INCOME TAX (EXCESS PAYMENTS). (Hansard, 28 November 1916)

§ Sir STUART COATS
In times such as the present I certainly have no desire to cause needless trouble for any Government Department, and since my election as a Member of this House no one can accuse me of having unnecessarily occupied its time. But the very unsatisfactory nature of the response to my appeal to the Financial Secretary to the Treasury for information showing monthly, from the beginning of this year, the number of claims for a refund of Income Tax paid in excess, which were then unsettled, and his subsequent refusal to state the number and amount of such claims pending and unsettled on the 31st October, have made me feel that I must draw the attention of hon. Members to the present situation in this connection, and to protest against its continuance. It is a notorious fact that in almost every case where application is made for refund of Income Tax overpaid, weeks, if not months, elapse before any attention is paid to the claim by the Department of Inland Revenue. That is a state of affairs which to my personal knowledge has existed for some years past, but the present rates of taxation have caused it to become an intolerable grievance to a large section of the community. Take a man with an income of £150 per year, and an Income Tax refund due to him of £15, £20 or £30. Any one of those figures constitutes a very serious percentage of his total income. Considering the very high rates of present taxation, and the excessive cost of living, the hardship becomes manifest. The grievance is no imaginary one. I have been asked by one of my Constituents to raise this question, and I do not feel inclined to let the matter drop until we have something definite in the way of a promise of relief in this direction.
I will mention various examples illustrating the hardship to which I refer, and at the same time it must be borne in mind, as payments of refund are only made semi- 282 annually to some individuals, in several of these cases some months must be added to the periods to which I shall draw attention. There is the case of a well-known hospital in London which made a claim for refund of over-paid Income Tax early this year, and some months elapsed before it received payment of same, although all the time its wards were taxed to the utmost capacity in nursing the wounded, and a great strain was put upon its funds. Take a second example of a gentleman whom I know, a manufacturer engaged exclusively in the manufacture of munitions for the Government, the prices for same having been cut down again and again by the Government until it is very difficult to make any profit. This gentleman applied for a refund over six months ago, and he could get no satisfaction until he threatened to have the matter brought up in this House, whereupon he promptly received part of the payment due to him, and the balance is now under consideration. Thirdly, there is the case of a well-known lawyer. He made his claim, and had no satisfaction for five months, and he tells me that it was only as the result of two or three communications, and finally of a sharp letter on his part to the Inland Revenue Department that he succeeded in getting the claim paid at all. Fourthly, is the case of a man who some months ago entered upon a position which placed him in close touch with Ministers. His claim for a refund was accompanied by a certificate from Parr's Bank as to the amount of interest paid on a loan along with the counterfoil of a dividend warrant showing that Income Tax had been paid in excess of the amount claimed. Thus the whole of the evidence required for immediate settlement of his claim was in the hands of the Board of Inland Revenue, and there was no reason why that claim should not have been settled within a week. After waiting for ten weeks, and no attention paid to the claim, he went to the Surveyor of Taxes in his district and informed him that while he did not wish to use his official position to forward his own personal interests, at the same time he did not propose to endure the present state of affairs any longer, and that unless he received the cheque promptly he was going to make himself unpleasant in the matter. The cheque which I saw was received within forty-eight hours.
