§ (1)Income Tax for the year beginning on the sixth day of April, nineteen hundred and eighteen, shall be charged at the rate of six shillings, and the additional Income Tax under Section twenty-seven of the Finance Act. 1916, on securities which the Treasury are willing to purchase, shall be charged, levied, and paid for that year at the same rate as was charged for the year beginning on the sixth day of April, nineteen hundred and seventeen.
§ (2)All such enactments relating to Income Tax, including the said additional Income Tax, as were in force with respect to the duties of Income Tax granted for the year beginning the sixth day of April, nineteen hundred and seven teen, shall have full force and effect with respect to any duties of Income Tax granted by this Act.
§ (3)The annual value of any property which has been adopted for the purpose cither of Income Tax under Schedules A and B in the Income Tax Act, 1853, or of the Inhabited House Duty for the year ending on the fifth day of April, nineteen hundred and eighteen, shall be taken as the annual value of that property for the same purpose for the next subsequent year:1288
§ Provided that this Sub-section—
- (a) so far as respects the duty on inhabited houses in Scotland shall be construed with the substitution of the twenty-fourth day of May for the fifth day of April; and
- (b) shall not apply to the Metropolis as denned by the Valuation (Metropolis) Act, 1869.
§ Motion made, and Question proposed, "That the Clause stand part of the Bill."
§ Mr. RAWLINSON
I desire to raise one or two small matters in connection with the Income Tax. One quite realises that it is necessary to raise the amount of the tax, but I particularly desire an assurance from the Chancellor of the Exchequer as to the collection of the tax at the present time. Are we sure that the taxes we put on are really carefully collected? I would put that question, first of all, with regard to the tax on incomes under £200 a year— the smaller incomes upon which the tax is not collected in many cases by the regular means of collection. Can the right hon. Gentleman tell the Committee anything as to the way in which that tax is coming in? I have heard disquieting reports even in England, and I suppose as far as Ireland is concerned it is too much to ask for an assurance to this effect. I would also wish the right hon. Gentleman to tell us something about the collection of the tax on the War Loan dividends. From a business point of view the present arrangement is an extraordinarily bad one. I was interested in an estate which was wound up in 1916, and I found it very difficult to get anybody to take the tax. Eventually I got someone, as a personal favour, to make an assessment, and the money was paid last year. Again, we have had great difficulty about War Loan dividends which came in last December. Not only did the Chancellor of the Exchequer not get the tax last December, but the return has yet to be made for this year, and the tax will not be payable till next January. Even then it will not be collected until a later date. That is a very long delay in getting in a tax, in addition to which there is a considerable loss of Income Tax, because people do not make their returns properly. Difficulties arise at every turn. I have no doubt that before the Chancellor of the Exchequer made the present rules he carefully considered the matter. In one sense it was a choice of evils. I would suggest that, if it is found that the rules work as badly as they do at the present time, the Chancellor of the Exchequer should reconsider them. Another question of great 1289 complication in connection with the Income Tax, and which has been raised in the House frequently by various Chancellors of the Exchequer, is the question of the three years' average. It may be defensible in certain times, but it is absolutely indefensible now. The various exceptions which may be granted whittle the tax away practically at every turn. I also desire to have an explanation in regard to Sub-section (3), which says:The annual value of any property which has been adopted for the purpose either of Income Tax under Schedules A and B in the Income Tax Act, 1853, or of Inhabited House Duty, for the year ending on the fifth day of April, nineteen hundred and eighteen, shall be taken as the annual value of that property for the same purpose for the next subsequent year.Is not that a new Sub-section, put in for the first time? If so, what is the object of inserting it here? I assure the right hon. Gentleman that I do not in the least oppose the raising of the Income Tax, which appears to be absolutely necessary, and it is not in any spirit of antagonism to the Clause that I ask for an explanation on these three points. Naturally, we do not like the Income Tax being raised, but the whole Budget has been most carefully constructed, and it is only on matters of detail that one desires to offer criticism.
§ Colonel STIRLING
May I ask, on a point of Order, whether on Clause 23 we can have a general discussion on the taxation of woodlands, or whether we should raise the point on this Clause?
§ The DEPUTY-CHAIRMAN
I see that the Government have an Amendment on the Paper to Clause 23, and on that the point can be raised.
§ Mr. BONAR LAW
I should like, if I may, to give a reasoned reply to what has been said by my hon. and learned Friend (Mr. Rawlinson), although I rather think that what we are discussing is not administration but additional taxation, and the points he raised were questions of administration. If, Sir Donald Maclean, you will allow me, I will explain how the matter stands. The Committee will remember that at the time we tried to raise the Loan in January, 1917, we were very anxious—the House as well as the Government—that it should be made a great success. As had been done by all previous Chancellors of the Exchequer, I consulted experts in the City in regard to this matter and was told by everyone of them that it would make the Loan much 1290 more attractive if we could take away the deduction of Income Tax at the source. That seemed, on the face of it, obvious. We were very anxious to get subscriptions, as far as possible, not merely from those who were very rich but from all sections. As I said before, it meant that everyone who subscribed to the War Loan, in order to get back the difference by abatement allowance, had to prove that they were not liable to pay the full amount of Income Tax. By the arrangement we made the. custom was reversed, and the claim had to be made on the individual. I consulted my advisers about this, and they thought, as my hon. and learned Friend has said, that there would undoubtedly be some delay in collection, but they did assure me that, in their opinion, in the long run there would be no loss of revenue. Acting on the best advice I could get, I was satisfied that, on the whole, putting one advantage against a disadvantage, it was in the national interest at that time to encourage subscriptions to the Loan by doing away with the principle of deduction at the source. I quite admit, and I am pure every financial expert in the Committee will agree with me, that it was rather a bad precedent, because the success of the Income Tax largely depends upon collection at the source. I admit that, but I still think that in all the circumstances in which we were then placed it was the right thing to do. The result of the Loan justifies the course we took.
As to the collection of the tax on small Incomes, it is obvious that it must be very difficult, comparatively, to collect the Income Tax in the case of these small incomes. All that I can say—I have made inquiry—is that this collection is getting more and more efficient the longer this tax lasts. My advisers are getting all they can in, and are well satisfied with the result. As an indication of the result of the tax, and that the effort made to get it in has not been unsuccessful, I may say—I am sure my right hon. Friend the Leader of the Labour party (Mr. Adamson) will agree with me that once the House has imposed the tax it is the duty of the Government to collect it—that one of the best proofs that it has been effective is the number of deputations I have received from various bodies. My right hon. Friend has been present at most of them. They have been deputations urging me to increase the limit to which the Income Tax applies. As to Sub-section (3), I have no note upon it, and I do not know whether 1291 or not it is new. If there is any difficulty, it can be put right on Report. I will make inquiries about it.