§ (1) Super-tax shall be charged in respect of the income of any individual, the total of which from all sources exceeds £2,000, and Part II. of the Income Tax Act, 1918, shall have effect accordingly.
§ (2) The rates of Super-tax for the year 1920–21 shall, for the purposes of Section four of the Income Tax Act, 1918, as amended by this Act, be as follows:
§ In respect of the first £2,000 of the income—Nil.
§ In respect of the excess over two thousand pounds—
§ For every pound of the first five hundred pounds of the excess—One shilling and sixpence.
§ For every pound of the next five hundred pounds of the excess—Two shillings.
§ For every pound of the next one thousand pounds of the excess—Two shillings and sixpence.
§ For every pound of the next one thousand pounds of the excess—Three shillings.
§ For every pound of the next one thousand pounds of the excess—Three shillings and sixpence.
§ For every pound of the next one thousand pounds of the excess—Four shillings.
§ For every pound of the next one thousand pounds of the excess—Four shillings and sixpence.
§ For every pound of the next twelve thousand pounds of the excess—Five shillings.
§ For every pound of the next ten thousand pounds of the excess—Five shillings and sixpence.
§ For every pound of the remainder of the excess—Six shillings.
§ (3) All such enactments relating to Super-tax as were in force with respect to the Super-tax granted for the year 1919–20 shall have full force and effect with respect to the Super-tax granted under this Section.
§ (4) In estimating the total income of any individual for the purpose of Super-tax, the amount of any earned income shall be taken to be the full amount of that income without the deduction of any allowance under this Part of this Act, and Section 5 of the Income Tax Act, 1918, shall have effect accordingly.
§
The following Amendment stood on the Order Paper in the names of Mr. Charles Edwards, Mr. Bromfield, and Colonel Wedgwood: At the end of the Clause to add the words
In the case of the death of any married person liable to Super-tax at the rate applicable to the joint income of husband and wife during any year for which Super-tax is charged, a part only of the year's Super-tax shall be payable on the joint income of husband and wife proportionate
1364
to the part of the year which has elapsed before the date of the death of such married person, and Super-tax shall be payable in addition on that part of the said joint income which is the income of the surviving spouse on the basis of the amount of the survivor's separate income assessable for Super-tax purposes for the year calculated at the rates applicable to such separate income, but in respect of such proportion only of the Super-tax which would be payable for the year as the period within the year of assessment subsequent to the death of the survivor's spouse shall bear to the whole year of assessment, and Section 6 of the Income Tax Act, 1918, shall have effect accordingly as from the fifth day of April, nineteen hundred and twenty.
§ The CHAIRMANThe first Amendment standing on the Paper is out of Order. It introduces a charge, and would impose a tax on the widow to which she is not now liable.
§ Colonel WEDGWOODOn a point of Order, I do not know what the Amendment actually does, but I know what it is intended to do, and what I believe it does, remove a tax. The point is this: As the matter stands at the present time the tax is payable on the joint assessment of husband and wife. In the event of the death of husband or wife, Income Tax is still payable for that year on the joint income even if the survivor has not the income. The point was brought out in Mr. Justice Rowlatt's summing-up in the case of Lady Mary Wyndham v. Rex. The judge pointed out that the effect of the legislation on the subject of the Super-tax was that if the wife, who had a separate income of only £100 a year, were to claim separate assessment in the case where her husband who had £20,000 had died, she would be liable to pay tax for the whole of the taxable year, even if her husband had died quite early in the year. The rate was applicable to the joint income of £20,100. She could obtain no relief in view of any loss of income she might sustain. Our point is, that this Amendment does away with that injustice. It proposes that in future, in dealing with the Super-tax, the husband and wife shall not be made chargeable for the joint income of the previous year in the year in which the tax is actually paid. I submit to you, Sir, that this is an obvious injustice, and ought to be remedied. In asking the Chancellor to accept this Amendment, we are asking a reduction of the tax and not an increase.
§ The CHAIRMANUnfortunately in the drafting of this Amendment the hon. and gallant Gentleman has not done what he intended to do. He has brought into assessment a widow for the remainder of the year in which her husband has died. That is the reason why it is out of Order.
§ Colonel WEDGWOODI put that proposal in to make it absolutely square. We want to put them both upon an equal footing.
