HC Deb 28 June 1916 vol 83 cc903-15

The income of any individual assessable to Super-tax shall be the total income of that individual for the previous year estimated in accordance with the provisions of Section sixty-six, Sub-section (2), of the Finance (1909–10) Act, 1910, but in estimating the income of the previous year there shall be deducted therefrom the amount of Income Tax paid in respect thereof, and Section sixty-six, Sub-section (2), of the said Act shall in its application to the Super-tax for the current and any subsequent year be amended accordingly.

Clause brought up, and read the first time.

Motion made, and Question proposed, "That the Clause be read a second time."

Let me ask him to take the very simple case of a man with £6,000 a year. Five shillings in the £ will be a quarter of his income. He will receive £4,500. That is the income he has really got, yet under the present Income Tax scale it works out like this: Super-tax level now £2,500. When the Minister of Munitions was introducing the tax into the House he spoke of it as a tax for very rich men with over £5,000 a year. But now everybody who has over £2,500 a year is a Super-tax payer. Therefore, my little calculation is this: That a man with a gross income of £6,000 a year pays Income Tax of £1,500. On the first £500 over £2,500 he pays Super-tax of 10d., then he pays 1s. 2d. on the next £1,000, then Is. 6d., and on the fourth £1,000 he pays 1s. 10d. The total Super-tax he pays on the basis of having £6,000 a year, which he never receives, is £244 3s. 8d. If he pays Super-tax on an income that he actually receives, he will pay £115 0s. 4d. If you go to the higher rates of income where you get a Super-tax of Ss. 6d. in the £, if this is added to an Income Tax of 5s., the figures will be gigantic. I do not propose to take any but one simple, ordinary, average case of a man who is neither very rich nor very poor. Is it a reasonable basis that we should say that our Super-tax ranges from 10d. to 3s. 6d. when, as a matter of fact, it does nothing of the kind? It is 10d. and 3s. 6d. on the gross Income, with the Income Tax added, and is really 25 per cent. higher. Therefore, I think there is something very fraudulent in such a basis of taxation, because it tries to make out to the public and to those concerned that the tax is of a very much more moderate character than it really is.

It is very important at the present time, when we hear from the Labour Benches appeals to the Chancellor of the Exchequer, in view of the exigencies of the situation, to provide more revenue for the War on the lines that even the present Income Tax, Super-tax, Excess Profits Tax, the controlled establishments levy, and the like are not high enough, and that a great deal more ought to be taken, that what is taken should be accurately stated in the Act of Parliament, and that we should not depend upon a fictitious basis of assessment in order to try to make out that the Super-tax is something much less than it is. When, in addition to that, you have got such a cumbrous system of assessment, with constant changes in the rate of Income Tax—I am not complaining; it is, of course, necessary in time of war to realise that the Chancellor of the Exchequer cannot look very far ahead, and it may be necessary for him to have an Income Tax of 2s. 6d. part of the year, and then raise it to 3s. 6d. or even to 5s.—I do not, I say, complain—when we are living under a state of affairs like that, I really think we ought to have a basis of assessment that does not require you to find out exactly what Income Tax was deducted from each particular dividend. Therefore, I ask the Chancellor of the Exchequer, if he will not accept this Clause, and take whatever steps are necessary to alter the scale of Super-tax to agree with the actualities and facts of the case, instead of leaving the whole thing in a state in which nobody, by looking at the Acts of Parliament, can possibly tell what the Super-tax is unless he enters into elaborate calculations, and where he creates a wholly mistaken impression on the part of people who think that the rich are not taxed enough, by telling the public that they are taxed at the rate at which they are not really taxed at all, and which the Chancellor of the Exchequer knows is not really the real rate upon the income which they receive.

There is nobody but would sympathise with the feelings of the hon. Member who has described in such forcible terms the hardship of having to pay Super-tax on money never received. There is no question, perhaps, but that people who pay Super-tax agree with the view which the hon. Member has expressed in regard to the various specified inconveniences. Having said so much, do not let us exaggerate. The hon. Gentleman said that a large part of a man's life was spent in making out accurate accounts.

A large fraction of the year, I said.

A large fraction of the year would be spent in making up the actual amount. What is actually required of him, according to the Treasury return, is to ascertain the income which he has actually received and add one-seventh to it. If he adds one-seventh the Treasury is prepared to accept the amount so returned as the true amount. That is stated in the assessment form sent to every individual who has claimed. He has only to turn to the last page and he will see how very simply this difficult operation can, in fact, be carried out.

