§ 13. "That there shall be charged on all payments made in respect of the purchase or supply of articles sold or supplied in Great Britain or Ireland (excluding articles sold wholesale unless sold by auction), which shall be declared by Resolution of the Committee of Ways and Means of this House to be articles of luxury, and on all payments made in respect of goods sold or supplied, accommodation supplied, or services rendered, at any place in Great Britain or Ireland which shall be declared by Resolution of the Committee of Ways and Means of this House to be a place of luxury, an Excise duty of an amount equal to one-sixth part of the payment."
§ Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
§ Sir CHARLES HENRY
Whilst I am not enamoured of this Luxury Tax, and personally I would prefer the Chancellor of the Exchequer making an addition to the Income Tax in order to avoid it, now that he has decided to impose this duty, the Committee which he has set up has solely to deal with the Schedule of the articles on which the duty is to be imposed. I would like some information on this point. As I understand it, the consumer or the ultimate purchaser will have to pay the duty, and there will be no duty paid by the retailer or by the distributor when he purchases from the wholesaler except in the case of sale by auction. If the Chancellor 1595 will permit me to say so, I think there he is up against somewhat of a difficulty. I will take an instance which is familiar to a good many Members of this House. Take sales at Christie's, for example. There was a sale there recently in aid of the Red Cross. If I bought an article at that sale, before Christie's would have delivered me that article, I would have had to pay this duty of 2d. in the 1s. But if a dealer bought the article — he is really in this instance a wholesaler — according to this I find he would also have to pay the duty. Therefore, if a dealer buys an article at auction, and I buy it from the dealer, does the Revenue obtain this duty twice?
§ Sir C. HENRY
Then I hardly think it is equitable. I really think this will not only create hardship, but will hit auction sales. I think it is a point that will require some consideration. There is another point. As I understand, the Chancellor of the Exchequer has not brought forward this Luxury Tax entirely as a war method of raising taxes, but, so long as we have this great load of debt upon us, as a permanent addition to our fiscal system. I know at the present time it is almost impossible for an individual to get things from abroad. After the War, when the present regulations and restrictions are relaxed, people will be able to go to the Continent and buy things and import them. I will put a concrete case. I go to Paris to buy an article of luxury, say, a table, or my wife goes over and buys an article of dress. She can import that article, and the Exchequer will get no revenue from it. I am not speaking from a Free Trade or Tariff point of view. But if in normal times the Chancellor is imposing this Excise Duty on these articles of luxury, must he not, in order to safeguard his revenue, impose a countervailing import duty? Otherwise there is a great temptation for people, when possible, to do their shopping abroad, and be able to buy at 15 per cent. lower price than in this country.
§ Sir C. HENRY
It all depends. It may pay one. Those are some of the difficulties, and, as I understand this Committee will have nothing to do with the imposition that is laid down in the Finance Bill, but will only deal with the Schedule of the articles, I think the House would 1596 like to have some information with regard to the points I have put before the Chancellor.
§ Sir W. RUTHERFORD
I venture to think there is a very simple answer to the difficulties which the hon. Baronet seems to anticipate. In the first place, with regard to sales by auction, some of us have been of opinion for some years, when members of our family go to auctions, that it would be a very good thing if some brake and some obstacle could be put in the way of their indulging in the practice, and I cannot imagine anything more hopeful or more satisfactory for our taxation in this country than the tax that is now proposed. It seems to me that if Christie's had sold an old master, say, to a member of the firm of Agnew or Duveen, and Mr. Agnew or Mr. Duveen, or some dealer of that description, keeps that picture for two or three years and eventually disposes of it, I cannot see why he should not pay the tax just as a private individual going to buy it. Therefore the objection from that point of view really comes to nothing. As regards the difficulty suggested about going over to Paris, there, I think again, the hon. Baronet has fallen into error. He has overlooked the fact that they have a similar tax in France.
