§ 17. "That—
§ (a) the additional duty of Income Tax (called Super-tax) shall be charged, in respect of incomes which exceed £2,500, as follows:
|in respect of the first£ 2,000 of the income||Nil.|
|in respect of the excess over £2,000—|
|for every pound of the first £500 of the excess||one shilling.|
|for every pound of the next £ 500 of the excess||one shilling and sixpence.|
|for every pound of the next £1,000 of the excess||two shillings.|
|for every pound of the next £ 1,000 of the excess||two shillings and sixpence.|
|for every pound of the next £1,000 of the excess||three shillings.|
|for every pound of the next £ 2,000 of the excess||three shillings and sixpence.|
|for every pound of the next £2,000 of the excess||four shillings.|
|for every pound of the remainder of the excess||four shillings and sixpence.|
§ (b) the like provisions shall have effect with respect to the Super-tax as so charged as had effect with respect to the Super-tax charged for the year beginning the sixth day of April, nineteen hundred and seventeen; and
§ Resolution read a second time.
§ Sir F. BANBURY
I beg to move, in Sub-section (a), after the word "which" ["in respect of incomes which"], to insert the words "after deducting Income Tax."
The object of my Amendment is to secure that the Super-tax shall be levied not on a sum which the man does not receive, but on the sum which he does receive. As everyone knows, the Super-tax at present is levied, not on the actual income of a man, but on the amount which he would have received if he had not had to pay Income Tax. When the Income Tax was only Is. or something of that sort in the £1, it really did not very much matter whether the Super-tax was charged on the actual income or on the gross amount, but now that the Income Tax has risen 6s., it makes a serious difference. Supposing a man has an income of £4,000 a year, 6s. Income Tax on that represents £l,200, and his actual income is, therefore, only £2,800; but he is called upon to pay the Super-tax on the £4,000 which he has never received, and which, in fact, he is not able to get. That does seem to me to be a very curious way of levying.
§ Sir F. BANBURY
The right hon. Gentleman is referring, of course, to the deduction, but that really does not meet my argument. It may be argued that it is necessary to get the money, and that if the Income Tax is levied on the actual amount received it would have to be raised in amount. Admitted for the sake of argument that it is necessary to obtain the money in this way, I should much prefer 1631 that the tax should be increased, and for this reason, that there has been lately a considerable discussion as to whether or not there should be a levy on capital. I doubt if the vast majority of the people of this country really understand the amount which has to be paid on incomes of over £3,000 or £4,000, and if there were an increase in the tax itself simply in order to raise the same amount of money it would have this advantage that people would know what certain classes of taxpayers are actually paying to the State. We have, I believe, been told by the Chancellor of the Exchequer that a man with an income of £20,000 a year pays 9s. 5d. in the £l, but there are very few people who know that. I think it is only fair that people who are paying these very high taxes and who, as the Chancellor of the Exchequer will admit, have hitherto paid them without murmuring, should have it known that they are mulcted to this extent by the State.
§ Sir F. BANBURY
Yes; that also has to be considered. But my Amendment deals with the Super-tax, and with that alone, and I want it to be so arranged that that Super-tax shall not be charged on what a man does not receive. It does not seem to me to be fair to do that, and I, for one, would be ready to pay a larger rate of Income Tax provided that the Super-tax was levied on the amount I actually receive. I am a little doubtful as to the advisability of imposing such a high Income Tax and Super-tax. I do not say that personally I have any objection to pay. I do not believe that the people who do pay it have any great objection, but there are many people who are under the impression that the Super-tax is not a very large sum, and that at the highest it only represents 4s. 6d. in the £ whereas it is something very much greater. I do not want, however, to enlarge upon this point. I will content myself by moving the Amendment.