§
The following Amendment stood on the Order Paper in the name of Mr. Lunn: At the end of Sub-section (4) to add the following new Sub-section:
(5) In estimating the total income of any individual for the purpose of Super-tax there shall be included therein in respect of any bonus shares to which such individual became entitled during the preceding year by reason of any holding of shares belonging to him,—
(a) if the bonus shares were issued free and no subscription was payable in respect thereof, the nominal value or such shares;
(b) if the bonus shares were issued in return for a payment by way of subscription, the amount, if any, by which the nominal value exceeded the amount payable by way of subscription in respect of such shares;
and in respect of any shares owned by such individual in a private limited company, a sum bearing the same proportion to the amounts placed to reserve as the individual's holding of shares bears to the issued capital of the company.
§ The CHAIRMANThe Amendment standing in the name of the hon. Member for Rothwell (Mr. Lunn) also imposes a charge. It brings in persons not at present chargeable and in some cases would tax them twice over. Therefore it is not in order. These points can be raised in argument on the Clause.
§ Motion made, and Question proposed, "That the Clause stand part of the Bill."
§ Sir HENRY CRAIKI want to draw attention to this Clause as it is now proposed. I cannot boast of that amount of financial knowledge which would enable me to enter into details, but I think one is entitled, if one is to apply such study as he can to the economic conditions of the country, to ask the Committee to weigh all that is contained in this charge. I speak with the disadvantage of not knowing, and not being acquainted with the various interests concerned, but with the advantage that I speak impartially. I have held no 1366 land, and Super-tax leaves my withers un-wrung. I think it is necessary in considering a great question like this to remember the advance we have made upon what I consider a very dangerous and revolutionary sort of taxation. This is a question which has changed the whole aspect of taxation in this country. It is only 11 years ago since the first Super-tax was introduced, in the year 1909. Up to that time not a single financier of any reputation would ever have associated his name with any such proposal. No one would have opposed such a scheme of taxation more strenuously than Mr. Gladstone. I could quote for the benefit of my hon. and gallant Friend opposite (Colonel Wedgwood) another distinguished and very advanced Liberal, Mr. John Stuart Mill. His opinion with regard to a Super-tax was that it was, to say the least of it, a mild form of robbery.
A few years after these views were held by the most advanced Liberal Finance Ministers of the country we had this proposal made in the year 1909. I tabled a Motion against that Super-tax. It was discussed in the House, and I see no reason why I should not now make it perfectly clear what happened. There were many on the Conservative side of the House who had been severely struck by this Super-tax and they went into the Lobby against it. I was asked by my own Leader at that time not to go into the Lobby on account of the feeling of those of our own party who thought it was not right to vote against a tax which might affect their own pockets. I bore a certain amount of reverence for the delicacy which they showed, but I am not sure that I would have less reverence for them if they had said boldly, "Whether this is for our advantage or not, we consider it is not for the advantage of the country, and that caution ought to be taken in making this very dangerous descent."
It does not require a long memory to carry one back over those 11 years. The Super-tax amounted then to 6d., and I remember the Prime Minister waxing eloquent when I said that I sincerely believed that if a Super-tax was a proper system and ought to be used as a means of producing income that 6d. would never content me. I was laughed at, and the Chancellor of the Exchequer of that day retorted that he thought that to every Scotsman 6d. was a very serious consideration. That was hardly a remark 1367 worthy of the Chancellor of the Exchequer in a serious discussion, but it had to do duty at that time, and we allowed the tax to pass unchallenged. What has happened? I prophesied that in a few years it would not be 6d., but that it would amount to a good deal more. What is it now? It is 6s., and therefore in nine years it has increased twelve-fold. My right hon. Friend the Chancellor of the Exchequer knows quite well that I am not finding fault with his Budget and that I am in no way blaming him. I quite conceive that, having come to the point he has now reached, it was impossible for him to go back, but I ask this Committee, considering all that is involved in taxation of this sort, to think gravely how far we have already gone, how rapidly we have moved, and think of all that is involved in taxation of this sort, which is what I call a very near approach to confiscation.
