr. WALTER GUINNESSThe hon. Gentleman who has just sat down assumed that because hon. Members on this side oppose this particular form of Income Tax, therefore they are unwilling to meet any further burden. He seems to forget that the Committee which has been referred to several times in this discussion did not by any means lay down that a Super-tax was the right way of raising Income Tax, but they also spoke of the alternative of raising further Income Tax by degression. We feel there is much less danger of vindictive taxation if the old system of Income Tax is increased to a higher figure, and abatement is given by degression because, as that Committee pointed out, there is a limit to the size of taxes you can impose in that way when the rate becomes so large as to inconvenience taxpayers. There are one or two points I should like to mention with regard to this Committee which arise out of the statment of the Chancellor of the Exchequer. He gave us to understand that this Committee reported in favour of the Super-tax. The very first words of the Report are:—
Your Committee have deemed it to be beyond the scope of our inquiry to consider the desirability or equity on general grounds of public policy of the various proposals which have been placed before us, and the questions of principle which they raise.They only went into the machinery question as to whether it was possible to 177 raise a Super-tax. The right hon. Gentleman speaks as if it were only a matter of carrying graduation a little further. It is a far larger matter. It is a new form of taxation, which was opposed by every expert witness before that Commititee—I mean witnesses who have had practical knowledge of taxation in this country. There were four chief witnesses—Sir Henry Primrose, Mr. Bernard Mallet (who is a Commissioner of the Board of Inland Revenue), Mr. Gayler (Chief Inspector of Stamps and Taxes), Sir Thomas Hewitt and Mr. Gyles (who were in the Inland Revenue)—and all of whom pointed out the insuperable obstacles to raising Income Tax by means of Super-tax. I think the right hon. Gentleman, in forming his estimate, ought to remember the opinions expressed by officials of the Inland Revenue. One other word I should like to say on this subject, and that is the danger we foresee if this tax is passed. In the "Socialists' Budget" the hon. Member for Blackburn (Mr. Snowden) points out that if this recommendation is carried out each individual would be required to give a return of his total income whether taxed or not, and that we should then have material for putting each individual into his proper compartment, and the way to graduation would be open. The evidence given before the Committee by one or two members below the Gangway was an favour of the 7s. Super-tax, and one hon. Member even stated that every income beyond a certain figure should be absolutely confiscated. It would be only a matter of time before that class would be taxed out of existence. If, however, there is a Super-tax by degression there is no danger of that. We do not, I am certain, object to the extra 6d., but we object to the principle. If there had been degression no objection would have been taken. I think a Super-tax in this form, knowing the objects of those who promote it, would be a danger signal to those with capital to shorten sail and make for countries with sunnier skies.
§ Sir CHARLES W. DILKEAs Chairman of the Committee mentioned, I may say that the effect produced on my mind throughout the proceedings was not in the least that produced on the hon. Member who has just spoken. As he has relied very largely upon the somewhat retrograde evidence of Sir Henry Primrose, which, naturally, coming from the head of the Board of Inland Revenue affected the evidence of his subordinates, 178 the opinions of one of whom were clearly the other way, I ought to add that Sir Henry Primrose distinctly opposed the mode of degression which the hon. Member prefers. The mind of the Committee was quite open, I think, as to the best method in the event of such a principle being at any time adopted—open, I mean, between degression and the plan which is now adopted. But Sir Henry Primrose and all the City witnesses, I think without exception, gave as a fatal objection to this method of degression the locking up of capital which they said would take place. Personally, I was not persuaded that that locking up of capital would be a fatal objection to the plan. The weight of evidence for the plan of the Government, as against degression, was overwhelming from the official and from the City witnesses.
