Mr. CHAMBERLAINI have finished with Customs and Excise. I turn now to direct taxation, and, first of all, I must say something about the Excess Profits Duty. The tax in its present form is a war tax. It was imposed under the stress of war, and when, in the midst of the enormous burdens we had to bear, it was felt that profits in excess of pre-war profits might justly be called upon to make a special contribution. It is open to many objections, but it was a rough and ready method of justice which Parliament, in its then, happily, not very critical mood, accepted without too much difficulty, and the revenue results of it have been most satisfactory during the War period. It was imposed for the first year at 50 per cent., then for a varying period at 60 per cent., and since the 1st January, 1917, at 80 per cent. It has been, as I have said, a good revenue raiser, but there are great objections to it. In the first place, it operates with unfairness and inequality as between firms with a good pre-war standard of profit and firms with a poor pre-war standard or no pre-war standard at all. In the second place, at the existing high rate nobody can doubt that it has encouraged wasteful expenditure. When £4 out of every £5 would have gone to the State if not spent by the owner, he was inclined to lavish expenditure on his business. But more 205 than that, it cannot be doubted that a flat rate tax of 80 per cent. on all profits over a pre-war standard or, where there was no pre-war standard, over a small margin, acts as a great deterrent to enterprise and industry and a great deterrent to new development. I do not wish under these circumstances to continue the tax a moment beyond what is necessary at so high a figure as at present; it would be contrary to public interest, and I do not propose to do it. On the other hand, I have to remember that, as I said, this is a war tax, that war expenditure is still continuing, that even after peace is signed war expenditure and the burdens of war will still remain, and I am not in a position simply to repeal the duty without finding anything to put in its place.
In these circumstances my first effort was to find some form in which the profits of business might be called upon to make a special contribution to the revenue of the country without the anomalies and the objections to which the present tax is subject. I had before me suggestions made to that effect by my hon. Friend the Member for the Everton Division of Liverpool (Sir J. Harmood-Banner) and by Mr. J. F. Mason, who was then a Member of the House, and who I very much regret is not now a Member, and by Mr. Lionel Hichens, a name well known in industry, and I had also the example of taxation imposed with similar objects both in the United States and in Canada. But my information is imperfect, and the time at the disposal of myself and my colleagues has been short, and we have been subject, as the Committee knows, to other daily grave preoccupations. I need not say that if a new tax is to be imposed, it would in any case be necessary that it should be carefully thought out and its advantages and disadvantages carefully weighed in order that we should not repeat the anomalies or injustices of the existing tax. Therefore the form of the tax would be of great importance, and such an inquiry takes time. I have had other suggestions made to me, but the Government have not been able to give to the subject in the weeks before the Budget the attention which it requires for a satisfactory solution.
Under the circumstances, therefore, I propose to the Committee, as a temporary and only as a temporary measure, to continue the existing tax for another year at the reduced rate of 40 per cent. I 206 anticipate that the yield of the Excess Profits Duty on this basis for a full year will be £50,000,000. The Committee, after listening to the amounts produced last year and anticipated this year from the higher tax may be surprised at the smallness of that figure, but it must not be supposed that the yield of the 80 per cent. rate under war conditions is at all a safe guide as to the yield under post-war conditions. I have to allow for the right of recoupment which is given by statute under certain conditions to those who have paid the tax. I have to allow for the fact that the high yield of the tax, and indeed the initiation of the tax itself, was based upon the fact that certain businesses were making extraordinary and abnormal profits. Under these circumstances, although the Estimate must of course be a very rough and hypothetical one, I am advised that it would not be safe to count upon a revenue of more than £100,000,000 if the tax continued at 80 per cent., and I expect a revenue of £50,000,000 at the lower rate of 40 per cent.