10 P.M.
Let us see exactly what this in fact means. Who are the people who are chiefly harmed by this tax? I would recall to the Committee an other incident of that year. I happened to be sitting next to a member of our own party—he is no longer in this House—one of the great leaders in the world of finance. I asked him what he thought of taxation of this sort, and he said: "I entirely disagree with it as a fiscal measure. I think it is a mistake; but if you ask me what effect it will have, I reply that I view it with the most absolute indifference. You do not suppose that finance all over the world—that the greater finance is regulated or kept down by mere municipal regulations which you make with regard to your taxation. We must balance our business, and spread it all over the world." I remember another Member of the House—at that time a Radical Member—who also has ceased to be a Member. He came to me, and said: "We disagree on almost every possible subject, but I agree with every word you said in your speech to-night with regard to the Super-tax. I know that that Super-tax will be our first, our strongest instrument in carrying out what we intend to do." These two opinions are not altogether uninstructive. We answered the call of the Chancellar of the Exchequer in 1909 1368 for 6d. Super-tax. Eleven years later we are asked for a 6s. tax. How long will it stand there? It will go on on its Rake's Progress in interfering with the rights of property. Again, I ask, who are the people chiefly interested and wronged by this tax? Not the great financial interests, not the profiteers, not the great manufacturers, but the landed interest of this country. I know quite well that to hon. Members opposite any mention of the landed interest is like waving a red flag in front of a bull. I know my hon. and gallant Friend opposite (Colonel Wedgwood) can never see any political question, except through a glass which is coloured with the crimson beams of the landed interest. I never owned an acre of land. I am connected with no one who does own any; but I say if we look back at the history of this country, we find that the landed interest, and those responsible for it, have a right to claim that they have acted a great part in that history. It is not only unjust, but ungenerous and mean, for those who belong to a newer class to take up that cry. It is not my hon. Friends of the Labour party who have raised that cry; it is, as Lord Beaconsfield said, one of those commonplaces of middle-class ambition which humorously describes itself as democratic opinion. It is the middle class, the manufacturing class, who have led you into this unnatural, unreal, artificial dislike of the landed interest. Possibly you may doubt it, but I say that, looking through our history, one can see what has been done by the landed interest for this country, as by very few other classes of the country. They have sacrificed as much, and above all, more than with any other class, the property they own is considered to involve obligations and duties which they cannot get quit of, even if they would. Of course, there are unjust landlords; there have been men who, placed in that position, have used their power badly. But in what class are there not such men?
§ The CHAIRMANI am afraid the right hon. Baronet is getting too general in his remarks. This tax applies, not to one class, but to all persons whose income is over a certain amount.
§ Sir H. CRAIKI know that, but this class is the one which is taxed through Super-tax upon an income which is often 1369 purely imaginary, and not really at the disposal of those who receive it. There is no class which suffers by this Super-tax to anything like the same extent as the landed class. The landed class, we know, is credited with an income which is purely artificial, and which is estimated on a misleading basis, and it is upon that that they are charged Super-tax. This great landed class, who, despite the jeers of my hon. Friends opposite, have played a great part in our history, are rapidly coming to the end of their work. On every side it is becoming impossible for them any longer to hold their place. Land will be held, but not by those who held it as involving a certain duty, and as making themselves the friends of those around them. It will be held, necessarily, by those whose interests are far elsewhere than in the land, by those who have financial interests which will weigh with them more strongly than the land, by those who will either neglect their land or will, on the other hand, apply their business methods to it, and seek wholly and solely to extract the very largest profit from it that they can. That will be the result, that is already the result of what you have done in this Super-tax. You have taxed this class, be it great or small—that must be admitted—almost out of existence. You only have to look at the columns of the newspapers to see how few of the landowners can any longer afford to keep the land, with the burdens, the duties, the obligations always connected with it. Now that we have gone so far, we cannot cut this tax out of our Budget this time, and I know my right hon. Friend, however much sympathy he may have with this heavily burdened class, is bound to continue it, but it behoves this Committee carefully to take stock of the length to which they have gone and of the dangers involved in it. The Committee has perhaps shut its ears and blinded its eyes to the real facts of the case, because those injured by this tax have not themselves uttered their plaints, and have not made their remonstrances vocal. They have avoided doing so because they felt that heavy taxation was now necessary in the condition of the country. All honour to them for doing so. They have avoided it, and let us remember that from the first time this House introduced it in 1909 till eleven years after it has scarcely ever been 1370 the subject of half-an-hour's discussion, and on no occasion have these remonstrances or the objections to the tax been raised by any of that class to which I have referred. That class is one which may go down, but it will be regretted by the country, and it will leave behind it, I believe, whatever its fate may be, a memory of great public duties well performed. I would ask hon. Members to compare the happiness of the rural population in past generations under the guidance and with the friendship of this landed class who are now being taxed out of existence with the conditions of the manufacturing classes in our great towns.