§ Mr. BONAR LAW
I hope and think my right hon. Friend merely desires to draw attention to a question which is a very old subject of discussion rather than to press it now. I quite admit there is a good deal of force in what he has said. It is rather absurd for a man to pay Super-tax on an income which he does not get. But really it is as broad as it is long. We 1632 have to get the money, and if we made this suggested change the Super-tax would have to be made proportionately higher. There is also something in what my right hon. Friend has said as to the desirability of people knowing how the higher incomes are taxed. Still, I do not think it is possible to consider making any change at the present moment. No doubt when we go into the whole question of Income Tax it is possible the Super-tax as such may disappear, and it may be a question of graduated taxation right through. Therefore, I do not think we need have this discussion now. I am inclined to think for myself that the man in the street, who does not really follow these things closely, may believe that the rich man pays more than he actually does. He sees that the Income Tax is 6s. and the Super-tax 4s. 6d., and it appears to him, therefore, that the total amount of the tax is 10s. 6d. That is quite a common idea, and although the tax is pretty high we know it is not as bad as that. I shall be glad if my right hon. Friend will not press his Amendment.
§ Mr. L. JONES
I do not really think the point is of great importance. It is purely an arithmetical question as to what is the percentage of a man's gross income which is taken by the State in the present form of the tax. I rose mainly for the purpose of drawing attention, not to the imposition of Super-tax on an income which a man does not receive, but on his escape from payment of Super-tax on an income which he has received.
§ Amendment, by leave, withdrawn.
§ Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
§ Mr. JONES
I think the point I was about to make does arise on the main question. That point is that the dividends paid last year on War Bonds and War Loan Stock—dividends which are paid without deduction for Income Tax and Super-tax—are not included in the statutory income which is taxed, and therefore do not appear in the Super-tax returns. The result is that the dividends of 5 per cent. on War Loan Stock and Bonds escape any payment of Super-tax 1633 in the current year, and they will only begin to pay Super-tax in the year 1920. I have no doubt my right hon. Friend took that into account when he was making his Estimate. I should very much like to know what is the loss to the Revenue by that arrangement. I should like to know also, in regard to the form in which Super-tax is levied on statutory income, whether there is any way of getting round it, or how it comes about that all these dividends which have actually been received by investors in War Loan are exempted from Super-tax this year? I cannot see any objection to their paying it. I know, in fact, it has come as a great surprise to some holders of War LoanStock that they have not been called upon to pay it, and some have gone so far as to return these dividends to the Commissioners of Income Tax, and are now asking to have their returns sent back in order that they may strike out the dividends which in a hasty moment they included.
§ Mr. JONES
The Super-tax is payable on the incomes received by the taxpayer last year, and the Super-tax payable for the year 1918–1919 is on the income received in the year 1917–18. Consequently the incomes which have actually been received by the investor in the last year will not pay the Super-tax this year, and the result may be a loss in perpetuity of a considerable sum which might have been collected by the State without any hardship upon the receivers of the income.
§ 8.0 P.M.
§ Mr. BONAR LAW
The question is complicated, as my right hon. Friend (Mr. L. Jones) understands. I do not think we 1634 have any loss. I think it is a case of postponement, and, as he knows, while he is putting a point of view which is that these people are too well treated they are putting their point of view that they are being wrongly used by being asked to pay 6s. instead of 5s. The explanation is that at the time we were raising the War Loan at the beginning of last year I was asked to make it as attractive as I possibly could, and I am sure everyone will agree with that. I was urged by nearly everyone in the City whom I consulted to give people the right of not having the Income Tax deducted at the source. The object of that is obvious, because every small investor who has a claim, if the tax is deducted at the source, has the trouble of making his claim and getting back the money. If the other course is taken, the Treasury has the trouble of hunting him up and getting the revenue. What I did was to consult with them as to the amount of loss the Revenue would suffer by agreeing to this course. They advised me, after carefully going into it, that there ought not to be a loss in theory, but that there might be a loss in practice by our not getting all the people who should do to pay. Acting on this advice, I came to the conclusion that it was worth while running that risk for the purpose of making the Loan more attractive. That is the explanation, and I hope the House will accept it.
§ Resolution reported,