The fifth case is the most aggravated to which I shall refer, and comes from the 283 Wimbledon constituency, as have most of those to which I have made reference. It is that of a trustee of a trust for some young ladies, among whom he divides a small annuity from which Income Tax has been deducted. This gentleman states that as far as his memory serves him, in the last few years he has never had that refund paid to him within a year of the time he made the claim, and that on one occasion it was almost eighteen months before he received the cheque due under this trust. Moreover, he called one day at the Inland Revenue Office and was met by an official who told him that there were hundreds of other claims such as his, and that he would have to take his turn. That is curiously paralleled by the experience given in a letter under the signature of a small landowner which appeared in the "Morning Post" of 7th October as follows: I have a case in point of a spinster lady, a relative on whose behalf my solicitor makes claim for refund in respect of an annuity of £110, and I have never known the money returned in less than eleven or twelve months, and it is not for want of reminders, which are only met by a short, curt printed reply from the {Secretary of the Inland Revenue that the matter is still under inquiry. I venture to assert that the inquiry could be made in four days, or, allowing for the slow inefficient methods of the department of Inland Revenue which deals with these claims, in tour weeks instead of twelve months. Just think of the position. This year Income Tax at the rate of 5s. in the £ will be deducted from this annuity of £110, amounting to £27 10s., and probably this lady will not receive that large portion of the income for a period of twelve months. What can justify the continuance of such a state of affairs as that? I could go on multiplying examples from England and Scotland, but I have given sufficient to show that I am drawing attention to a widespread abuse which causes severe and increasing hardship to fall upon a large and not the least deserving section of the community, whose resources are now strained by the increased cost of living, and very heavy taxes, and whose incomes are frequently reduced by the fact that dividends have been reduced, or suspended, owing to the present state of affairs. I am sure that there are many hon. Members who can corroborate what I have just said, and who feel the injustice, as I do, to be of a peculiarly cruel and unnecessary character. It is idle to say that the necessary assistance cannot be obtained to cope with the arrears of work. I have made inquiries, and I am informed that there are plenty 284 of female and elderly male clerks to be had, and if there had been any genuine desire to do away with the present situation, matters could have been rectified long ago. The Department of Inland Revenue has no more right to take the funds of the taxpayers and lock them up for months or for a year than the treasurer of a large industrial concern would have to take the funds of his company and receipts turned over to him and deposit them in his own private banking account, pocket the interest on same, and turn them over to the company of which he was an officer at any time from three to eighteen months, whichever happened to suit his own convenience. In saying this, I do not wish to be understood as doing it in any spirit of hostility to the Government. If any evidence should be brought forward either that there is an improvement being effected now or contemplated in the future, I shall be glad; but I do wish to emphasise most distinctly that this is a very serious grievance, crying for an immediate remedy. I therefore urge upon the Financial Secretary to the Treasury not to put us off with any platitudes about "the country being in a state of war," but to take up the matter at once and give us satisfactory evidence that a state of affairs which is a distinct reflection upon the conduct of one of our great Departments is done away with once and for all, and that such injustices as these shall not be allowed to recur in the future.