§ Sir W. RUTHERFORD
It does not benefit the British Treasury in any shape or form, but if the hon. Baronet thinks he can buy a similar article in Paris because there is no tax of this kind, he is neglecting the fact that only a few months ago the French Government imposed a similar tax, and I am one of those who are under the impression that the terrible expenses all over the world, including even the United States, are going to be such that this tax will be adopted almost universally, and the idea that the hon. Baronet will be able to go to any place, where anything can be purchased that is really worth purchasing, and escape this tax if it is an article of luxury, is, I think, a wrong one. I think he will find that he will have to pay. I would appeal to the patriotism of the hon. Baronet that if he is going to buy an art production for himself or a dross for his wife such as he has suggested, that he should do it in England — why not? where the tax, at all events, will go to the British Exchequer, instead of going — as he 1597 threatened just now — over to France, where he would have to pay exactly the same tax, and the French Government would get the money. I do not think there is really anything in either of the two objections which the hon. Baronet has put before the House.
§ Sir F. BANBURY
I do not agree with the hon. Baronet as to the way in which he regards this particular tax. If the Select Committee do their duty properly it seems to me that it is an extremely good tax, because there can be no question about it; but at the present moment a large number of people are spending a consider able amount of money which they ought not to be spending. What we require at the present is thrift. We require it more than anything else. We will not, however, get this merely by advocating it. Mention has been made in some speeches by hon. Members of a certain gentleman. I do not just remember his name—
§ Sir F. BANBURY
— —going about advocating thrift, and so far as I can remember, at one of his meetings he was asked how it was that he was wearing a starched collar at the time he was advocating that no money should be spent on things of that description. It has no effect, this advocacy. It is the duty of all who can to cease unnecessary spending, and anything to this end put forward in the House of Commons I shall be extremely glad to support. A great deal depends upon the Select Committee. I am extremely glad the Chancellor of the Exchequer did not do me the honour to put me on that Committee.
§ Sir F. BANBURY
I see; the Patronage Secretary to the Treasury. I suppose that would be the right hon. Gentleman the Member for Dumfries, who probably selected all these gentlemen. I gather from the form in which this Resolution is worded that when the Select Committee have come to their decision it will be submitted to this House, and that we shall have the opportunity of deciding whether or not we approve of the result of their 1598 deliberations. A great deal will depend upon the method in which they have chosen the articles which are to be taxed. I am not in any way casting any reflections upon the Committee, for their duty is one of those difficult duties which are imposed from time to time; and it is quite possible that certain arguments may have to be put forward against the recommendations of the Committee or in favour of other recommendations. I presume we shall not be in order in suggesting another tax. All we shall be able to do will be to move to reduce the number of the articles or the duty fixed. I do not quite understand the meaning of the words in the Resolution: "Excluding articles sold wholesale, unless sold by auction." If anyone goes to Christie's to buy a work of art I do not see why he should not pay the 2d. If a dealer — and dealers arc usually very astute gentlemen — he will be perfectly well-advised in paying the 2d. But there is the further proviso, and I do not see how you can distinguish between the man who buys an article for the purposes of resale, and the man who buys an article for the purpose of use.
§ Sir F. BANBURY
I do not understand the proposal. It is not quite the illustration given to us by the hon. Baronet. He talked about Christie's, but you do not sell pictures wholesale at Christie's. I know very little about art. I could not go to Christie's and spend a large sum of money for pictures, or anything else. You do not, so far as I know, buy pictures wholesale, but simply, so to speak, by retail. I should like to ask what is actually the difference between the sale of an article wholesale by private treaty and the sale of an article wholesale by auction? What are the articles upon which this tax is to be imposed? Is it to be imposed upon article A if A is sold wholesale privately to B? If it is sold wholesale by auction to me, do I then pay the tax? I do not see the object of that. I do not see why there should be a difference or a penalty upon the person who sells the same number of articles by private treaty — why he should be treated better than another person who sells the same number of articles by auction? Probably there is some reason for it, but I cannot see it, and before we part from this item I hope we shall. have an explanation.