In justice to myself, I must say I drew a distinction between accepting the rough-and-ready method of getting over what is almost an impossible calculation. I mentioned one-seventh, which the Treasury officials give.

The information may be obtained from the Treasury by anybody who is prudent enough to apply. As a matter of fact, this information is given to everybody on the assessment return itself. So much for the calculation. Now, as to the other question, whether the Super-taxpayers should only pay upon the amount of income after the deduction of ordinary Income Tax. Personally, provided they pay the same amount altogether, I have no objection as to how they pay it. The actual proposal of the hon. Gentleman would cost the Exchequer in this year something like £4,500,000. Does he really propose to let off Super-tax payers that amount?

made an observation which was inaudible in the Reporters' Gallery.

I gather from the interruption of the right hon Baronet that having voted for the duties on tea and sugar, and all the other articles of general consumption, he would propose as his one object for relief of taxation the Super-taxpayers, and relieve them of £4,500,000 of taxation.

I did not propose any relief at all. What I proposed was that the tax should be fairly imposed. I say it is not fair to impose a tax upon an income which a man never receives. If the right hon. Gentleman would make the man who drinks tea pay a tax on tea which he does not drink, that is an analogy.

I did not put forward that proposal.

That is the proposal on the Paper, and I am glad the hon. Gentleman did not mean it.

I did not say it.

I hope, therefore, the hon. Member will not press this proposal any further.

I think the right hon. Gentleman knows he has a very bad case or he would not have used, if I may say so, such extremely weak arguments. No one ever suggested, when the Income Tax was raised from 2s. 6d. to 5s., that because in the previous year it had been 2s. 6d. the extra tax should only be paid on seven-eighths of the income. No one ever suggested anything of the sort. That is an alteration in the tax. Income Tax is an annual tax, and can be altered annually. What has been suggested is that this particular form of levying Super-tax is unjust, and was not intended when the tax was imposed. I admit I am, unfortunately, a Super-tax payer, but I do not know how long I shall be; if we go on at this rate, it will not be very long. But, putting the personal element out of the question, what Super-tax payers are asked is to make a return of the income they actually receive. Having made that return, they offer no objection, at any rate at the present time, to paying a further tax upon their income, but what they do say is that they are asked to make a return of the income received and then they are asked to make a return of something they have not received.

The right hon. Baronet sees the form every year. It says, "The income to be entered is your total income from all sources, estimated in the same manner as the total income from all sources is estimated for the purpose of exemption and abatement under the Income Tax Acts." That is to say, you return your total income without exemption or abatement.

But Income Tax, in the majority of cases, is deducted from the source. Out of £6,000, therefore, your total income is £4,500, and that is what you receive, and yet for the Super-tax you are asked to pay, not upon the £4,500, but upon the £6,000. It may have been, and I am not at all sure it was not, a small point when the Income Tax and Super-tax were low, but it is not so now, when both are very high. In certain cases you are taking 8s. or more from individuals, and if you add what is to be set aside for Death Duties, some people, although not millionaires, are paying 12s. in the £ out of their incomes to the State. The analogy of the tea could only arise if a man were asked to pay on tea he did not drink. I must say the right hon. Gentleman might easily make this concession.

Four and a half millions!

Why not? I think it would be very fair to make that concession. If the thing is just it ought to be done, and if it is unjust it ought not to be done. Justice is not measured by the amount of money lost or gained. I was very much surprised, in the Debate on the Excess Profits Tax, to hear the right hon. Gentleman asked to agree to the proposal because he had made a bargain, and because he would not lose much by so doing. That seems to me a very extraordinary proposal to put forward. It is not a question of what you are going, to lose or gain, or whether a bargain is made, but it is whether a tax is just or unjust. That is the only consideration which ought to influence the right hon. Gentleman.

I would ask the Chancellor of the Exchequer whether he would not consider the desirability of letting the country know exactly what well-to-do people pay to the State? I for myself have never been able to understand why the Super-tax has been based on an income which has not been received. The right hon. Gentleman said he had no objection how the tax was paid so long as the amount derived was the same as it is now. I am not seeking to revise the amount of the Super-tax, but what I desire to know is, why should I have to make this complicated calculation? Personally, I never trouble to make a calculation, but I put down what is the actual income I receive and send it to the Income Tax Commissioners. I am not able to check them. I cannot see why you want to levy a tax on an income a man has not received. Why not increase the Super-tax so that the country should know what well-to-do people are paying? I am sure the ordinary man in the street has not the slightest idea that the tax the rich man pays to-day mounts to something like 9s. out of every sovereign received. We in the House of Commons know, but the country does not realise it. Therefore, I would ask my right hon. Friend to get back from a very bad principle, started by a predecessor, of levying Income Tax on income not actually received. I do not know what actual amount would be required to bring the tax to the same amount as to-day, but I cannot see why the tax cannot be levied on the actual income received. I do hope, before the Report stage, my right hon. Friend will give consideration to the matter, because it would simplify it. After all, the taxpayer likes to make out a return and know what he is actually paying, whereas under this complicated method he does not.