§ Mr. W. GRAHAMI should like to make a brief but probably not inadequate reply to the speech of the right hon. Gentleman (Sir H. Craik), one of whose constituents I happen to be. I am sure I express the feeling of the majority of Scottish Members when I say that we are surprised to find such doctrines coming from a representative of a Scottish constituency, because we have always believed in advanced taxation and we have always subscribed very strongly indeed to the principle of imposing the taxes on the shoulders of those best able to carry them. At this time, in spite of the dark and almost terrible picture which the right hon. Gentleman has drawn, what are the actual facts of this situation? When the Super-tax was imposed in 1909–10 the actual number of people involved was 11,000. In 1918–19 the number involved was 48,000. If we pass this Budget and reduce the Super-tax limit to £2,000 we stand to add an extra 30,000 to that total; so that in round figures we cover not more than 80,000 people. No hon. Member will contend that a tax which falls on 80,000 out of 44,000,000 people can be said to be a tax which affects a tremendous portion of our industry and our commerce, or a large proportion of our life and activity. The broad facts of this tax do not substantiate the terrible picture which the right hon. Gentleman has painted for the benefit of this House. I want to make it perfectly clear from the point of view of the Labour Members that we fully appreciate the burdens which different sections of the community are carrying. We yield to none in our admiration of the personal sacrifice which has been made by the landed classes and others during 1371 the past five years. We have always recognised that landowners, land labourers and others have gone down together in one common cause. Let there be no doubt or hesitation on that point. I am also willing to admit, as one who has seen the incidence of this taxation under the investigations we made in the Royal Commission, that landowners are in a peculiar and in some respects a difficult position, though I am not willing to admit that they are not able to carry most of the taxation imposed upon them at the present time. That is not the point at issue in this Debate. If we analyse the Super-tax we shall find that included in the 80,000 people there is a conspicuous and strong element which year after year is drawing its income in this country, not so much by its own personal exertions, not so much from the toil in which it engages, but more or less by automatic processes as a result of great monopolies, trusts and combines which give that income without any effort or any exertion on the part of the recipient. Is it unfair, in the light of the present direct taxation and more especially in the light of the indirect taxation and the terrible burden which it involves upon the very poor, to say that people with £2,000 a year and upwards should be called upon to pay a little extra by way of Super-tax, and that we should ask them to make that sacrifice probably by the process of reducing luxury expenditure—there is nothing we require to do more than to reduce luxury expenditure—and so ease the financial situation of the country in a manner which imposes no injustice upon them, but which involves real benefit for the rest of the people.
§ Colonel WEDGWOODCato weeping for the lost virtues of the Roman republic was nothing to the right hon. Gentleman (Sir H. Craik) weeping for the landed aristocracy of this country. I think he might spare his tears on this occasion. Surely in this Budget in which we are abolishing all trace of taxation on land values or any form of burden upon the landed interest, and when they are getting back all the arrears, this is not the occasion for those bitter tears. It is not merely the landed aristocracy of this country who are paying super-tax. I do not like supertax a bit. I differ from most of my colleagues on these Benches in this matter. I have 1372 the strongest objection to supertax, and for very good reasons. My objections to supertax are that I object to putting the heaviest burden on the broadest back. I believe it is a universal claim in this House that you ought to put the heaviest burden on the broadest back, and that when you have done that you have done all that can be done in the way of taxation that is equitable, just, fair and proper. Well, Mr. Whitley, you and I know that that is not so. We know that taxation should not be according to ability to pay, but that it should be according to benefits received and that in that case you would have just taxation instead of merely equitable taxation. And one of my reasons, my only reason I suppose, for objecting to supertax or Income Tax, is that those are taxes which have no relation to justice, and that only by taxing lane values can you tax according to benefits received.
But the hon. Gentleman opposite in bewailing the results of the supertax forgot one very important point. The supertax is a tax which is hated and justly hated by all old men. It is very popular with the younger generation. The parent getting on in years who sees himself rendered liable to super-tax immediately thinks that his children require an independent income and they get it before they otherwise would. I have not done so badly myself. To evade Income Tax, and perfectly justly, by dividing your property among your children may be unpopular with the parents but it is extremely popular with the children. I cannot help thinking that one of the principal results of imposing supertax has been the breaking up not only of big estates, but also of the big properties in shares and capital among the children of the people who are enjoying those incomes. Not a bad result on the whole if you are going to consider the benefit of the greatest number instead of my canon measuring taxation by justice. The super-tax has come to stay. I quite agree that the supertax may be abused, and that in the supertax you are getting day by day and year by year more and more gross evasions. After all, dividing property among the children is not so much an evasion, but there are many less reputable ways of evading the Income Tax than that.