§ Mr. BONAR LAW
This very short discussion to-day is a good illustration of the difficulty encountered in dealing with taxes of this kind. I think, also, it is an indication that the Government were right in trying to get the moral support of all by giving the matter over to a Select Committee for the preparation of a Schedule, instead of simply presenting a Schedule worked up by Board of Trade officials, to be followed by that kind of criticism with which such is usually accompanied, when Members point out the probable effect of the tax upon this, that, or the other. I think the whole of the House takes the view, on broad grounds, that this is a kind of tax which, if we can, we ought to impose. The Government certainly put forward the proposal to that end, and are assured that the Committee, and the House of Commons, will help us. Anyone who has had, even for a short while, any official connection with the Treasury will know that there is a feeling of apprehension in anything new like the present proposal. Its difficulties stare one in the face. The question arises, "How is it to be worked out?" I was frightened when I began to consider this proposal. I fancy my right hon. Friend opposite, if I am not mistaken, was faced with the same feeling and apprehension in connection with a smaller tax—that is, the Entertainments Tax—but he was convinced that it was a right kind of tax in wartime, and it has brought in £5,000,000 of Revenue, and our present proposal will, we believe, give us a large sum of money. This, too, we believe, is the right kind of tax to impose in wartime.
Mention has been made of Christie's and cases that may arise here, and how impossible it would be to say that if an article were sold to a private person he should not pay the duty, while if it is sold to a dealer by auction he should pay the duty. The difficulty of working out cases like this is almost insuperable. There is no intention of making that distinction which the words of the Resolution, I admit, seem to imply. Take the case of the auction sales of furs, which are not sold wholesale in the ordinary way. If an article is sold wholesale in the ordinary way it is not to be treated differently from the things sold wholesale by auction. We shall have to make arrangements to meet these various difficult cases. All kinds of difficulties of this kind are in front of us. 1600 But when the time comes we shall rely upon the House of Commons to help us to get over these difficulties.
Sir H. DALZIEL
I should like to put one point to the right hon. Gentleman. It will undoubtedly come up from the Committee as a result of their deliberations. As I understand it, the Resolution excludes articles sold wholesale unless sold by auction. What does that exactly mean? I will give a case about which I would like to know the view of the Chancellor. Suppose a picture is sold at Christie's for £20,000, and it is bought by a wholesale dealer for the purpose of re-sale, would the tax apply in a case of that kind?
§ Mr. BONAR LAW
The House of Commons will have the opportunity of considering points like that put by the right hon. Gentleman. My own view, however—and I am not going to say anything which I have deeply considered — is this: If a dealer goes to Christie's and is prepared to buy, in spite of the fact that he knows he will have to pay the tax, I do not see why he should not pay it. It is almost impossible, however, to deal with auction sales of that kind on the basis that the person who is buying for himself will pay, and that the person buying for another one will not. Cases of that kind will have to be very carefully considered, and the House of Commons will have the opportunity of expressing an opinion upon the proposal put forward.
Sir H. DALZIEL
I am very much obliged to my right hon. Friend for giving us that explanation. I was only anxious to guard against this Resolution being passed, and confusion being caused by our being bound by it as it stands.
§ 6.0 P.M.
§ Sir J. WALTON
I approve of the principle of the Luxury Duty. No one could have voted, as I did the other evening, for imposing an extra tax upon sugar, which is most felt by the poorer people in the country, unless he were at the same time quite prepared to impose much larger burdens on the wealthier portions of the community. One has only to walk through the streets of London to see the shop windows crowded with articles of luxury which are wholly unnecessary in war-time. I think it is a very happy inspiration on the part of the Chancellor of the Exchequer that he should bring in this Luxury Duty. We have had a statement from him to-day 1601 showing the reasonable spirit in which he has approached the subject. We have had from him a recognition of the difficulties to be got over. We have also had an assurance from him that questions regarding the articles to be included in the Schedule, those articles which are sold wholesale, and so on, can be fully considered in Committee, and adjusted in an equitable manner. Personally I should be glad to know that imported luxuries were also to be taxed, because if they are not to be equally taxed it produces an inequality and injustice to the manufacturers of similar articles at home. I do not know how the Chancellor of the Exchequer proposes to equalise that in order that the English producers of luxuries will not be placed at an unfair advantage. I support very strongly the putting on of this Luxury Duty, and I hope that the Schedule of articles to be included will be drawn wide enough to cover what really can be dispensed with during the War, and the purchase of which is unnecessary expenditure which ought not to be made in view of our general financial position to-day and what it is likely to be in the near future.