It is quite clear I could not do that this year, as it would require a Resolution altering the whole rate of the Super-tax. If I understood my hon. Friend rightly, he would go a great deal further than he proposed. Of course, I know that a number of people conceal the true income liable to Super-tax, and so avoid their due shares of the burdens of the country at the expense of others.

I do not desire to protect fraudulent people.

It is not exactly fraudulent, but they may do it under the law, because, unfortunately, now it is difficult to amend it, though, of course, it is a practice I do not wish to encourage.

Will you tell us how to avoid the tax?

Is not the real position that you ought to add the Income Tax and the Super-tax together, and those with large incomes in reality pay 8s. 6d. in the £ with gradations downwards? The suggestion I would venture to make to the Chancellor of the Exchequer is, would it not be far better to do away with the Super-tax altogether and increase the Income Tax on a fairly graduated scale? It would simplify all this difficulty of making double returns. I agree with my hon. Friend in not desiring to reduce the revenue by a single penny, but it is a great grievance and annoyance to have to work out those complicated returns twice over, first for Income Tax and then for Super-tax, whereas if you put it all on Income Tax on a properly graduated scale you would produce the same revenue, simplify the administration and collection, do away with the Super-tax Department of the State altogether, and reduce expenditure. It would, I think, simplify matters, and make them more equitable and just than the present system of duplication and of charging taxation upon income that has not actually been received.

I intend to say one or two words in a democratic note. I have been amazed to hear rich men coining to this House at such a crisis to save their pockets when every class of the community is feeling the strain of the War to the utmost, and when we are approaching days during which I venture to say that this country will be tried to its very entrails. Men are being asked to sacrifice their lives, not to save themselves from the Income Tax, but to save their skins in face of the terrible fire of the enemy. Soldiers are losing their limbs and their lives, and the Chancellor of the Exchequer invites them to dispense with butter on their bread, and at such a crisis as this the House of Commons is entertained to long speeches in defence of Mammon. Some of those speeches have been delivered in a proper spirit, like that of the hon. Member for Mansfield (Sir A. Markham), but the speech we have listened to from the Front Bench has been in quite another spirit. I hope the outcome of this Debate will be that the Chancellor of the Exchequer will take particular note of what has been said for his next Budget, and I hope that the country will also take note, for then I am sure there will be a universal wave of feeling in this regard that the back of the poor man, which has already stood most of the strain and more than his share of the burden, shall be freed, and the right hon. Gentleman will know when he wants more money that he will be able to go to these rich men.

I had hoped that the right hon. Gentleman would be able to accept this Clause and rearrange his Super-tax to produce the same result. The right hon. Gentleman said that he did not mind how he got the money, and I concluded from that observation that he was prepared to do what I suggested, whether in this Finance Bill or the next docs not matter, so long as it is recognised that it is a most undesirable thing to have a basis of taxation which is not at all a true basis. The figure which the public assume to be the amount of the tax is not the amount at all. I hope the right hon. Gentleman will come to see that and make arrangements to put the collection of the Super-tax upon a sensible footing for the future. It is a very cheap argument to say what the right hon. Gentleman has said from the Treasury Bench to the effect that no private Member can suggest an Amendment increasing the amount of the Super-tax or any other tax in the Finance Bill. The method I have adopted is the only one that can be adopted in order to call attention to anomalies in the collection and assessment of the taxes. As for the speech of the hon. Member behind me (Mr. Lynch) I do not think it necessary to add to that kind of speech, which was evidently intended for consumption in some other place than the Committee of Ways and Means. The Chancellor of the Exchequer has not met any of the arguments which I put forward or the arguments used by the I hon. Baronet the Member for Mansfield as to the raising of taxation on a false basis, because when he says the Super-tax is at such and such a figure it is really nothing of the kind. I hope the right hon. Gentleman will come to the conclusion that there is a great deal in the arguments we have used in favour of what I can only say is the honest policy of taxation. Before the next Finance Bill the right hon. Gentleman can very easily alter the rates of the Super-tax and the method of assessment so as to produce the same result, and he should let everybody know exactly what it is the Super-tax payers are actually paying in Income Tax and Super-tax towards the cost of the War.

