§ Where it is shown to the satisfaction of the Commissioners of Inland Revenue that considerable hardship will be suffered in the case of a new trade or business commenced within five years next before the fourth day of August, nineteen hundred and fourteen, the statutory allowance of two hundred pounds shall be increased by the same percentage as the increase in the profit of the last of the three pre-war trade years bears to the average profit of the first and second of the pre-war trade years provided that such increased statutory allowance shall not in any case exceed four hundred pounds.—[Mr. Needham]
§ Clause brought up, and read the first time.
§ Motion made, and Question proposed, "That the Clause be read a second time."
§ Mr. NEEDHAMIn moving this proposed New Clause, I do so for the purpose of dealing with firms which have started business in recent years. I have in mind the case of two friends who were working for a certain firm, and whose joint salaries were about £650. They subsequently started business on their own account. In the first year they made a loss; in the second a trifling profit; in the third year a small income; and in the fourth year a bigger income. The average of their pre-war profits, so as to get a datum line, is such that the amount that they will have to find on the top of that, when the £200 is added, does not come up to the total amount of the joint salary which they were receiving before they commenced business for themselves. It does seem hard that in such a case—and there are a great many like it—to the datum line should only be added £200. The Income Tax surveyors in the localities have no discretionary power at all in the matter. They can only follow the hard and fast lines of the law. Consequently the hardship remains on the firm which has so recently started business. The attempt of this Amendment really is to give some trifling discretion, very limited in its scope, to the local Income Tax surveyor, so that a hard cose of the sort I have suggested could be met by raising the £200 allowance to a maximum, say, of not more than £400. There does not seem to be any provision in the Finance (No. 2) Act, 1915, for anything of this 957 kind. The Clause I suggest is really an Amendment of Clause 40, and I suppose ought really to come under Subsection (3). That Clause does attempt to deal with hard cases, and says that where special circumstances occur in dealing with excess profits they can be dealt with by Regulations. So far as I know, no Regulations have been made by the Treasury in the way I have indicated.
§ Mr. CURRIEIf I could support this Clause without causing a loss of money to the Chancellor of the Exchequer I would certainly do so, as I think my hon. Friend has made a very reasonable statement and a very strong case. The difficulty, of course, is where one is to get the money. I suggest to the Chancellor of the Exchequer that really what is wanted, and perhaps we could do it another year, if we have another year of Excess Profits Tax, is better gradation. Last year, and again this year, I think he has treated professional men, lawyers and barristers, and so on, with undue leniency, and there is a class of business which suddenly finds its profits multiplied three or four times over, and which, I think, could be taxed a great deal more stiffly than 60 per cent., though, in the main, I agree with the Chancellor of the Exchequer that 60 per cent, is a fairly high rate of tax.
§ Mr. MONTAGUI do not think this is a very good Amendment, if I may say so with great respect. There are two objections. In the first place, it only deals with a growing business where the progress is even. If there were, for instance, in 1913, a year of depression from some unknown cause, although the business was obviously progressive, it would be precluded. Now I will give the better argument which, to my mind, is that this Amendment would give the most dangerous power to the Commissioners of Inland Revenue. Just think what my hon. Friend suggests:
"Where it is shown to the satisfaction of the Commissioners of Inland Revenue that considerable hardship will be suffered."
We have already had a case to-day where the Committee have shown this new and very gratifying confidence in the Commissioners of Inland Revenue. My mind carries me back to Debates in which they were peculiarly suspicious when the Commissioners of Inland Revenue were to go through some purely mechanical form of 958 making perfectly harmless assessments. To-day we have a striking instance, which must be very gratifying to the Inland Revenue, of hon. Members who have asked that they should have unfettered discretion within certain limits to dispense with taxation or to impose taxation. Those who represent the Inland Revenue in this House would be very loth to accept that responsibility, and I am certain the Inland Revenue itself would feel very reluctant to undertake it. It opens the door to all sorts of individual applications. But I need go no further, because I am perfectly certain that, on reflection, the Committee will take the view, which it always has, that the House of Commons is the proper place to impose taxation, and that the discretion in Government Departments, as my right hon. Friend said this afternoon, should be limited to the smallest degree possible.
Mr. HENDERSONI quite agree with what my right hon. Friend has said, but there is a case which can be made out which ought to be considered carefully in this House. Take the case, say, of two mechanics who in 1912 earned £5 a week each, and who started a new business by themselves as engineers, and who will probably be very useful to the country at this particular time. It may be a case where they are struggling to get their livelihood, and you may cut them down far less than they were earning as mechanics. That is the point that my hon. Friend would wish, I am sure, to press upon the Committee, and I would also press it. If it could be done by regulation, something, I think, might be done for men who have started as paid servants, engineers, or otherwise.
§ Mr. NEEDHAMMight I ask whether there is any regulation contemplated to deal with cases such as this one?
§ Question put, and negatived.