Mr. CHAMBERLAINThere has been a good deal of discussion of late about a levy or tax on capital. If by a tax on capital is meant a small annual charge, then I think that that charge is as widely distributed and more fairly and conveniently raised in the shape of our Income Tax. If, on the other hand, there is meant a large levy on capital, a large slice to be taken out of accumulated capital, then I beg the Committee to consider what the result might be. It is a bad time to propose such a tax when, for the past five years, you have been begging people to save, and when you are still obliged to ask them to save and to give you their savings. It is a bad time to tax those who have responded to your appeal by reducing their expenditure and making economies and to let those go free who disregarded your instructions and who spent their money when it was not in the interest of the State or in ways which were not in the interest of the State.
But consider a levy on capital apart from the circumstances of the moment. The Death Duties make such a levy once in a lifetime, and at a time when the taxpayer receives an accession of income, and since they are levied only at death, and we do not all die at the same time, the process of making the valuation and of levying the tax is a task of manage- 208 able proportions. It can be done justly and fairly as between man and man, and it can be done with a minimum of evasion or of fraud. And since only a portion of the capital of the country is dealt with in any one year the tax is paid without any disturbance of credit and without any depreciation of securities to the detriment either of the State itself or of the individual. If a levy was to be made on all the capital of the country at one and the same time by the tax collector all these advantages would be lost. To make an efficient valuation fair as between man and man and fair as between the revenue and the State would exceed the power of any revenue administration in the world, and I make bold to say that our administration is the best. It would exceed their power at any time, and still more now when the staff is still depleted owing to the War, and when they are charged with the overwhelming new responsibilities which the War has brought. It would be open to all the objections and all the difficulties to which the simultaneous valuation and taxation of the whole land of the country gave rise under the Land Values Duties, and it would be open to that objection on a vaster scale, because you would have to value not only real but personal property. Since very few people would have money lying idle sufficient to pay their obligations under the tax, it would mean an immense disturbance of credit. Everyone would be seeking to sell securities of one sort or another, and, where all are sellers, who would be buyers, and who shall measure the loss to the country by the depreciation of all securities? Who shall measure the loss to the individual through the same cause?
If, to avoid these difficulties, the State takes payment in kind, then all the difficulties of valuation still remain. The State cannot refuse to accept property of any kind at a valuation which the State itself has put upon it, and we should be left the owners of odd parcels of land and odd parcels of shares in every conceivable part of the country and in every conceivable undertaking, many of them of very doubtful value and very difficult to realise. I will only add that if it were thought that this expedient, once resorted to, would, as might well be the case, and as some desire should be the case, be resorted to again, at every moment of difficulty or of extravagance, it would then be the greatest possible discouragement to industry and 209 enterprise that the mind of man or Parliament could devise. It would be the strongest deterrent to saving and the creation of new capital, and it would be the strongest incentive to wasteful expenditure and to the dissipation or withdrawal of existing capital. I say boldly that, whatever be our views on the distribution of wealth or on the respective shares of the fruits of industry to which capital and management and labour are entitled, our great need now and for years to come is that we should have not less capital but more capital, and I hope the Committee will lend no countenance to so hazardous, and, in my opinion, so disastrous an experiment.
I estimate, as I have said, that this new scale of Death Duties will add £10,000,000 in a full year and £2,500,000 in the current year, taking effect from the date of Royal Assent to this year's Finance Bill. There is one small matter in this connection with which I must deal. The existing rate of interest charged in respect of outstanding duty is 3 per cent. That no longer corresponds at all to the value of money. It acts as an encouragement to postpone the payment of the duties, and, without wishing to suggest for a moment anything in the nature of a vindictive or punitive rate, I think it would be proper now to raise the rate to 5 per cent.
Before we leave the subject of the Death Duties, let me say that the Committee is aware that certain relief was granted from the Death Duties as regards the estates of members of H.M. Forces, Mercantile Marine, and fishermen. I now propose to extend those provisions in two respects. At present the death must have occurred within twelve months of the wound, accident, or disease to which it was attributable. Experience has shown that that period is not long enough to cover a considerable number of cases which fall within the spirit, if not the letter, of the law. I propose to extend the period to three years, and to give that extension retrospective effect. Further, I hope the Committee will agree that there should be power to grant relief to persons belonging to the categories that I have named dying within the same period of three years as the result of wounds, accidents, or diseases occurring after the War, but, in effect, as a direct consequence of the War. I have in mind such cases as military operations if they continue anywhere after peace is signed, and cases where death or accident may be due to mine-sweeping 210 or removal of dangers which the War has left behind. Provisions to that effect will be inserted in the Finance Bill.