I think it is actually a Member of this House who has invented perhaps the most 1373 skilful way of evading Income Tax that is known. [HON. MEMBERS: "Name!'] He is not here. I would not give his name. I would not give him away for worlds. [HON. MEMBERS: "The scheme!"] I will give you the scheme. It is this: You form yourself into a company. All your property becomes the property of that company, and the dividends of all those companies in which you originally had holdings are paid into this holding company. This holding company is you, but it has this advantage that if this company pays no dividend to you, although you are the sole shareholder, you are not liable to Super-tax. It is true that Income Tax is paid. All the shares which are paid into that company of course pay Income Tax, but that company holds the dividends and does not pay any dividends out to you. The reserves accumulate; the property in the holding company becomes daily more valuable, and, when you want money, you borrow it from the company at a reasonable rate of interest. The company makes loans to you. In that way you avoid altogether the payment of Super-tax. I presume that at present that method is perfectly legal.
There are, of course, endless ways in which you can manage to dodge this tax. The way mentioned earlier in this Debate is very common. The issue of bonus shares by the companies is the best way of preventing shareholders having to pay Super-tax. You pay a regular 10 per cent. dividend and if you happen to have shares in certain companies you get every year a bonus share as well. You may have to pay 20s. for a share worth 40s., but the other 20s. is a little addition to your income or your capital. In any case that addition to your income does not have to pay Super-tax. You may pay Super-tax on the 10 per cent. dividend on the shares in that excellent coal company, but you do not pay Super-tax on the bonus share that you get, which adds to your wealth. This system of bonus shares is growing daily, because most of our company directors happen to be in the position of Super-tax payers, and, therefore, the natural tendency is to pay dividends not in the way of ordinary dividends but in the way of bonus shares, or shares issued at a discount. I submit that if this Super-tax has come to stay the sooner these evasions are done away with the better, 1374 because it is not merely the loss to the revenue that matters; it is the creating of dishonesty and a sense of injustice throughout the body of taxpayers. It is said, "If one man does it why not I?" Therefore, the system of attempting to evade taxation spreads. I beg the right hon. Gentleman as soon as possible to introduce legislation which shall make the Super-tax water-tight, and perhaps when he makes it water-tight he can reduce it at the same time, so that he brings in the same amount of money but brings it in from everyone instead of from those unfortunate ones who do not know how to evade the tax. I beg the hon. and learned Gentleman opposite not to waste too much time upon Gladstone and John Stuart Mill. After all, when we are recommending the views of Gladstone and Mill to this House we might also recommend their views on economy, on public expenditure, on war, and on foreign policy, and not merely their views on taxation. I wonder what Gladstone or Mill would have said if either of them had been Chancellor of the Exchequer at the present time. It is all very well to talk about the views of these pundits when taxation was 70 millions, 60 millions and even only 50 millions a year. You can have fine, sound and thorough views on finance with such taxation, but when you have to raise £1,400,000,000 even Mr. Gladstone might be unsound for a moment and might consider the possibility of getting money even by a Super-tax. I feel certain that if we could only persuade the Chancellor of the Exchequer to model himself more upon Gladstone and Mill, not only in the raising of the money but in preventing other people spending the money, we should not have Budgets like this.
§ Lieut.-Commander KENWORTHYI do not propose to deal with the terrible misfortunes of the landed class or the evasions practised by the plutocracy in order to escape taxation. I have a certain sneaking sympathy with the hon. Member for the Scottish Universities in drawing attention to this Super-tax. I think it is only right and proper that there should have been some little Debate on such a very crushing burden of taxation. When we come up to 12s. in the pound for Income Tax it is a matter for very grave consideration indeed. I do not want to make any proposal to abolish 1375 it or cut it down, and I would not be in order in moving any increase. I do think that the top level should be raised. There is a very good graduation on the revised rates up to that level, but not in the case of enormous incomes. In view of the terrible needs of the Exchequer, I think there should be a steeper graduation on those enormous incomes. That would bring home to the rich of the country what I wish to point out. This Super-tax is very hard in its incidence in certain cases, and leads to dishonesty and evasion. It hits the people who are, I believe, above all others responsible for the present financial state of the country. The people who pay Super-tax have been resisting the economies which we on these Benches have been trying to preach. The right hon. Baronet the Member for the City (Sir F. Banbury) has always resisted when we tried to effect real economies, and has always stood by the policy of enormous armed forces.
