NEW CLAUSE.—(Amendment of s. 44 of Income Tax Act, 1918.) (Hansard, 16 July 1919)

§ Sir F. BANBURY
I beg to move, That the Clause be read a second time. Clause 44 was a Clause which was really put in at my suggestion, but not quite in the form that I desired. Clause 44 says: If any individual who has been assessed or charged to tax for any year of assessment as respects which this Section is continued in force by any Act, claims and proves, in manner provided by this Act, that his actual income from all sources for that year is less by more than ten per cent. than the income on which he has been so assessed and charged, he shall be entitled to repayment of such part of any tax paid by him, and so on. That is to say, this is a reversion to the old custom that existed many years ago and was only changed by Mr. Asquith in 1908 or 1909, namely, that where amps; man finds that his actual income is less than the amount for which he is returned for the purpose of Income Tax, that he shall be allowed to pay Income Tax for the amount to which his income has been diminished. The words "ten per cent." have been put in. The result of that is that where a person has a fairly large income that 10 per cent. may mean a very great deduction from his income, and yet he may be unable to get any relief at all. 468 Take a particular case. A man has£10,000 a year; he returns his income at £10,000, although, as a matter of fact, his income for the year is only£9,000. He cannot, however, get a reduction on that£9,000 because it is not a decrease of more than 10 per cent. on his income. That seems to me to be very hard in these days, when taxation is something like 10s. in the£Hon. Members forget that, but there are a number of people at the present moment who, for every sovereign they receive, are giving back 10s. to the country, and that quite irrespective of any local taxation, of Death Duties, or anything of the sort. Therefore, I think the 10 per cent. ought to be omitted. It was the law for many years, from, I think, 1844 to 1908 or 1909, when /it was altered by Mr. Asquith. Mr. Asquith's reason was that the majority of people did not know of the Act of 1844, or whatever date it was, and that this provision was rather troublesome to the Exchequer because they kept finding out that there was such an Act. Therefore, he abolished it altogether, and you could not claim any exemption if your income were reduced. Four or five years ago I got a Clause put in, and the justice of my case was admitted, when, I think, Mr. McKenna was Chancellor of the Exchequer, fixing the 10 per cent. I hope my hon. Friend (Mr. Baldwin), who is now in charge, has been left in charge with instructions that he is not merely to reply to this proposal by saying he opposes it.

§ Mr. BALDWIN (Joint Financial Secretary to the Treasury)
The hon. Baronet has made such a singularly lucid explanation of this Clause that I have been able to understand it from the beginning to the end, although I am afraid that my instructions will not be satisfactory to him if I carry them out.

§ Sir F. BANBURY
Do not carry them out, then.

§ Mr. BALDWIN
Of course, my right hon. Friend was successful in getting this Clause inserted, but 1 do not think that the reason why he got it accepted by the then Chancellor of the Exchequer was that the Chancellor of the Exchequer wished to go back on what had been done in 1908, or that he was convinced by the eloquence of my right hon. Friend. I think he owed the acceptance of the Clause to the fact that we were at war and that, under Clause 43 and Clause 50 of the Income Tax Act, it was a concession given 469 to the taxpayer in view of the fluctuations to which incomes of all kind are subject at such time as the present. My own impression is—I do not know whether I am right—that the whole of this little group of Clauses under the Income Tax Act, which give special concessions to the taxpayer in regard to fluctuating incomes, will very soon be swept away again. But with regard to the 10 per cent. to which the hon. Baronet alludes, I do not quite agree with him that there is any hardship there. The concession given in the Clause is a very substantial one, and I really think that some small percentage is necessary to protect revenue authorities against an enormous number of trifling claims that might be made. If it were not for this restriction, it would be open to anybody who was in error to the extent of a three penny-bit to have all his case examined, with the necessary correspondence entailed, and with the mass of detail that would follow on any work of this kind, and 1 am sure my right hon. Friend the Chancellor of the Exchequer would not consent to make this 10 per cent. into a less figure, even to please the right hon. Baronet who is moving the insertion of this Clause. Considering that the 10 per cent. has lasted since the introduction of the Clause, and as its introduction was a concession, and having regard to what I believe to be a fact—that this and all these concessions arc of a very temporary nature—I hope ho will not press it any more.

§ Sir F. BANBURY
I quite agree that there ought to be some protection in order to avoid absurd claims for rebate, though I do not think that very many people would make absurd claims in this direction. If I might make a suggestion to my hon. Friend, it would be that he should, on the Report stage, substitute "5 per cent." for "10 per cent." If he will do that, I shall bevery pleased to withdraw my new Clause. May I ask him for some little consideration on that point?

§ Mr. BALDWIN
I think consideration was given when the 10 per cent. was inserted.

§ Sir F. BANBURY
At that time, as far as my recollection goes, the tax was not so high as it is now. Now a man has to pay 10s. for every sovereign he receives, and the 10s. which he has left is, according to hon. Gentlemen opposite, worth only about 5s. So that practically that man is left with only 5s. out of every sovereign that he receives; 10s. is taken by the 470 State, and the other 10s. is only worth 5s. In addition, he has to pay all the indirect taxation and all the increased costs which have arisen. Therefore, although 10 per cent. might have been a proper sum at that time, now that taxation has increased so much there should be some alteration in the amount. If my hon. Friend will tell me he will consider it—and we might discuss it with the Chancellor of the Exchequer when we have the interview which I understand he is going to give me—if he will do that I shall be pleased to withdraw the Clause.

§ Mr. BALDWIN
If the right hon. Baronet invites me, I shall be very pleased to discuss the matter with him.

§ Major COURTHOPE
The subject-matter of the two Clauses standing in my name was very fully and sympathetically discussed between the Chancellor of the Exchequer and the deputation only last week, and I shall not trouble the Committee or the Chancellor of the Exchequer by repeating the arguments. I therefore do not move.