§ Mr. EVELYN CECILOne or two points have not been mentioned, but which are very serious as regards the imposition of this new kind of tax. Something has been said about collection at the source, and one hon. Member mentioned Income Tax from dividends before they are paid into the banking account. Earlier in the evening the Chancellor of the Exchequer said that the abandonment of collection at the source was a very serious contingency which the Inland Revenue could not possibly face. But in this case he is making them face it. I quite agree with him that it is a very serious thing. I think it is perfectly proper that those with very high incomes should pay up to a certain amount more than others; but I do not think it is proper to introduce a tax which is open to such a serious objection as the abolition of collection at the source. The Committee states:—
It is interesting to recall the fact that 100 years ago we abandoned direct personal assessment, and collection at the source was substituted, with the result that the yield of the tax was almost doubled, immediately. In 1803 an Income Tax of 5 per cent. collected at the source yielded within a very small amount as much as a tax of 10 per cent. did in 1801, when it was assessed and collected direct from each taxpayer.That is a most interesting fact, and I am afraid it is a fact with which the Chancellor of the Exchequer is bringing himself face to face again, and he is almost certain to find that just as it occurred 100 years ago, if he substitutes this method of direct personal assessment in place of collection at the source there is sure to be a great leakage. I am very sorry that we should set aside a very good system. I am bound 179 to say that I regret the right hon. Gentleman's course very much. I do not think it is a wise financial policy, and I fear it will lead to a considerable leakage as against the Treasury. But there is another point, not mentioned in this Debate, which seems to me from an economical point of view a very serious one. We have already got a complete set of machinery for the present Income Tax. We have got the whole system of officials set up, and it has been a work of general satisfaction, roughly speaking. Now we are going to have quite a different set of machinery set up which necessarily requires salaries, more expense, more supervision, and I cannot for the life of me see that anything stated in the evidence, or anything which appears in the individual opinions of the members of the Committee, is sufficient to outweigh the great disadvantage of having two sets of machinery for the collection of the tax. I feel strongly from both points of view—whether you consider that the collection at the source is to be the future policy or whether you are setting up a fresh set of machinery for the collection of the tax—(whereas one set of machinery would be much better) it brings you to the conclusion that this new innovation and these new taxes are bad.I should like to call attention of the Committee also to one statement which the Chancellor of the Exchequer has repeated
§ before. He has told us to-night that differentiation already exists for the purposes of taxation and therefore, in that respect, this tax is nothing new. But it is something new, because the differentiation previously was for the benefit of the taxpayer. This differentiation does not offer any benefit to the taxpayer, but compels him to pay an extra tax. Only two years ago when the Prime Minister was Chancellor of the Exchequer, he was fully alive to the difficulty, and feared to face it; but the present Chancellor of the Exchequer is ready to rush in where the Prime Minister has feared to tread, and I do not think he has done so with very successful results. I should like to read to the Chancellor of the Exchequer precisely what the Prime Minister said. He said: "The moment you tell a man 'you are to declare your income, not for your benefit, but in order to pay a higher rate of taxation,' you find yourself confronting a good many formidable difficulties." I quite agree with the Prime Minister's remarks; but the Chancellor of the Exchequer has thrown all that to the winds. It only shows us that the Prime Minister has been dragged at the heels of the Chancellor of the Exchequer and others who agree with him.