§ Mr. J. HENDERSON
I am afraid there will be a good deal of difficulty in regard to the option which is offered. In the auction rooms in Mincing Lane expensive wines are offered for sale and bought in large quantities by the trade, and the wine merchant retailing wine would find that there would be a double tax upon it.
§ Mr. HENDERSON
In this case you are not selling one picture, but selling hundreds of dozens of bottles of wine.
§ Mr. McKENNA
These articles might be sold to the trade, and there might be competing with the trade private purchasers, and then the same difficulty would arise as in regard to the sale of pictures at Christie's. I think, however, that these questions might be settled better in Committee, and we cannot deal with them now.
§ Mr. WATT
I do not rise to oppose the Luxury Tax, and I think the Chancellor of the Exchequer is to be congratulated upon initiating it. I also congratulate the 1602 right hon. Gentleman upon the fact that for the first time he is inviting the assistance of a House of Commons Committee, and this is the initiation of a new principle, namely, that a Committee of the House of Commons is to assist the Chancellor of the Exchequer in the formation of his Budget. I do not know whether the right hon. Gentleman is satisfied with the Committee as it is set up, but I am told that it only represents the drapery trade and the Press. The point I want to direct attention to is that large establishments in the drapery trade are now advertising that they will pay this tax for their customers for one or three months. I would like to ask whether the Department are going to take any steps to deal with that action. I have had representations made to me from such establishments in my own Constituency that they regard this as unfair competition, and the right hon. Gentleman will realise that the 17 per cent. they are offering to pay for their customers on these articles of luxury will not come out of the profits of the establishment, but they will be put on some other articles which will probably not be luxuries, and, therefore, you will have the public paying a Luxury Duty on article which are not luxuries. The establishments which are advertising to pay this tax for their customers are, in many instances establishments paying Excess Profits Duty. If they pay Excess Profits Duty to the Government and they now arrange to pay the Luxury Tax it will come off the excess profits that should be paid to the Government. Therefore you will have this extraordinary position that the Government will be paying its own Luxury Tax and instead of getting excess profits the Luxury Tax will be taken off. I hope the right hon. Gentleman will take an early opportunity of dealing with this point so that this inequality will disappear.
§ Mr. D. MASON
I think the hon. Member for the College Division of Glasgow (Mr. Watt)said he was an enthusiastic supporter of this tax, and he congratulated the Chancellor of the Exchequer on initiating it. I think the illustration the hon. Member gave must have convinced anyone that it was an eloquent testimony to the unsoundness of this particular part of the Budget. While we all desire a reduction in the purchasing of luxuries, the hon. Member gave an illustration to show that already the drapery establishments are 1603 advertising that they are going to pay this tax for their customers, and the result will be that this will actually give a stimulus to the purchase of luxuries. The result of these advertisements will be to stimulate ladies to come to those particular shops to make their purchases quickly in order to escape this tax. The Committee appointed to consider this question has been referred to, but I think one ought to raise one's voice against what may be a waste of time on the Committee, because if you try to interfere with trade in order to get at some particular articles this invariably leads to evasion, and accentuates the difficulties which you are trying to overcome. I only wish to take advantage of my hon. Friend's very excellent example to show the inherent unsoundness of this particular tax. We all desire economy and a reduction of luxuries, but I think the better way would have been to increase the Income Tax or the Super-tax.
§ Resolution reported,