§ The FINANCIAL SECRETARY to the TREASURY (Mr. McKinnon Wood)
The hon. Baronet the Member for Wimbledon has brought before the House a lot of cases, of none of which he has personal knowledge, and of some of which he has read in letters in the newspapers It is perfectly impossible for me to deal with those cases. If the hon. Baronet desired the cases he has brought forward to be investigated, there was a very simple-method, and that was to call the attention of the Inland Revenue Department to the cases, with names and particulars.

§ Sir S. COATS
It is quite useless.

§ Mr. McKINNON WOOD
There is not the least evidence in regard to any one of those cases that the particulars are as stated. The only way in which I can deal with the matter is to lay before the House the general facts, for hon. Members will appreciate the fact that I cannot deal with 285 the particular cases of which I have had no notice, which were anonymous cases, and of which the hon. Baronet himself seems to have very little personal knowledge. What are the facts? The hon. Baronet said that he regretted to have given any trouble. I regret very much that it is necessary to have had special research made into this matter, because all the time taken for this special research has been taken from the work of dealing with the repayment of Income Tax—and necessarily had to be so taken. Let us look at the general facts. I think the House will see that the gloomy picture painted by the hon. Baronet is far removed from the facts. Since 1st January, 1916, the Department which deals with the repayment of Income Tax has dealt with 661,000 claim forms. How many of those are unsettled? Fifteen thousand two hundred and fifty. Of these fifteen thousand 5,400 are out of the last fortnight's list of claims, which amounted to 14,000, so that the total number, looked at from that point of view, of the claims undisposed of out of 661,000 is 9,850, or l½ per cent. of the total. What an appalling figure! But there is a great deal to be taken off that 1½per cent. A number of these claims come from abroad, and therefore many cases require a longer time to deal with. There are other reasons of a special character which affect those claims. There is one very common reason which probably would account for most of the cases which the hon. Baronet has brought before us, and that is that the people, in filling up these claims—and we all recognise that all forms for claims and other forms are difficult things to fill, easy enough when you have done it once or twice, but difficult when you come to it fresh, very difficult for an unlettered person, and, indeed, for an educated person—have omitted necessary particulars or have given erroneous particulars quite innocently. I think it will be found on investigation that the principal cause of delay has been either that some question of technical difficulty was raised by the claimant or the necessary particulars were omitted. Surely those figures I have given and which I regret to have had to get out specially, though it was necessary in view of the hon. Baronet's proposal to speak on the matter, do not justify the lamentable picture painted by the hon. Baronet. They are altogether inconsistent with his statements. I can only myself say that for 286 some years past I have given assistance to persons who were unaccustomed to business—mostly elderly ladies of limited income—and I have never had an experience like that. Perhaps I knew how to fill up the claims. A delay of a few weeks is the most that has ever occurred. It is no-use putting forward anonymous particulars which one cannot investigate and then on them basing a general charge against a hard-working and very successful Department. What are the facts?
Since the War broke out, 55 per cent. of the trained men in this Department have been lost to it. Their places have had to be filled by untrained men, and the work of the staff has been very greatly increased. The hon. Baronet referred to the fact that the Income Tax is at a very high figure. That fact has led to the extension of the principle of graduation of Income Tax, which necessarily adds more work, and more complexity, in dealing with these cases. Besides that, in order to meet the hardships which undoubtedly would have occurred if the tax of five shillings had been deducted, and the owner of property had had to wait the whole year, various arrangements were made by the Treasury to assist persons who were entitled to abatement. In the first place, when a person is in receipt of earned income subject to direct taxation, and also has unearned income, the tax of which is deducted at the source, the arrangement was that the abatement would be given by way of deduction from the duty to be collected under the direct assessment. In the second place, in the case of income from rents of property, provided that the owner lodges all the particulars early in the financial year, it has been provided that the lower rate may be deducted by the tenant and the owner in that way does not stand out of the full amount and is not obliged subsequently to claim an abatement. Another thing has been done. There has been enormous hardship in the case of a person all of whose income was unearned income derived from investments from which the tax was deducted at the source. If the bulk of the income was of that character, that is from investment, it was felt a great; hardship that they should wait a year, and that the person with an income perhaps not taxable at all should have to do without a quarter of his income for the whole year. Therefore, it was provided for the first time, that at the end of six months, when 287 the income for six months had been received, a claim could be made and repayment is made by the Department. In those cases where they are dealing with claims which they had before, the Department do not look at them at all severely if they are in accordance with the claims they have been accustomed to receive, and they are passed very rapidly. They are passed rapidly, because at the end of the year the whole matter will be gone into, and it will only have been probably six months since the matter was gone into before. There have Been 14,000 of those claims received, and how many are outstanding to justify the awful picture painted by the hon. Baronet? Eight hundred! I do not think he can claim that that is an extraordinary proportion. Eight hundred out of 14,000 of those claims are all that have now not been disposed of.

§ Mr. R. McNEILL
After how long?

§ Mr. McKINNON WOOD
Those claims are being constantly received. That is all that is outstanding. It is not a question after how long; the question is that there have been 14,000 claims, and in all 13,200 have been disposed of, so that there cannot be any great delay. But of course the delay usually occurs through some error in particulars furnished to the Department. Here you have a Department, that has lost more than half of its experienced and trained people, which has to deal with a much more complicated system and with a much larger mass of work. I think some credit should be given for the effort that has been made to meet the case of those who suffer from this heavy taxation. I think if you look at all the circumstances of the case, instead of censuring the House would congratulate this Department of the Inland Revenue for having dealt with that enormous mass of work with so much expedition as they have shown. When you look at the broad facts, the charges of the hon. Baronet fall necessarily to the ground, and the only regret that I have in the matter is, not that the question has been raised, because I think it is a good thing that these facts should be known to the public, but that I had to take away overworked officials from work in which, I think, they would have been better employed.