I would like to have had a reply to a remark which the Chancellor of the Exchequer seemed to direct to me with regard to the question of what basis people have to pay Super-tax upon. The Chancellor of the Exchequer said a good many people have evaded the Super-tax. I have said before that I do not pay Super-tax on anything that I can avoid. I think the Chancellor of the Exchequer directed his remark to me. I have told him in the past that I do not pay Super-tax on behalf of the mines. I pay on the income I receive, and I take it that the present Chancellor of the Exchequer agrees with his predecessor, who said that in the case of a man who disposed of his property to his children it was more in the interests of the State that the money should be divided amongst a larger number than a few. The right hon. Gentleman is perfectly well aware that a great many limited liability companies distribute only a small proportion of the total income they derive. It is quite correct for the Chancellor of the Exchequer to suggest that I was evading paying the Super-tax, but as a matter of fact, unless the Government are going to alter the whole basis on which the Super-tax is framed, it is clear that no taxpayer, according to the law as it stands, is called upon to pay Super-tax on other than the income he actually receives. If that is not so, what was the meaning of the right hon. Gentleman's answer in the concluding words of his speech?

I do not know why the hon. Member for West Clare (Mr. Lynch) described his speech as having a democratic note, for his remarks seemed to me to be exceedingly irrelevant. I do not know why the Mover of this Amendment does not stick to his guns, because there can hardly be a fairer subject upon which to divide the House. I protest against the assumption that any line taken on a question like this either is or is not democratic, and that is all claptrap. The hon. Member would argue that on this question he is serving God and the hon. Member for Devizes (Mr. Peto) is serving Mammon. That is a very rough-and-ready distinction, and quite unworthy of the House of Commons, and I protest against it. Why should not the tax be assessed in the manner desired by my hon. Friend? Where is the justice of taxing a man upon money he does not receive? When a man produces his pass-book and says this is what I have received, and I am willing to pay the amount fixed by Parliament, why, after that, is a computation to be made of the Income Tax, which is added to the amount? That is an indefensible method. You are merely taxing a man because he has a certain amount, perhaps as a result of his industry, and which he may spend mostly upon other people. I am rather sorry my hon. Friend will not stick to his guns. That is a point upon which those who most readily pay one-third of their income, and do it quite willingly, resent this particular method of adding Income Tax which they have never received to the total which they have received before another tax is put upon it. I think the broad principle of the Amendment of my hon. Friend is worthy of the attention of the Government.

My hon. Friend near me assures me that he took the same view that I did of the interruption made by the Chancellor of the Exchequer. Consequently I asked for a reply, and I want to know what is the meaning of it. The Chancellor of the Exchequer has no right to make an insulting observation with regard to an hon. Member of this House. The right hon. Gentleman looked directly at me when he made his observation, and he said it in a manner which led my hon. Friend near me to the same conclusion. Does the right hon. Gentleman impute motives to me or not? Of course, if he does not, I apologise.

I think the hon. Baronet is entirely mistaken in taking the view that the Chancellor of the Exchequer insulted him.

I find myself in a position of some difficulty. I heard what the Chancellor of the Exchequer said, but I did not catch the atmosphere or the direction in which he was looking when lie made his remarks. Unfortunately my right hon. Friend is out of the House, but he will be returning immediately.

I am sure we al know that the Chancellor of the Exchequer would not direct a remark of that kind, particularly to my hon. Friend. We know that the last thing the hon. Baronet would attempt to do would be to evade taxation.

Question, "That the Clause be read a second time," put, and negatived.

The next New Clause on the Paper, standing in the name of the hon. Member for Devizes (Mr. Peto)—[Allowance and Repayment of Duty in Respect of Motor Spirit Used by Ministers of Religion]—raises a question which has already been discussed and disposed of.

It is distinctly a separate subject.

Of course I cannot prevent the hon. Member from moving his Clause, but I must direct attention to the fact that the whole principle has been settled, and the only difference is whether he should get relief in one way or another. The principle has been settled that ministers of religion should not get this relief, and the discussion which the hon. Member could draw the attention of the Committee to would be distinctly limited to the difference between the tax on petrol and the tax on motor cars.