§ Question put, "That the Clause stand part of the Bill."
§ The Committee divided: Ayes, 107; Noes, 26.
181| Division No. 690.] | AYES. | [2.40 a.m. |
| Agnew, George William | Duncan, J. Hastings (York, Otley) | Laidlaw, Robert |
| Allen, A. Acland (Christchurch) | Dunn, A. Edward (Camborne) | Lambert, George |
| Allen, Charles P. (Stroud) | Dunne, Major E. Martin (Walsall) | Lamont, Norman |
| Baring, Godfrey (Isle of Wight) | Edwards, A. Clement (Denbigh) | Layland-Barratt, Sir Francis |
| Barran, Rowland Hirst | Edwards, Sir Francis (Radnor) | Lehmann, R. C. |
| Barry, Redmond J. (Tyrone, N.) | Erskine, David C. | Lever, A. Levy (Essex, Harwich) |
| Beaumont, Hon. Hubert | Essex, R. W. | Levy, Sir Maurice |
| Beck, A. Cecil | Evans, Sir S. T. | Lloyd-George, Rt. Hon. David |
| Benn, W. (Tower Hamlets, St. Geo.) | Fiennes, Hon. Eustace | Markham, Arthur Basil |
| Bennett, E. N. | Fuller, John Michael F. | Massie, J. |
| Black, Arthur W. | Fullerton, Hugh | Mond, A. |
| Boulton, A. C. F. | Gladstone, Rt. Hon. Herbert John | Morrell, Philip |
| Bowerman, C. W. | Glover, Thomas | Partington, Oswald |
| Bramsdon, Sir T. A. | Gooch, George Peabody (Bath) | Pickersgill Edward Hare |
| Brunner, J. F. L. (Lancs., Leigh) | Gulland, John W. | Pollard, Dr. G. H. |
| Buxton, Rt. Hon. Sydney Charles | Harcourt, Rt. Hon. L. (Rossendale) | Ponsonby, Arthur A. W. H. |
| Carr-Gomm, H. W. | Harcourt, Robert V. (Montrose) | Priestley, Sir W. E. B. (Bradford, E.) |
| Cawley, Sir Frederick | Harmsworth, Cecil B. (Worcester) | Radford, G. H. |
| Channing, Sir Francis Allston | Harmsworth, R. L. (Caithness-shire) | Rea, Walter Russell (Scarborough) |
| Clough, William | Haworth, Arthur A. | Rendall, Atheistan |
| Clynes, J. R. | Hedges, A. Paget | Roberts, G. H. (Norwich) |
| Cobbold, Felix Thornley | Helme, Norval Watson | Robinson, S. |
| Collins, Sir Wm. J. (St. Pancras, W.) | Henry, Charles S. | Rogers, F. E. Newman |
| Cooper, G. J. | Herbert. Col. Sir Ivor (Mon. S.) | Russell, Rt. Hon. T. W. |
| Corbett, C. H. (Sussex, E. Grinstead) | Higham, John Sharp | Samuel, Rt. Hon. H. L. (Cleveland) |
| Cotton, Sir H. J. S. | Hobhouse, Rt. Hon. Charles E. H. | Samuel, S. M. (Whitechapel) |
| Craig, Herbert J. (Tynemouth) | Horniman, Emslie John | Scarisbrick, Sir T. T. L. |
| Crosfield, A. H. | Howard, Hon. Geoffrey | Seddon, J. |
| Crossley, William J. | Johnson, John (Gateshead) | Seely, Colonel |
| Dilke, Rt. Hon. Sir Charles | Keating, M. | Simon, John Allsebrook |
| Stanley, Hon. A. Lyulph (Cheshire) | Trevelyan, Charles Philips | Williams, W. Llewelyn (Carmarthen) |
| Stewart-Smith, D. (Kendal) | Villiers, Ernest Amherst | Wilson, Hon. G. G. (Hull, W.) |
| Summerbell, T. | Wason, Rt. Hon. E. (Clackmannan) | Wilson, W. T. (Westhoughton) |
| Thomasson, Franklin | Wason, John Cathcart (Orkney) | |
| Thompson, J. W. H. (Somerset, E.) | White, J. Dundas (Dumbartonshire) | TELLERS FOR THE AYES.—Mr. Joseph Pease and Captain Norton. |
| Tomkinson, James | Wiles, Thomas | |
| Toulmin, George | Wilkie, Alexander | |
| NOES. | ||
| Banbury, Sir Frederick George | Harrison-Broadley, H. B. | Ronaldshay, Earl of |
| Carlile, E. Hildred | Helmsley, Viscount | Rutherford, Watson (Liverpool) |
| Cave, George | Hill, Sir Clement | Stanier, Beville |
| Cecil, Evelyn (Aston Manor) | Lock wood, Rt. Hon. Lt.-Col. A. R. | Walker, Col. W. H. (Lancashire) |
| Chamberlain, Rt. Hon. J. A. (Worc'r.) | Long, Col. Charles W. (Evesham) | Warde, Col. C. E. (Kent, Mid.) |
| Craig, Captain James (Down, E.) | M'Calmont, Col. James | Wilson, A. Stanley (York, E. R.) |
| Duncan, Robert (Lanark, Govan) | Oddy, John James | |
| Foster, P. S. | Ratcliff, Major R. F. | TELLERS FOR THE NOES.—Mr. Hicks Beach and Sir Henry Craik. |
| Gordon, J. | Remnant, James Farquharson | |
| Guinness, Hon. W. E. (B. S. Edmunds) | Renwick, George |
Question, "That the Chairman do report Progress, and ask leave to sit again," put, and agreed to.