§ The CHAIRMANThat is quite outside the question.
§ Lieut. - Commander KENWORTHYThis tax is sometimes very severe, but nevertheless I hope it will bring home to the people what Imperialism costs and adventure abroad.
§ The CHAIRMANI do not know how many times I have told the hon. Member that he drags in questions which do not arise and he really must not pursue the subject.
§ Lieut.-Commander KENWORTHYI do not see how this Super-tax can in any way be reduced unless in the future various methods which have been pointed out for reducing debt are adopted.
§ Sir F. BANBURYIn my opinion the Super-tax should be abolished and if a tax is to take its place it should be in the form of Income Tax. What is the result of having Super-tax and Income Tax? The ordinary person, and this is very important in view of the enormous power now in the hands of the people, thinks that the Income Tax in its heaviest scale is 6s. in the £. As a matter of fact, the Income Tax and Super-tax which are really one tax, amount in some cases to 12s. in the £ and in many cases to 10s. in the £. That is not known. A large number of the working classes are under 1376 the impression that this is a rich man's. Budget and that the poor man is heavily burdened. Nothing could be further from the truth. This is really a Budget which imposes a great burden upon the rich men and the Super-tax is the chief reason why this great burden is imposed. I should like to congratulate my right. hon. Friend (Sir H. Craik) upon his extremely interesting and able speech, but I am not going into the question as to what the landed class have done for the country. It would be a little out of Order, and it is perfectly well known. The fact, however, remains that by imposing the tax in this way, you are creating a false impression as to the burden which people have to bear. This is not the first time that I have raised this question, and I intend to go on raising it until I get it altered. I cannot for the life of me see why the Chancellor of the Exchequer will not accept my suggestion and, instead of imposing 12s. Income Tax, made up of 6s. Income Tax and 6s. Super-tax, impose 12s. Income Tax on certain incomes. It would save an immense amount of trouble. I am one of those unfortunate people who pay Super-tax, and I happen also to be a landowner. Last year I paid Super-tax on £1,100 which I never received. The Income Tax Commissioners recognised it, but said, "Well, under certain circumstances"—which will never arise—" you may get it back." I do not think some hon. Members really understand the difficulties in which people who have to pay Super-tax are placed, especially if you have the misfortune to own land. You are assessed on your nominal income, whereas, as a matter of fact, you do not get more than about 60 per cent. of it.
§ Mr. PRETYMANMore like 6 per cent.
§ Sir F. BANBURYA very large proportion of it you never receive at all. It would be so much simpler to be assessed at the source in just the same way as you are assessed for Income Tax. The hon. Member for Central Edinburgh (Mr. W. Graham) apparently thinks that this a good tax because it affects only 80,000 people out of 44,000,000.
§ Mr. W. GRAHAMI quite agree that a tax may be very unjust even although it falls on a comparatively few people. I said that it was not true to suggest that it covered a large section of 1377 the population, and I showed that only 80,000 people were involved.
§ Sir F. BANBURYThat is why I think it is such a dangerous tax. It is a very big tax when you remember that it is in addition to an Income Tax of 6s. If it affects only 80,000 out of 44,000,000, and if the majority of those 44,000,000 have the vote, then, human nature being what it is, is it not a very great temptation to those people to say, "We will abolish the Tea Duty, the Tobacco Duty, or the Beer Duty, which fall upon the majority of the population, and we will make it up by putting it on the 80,000 people who, after all, cannot protect themselves, and therefore do not count." That is a serious state of things, and it is one of the great dangers of democracy, and therefore I think the Super-tax ought to be embodied in the Income Tax, and when expenditure is reduced the first thing that ought to be reduced is this enormous Income Tax and Super-tax.
Mr. CHAMBERLAINI am not rising in order to prolong the discussion, for I think the Committee will agree that the Debate, although no doubt interesting, has been still more discursive. Indeed, if, on every occasion on which such a thing were possible, we were to undertake such a rambling discussion as that we have just listened to, I should despair of making any progress at all. I rise to answer a specific question which was put by my right hon. Friend the Member for the City of London (Sir F. Banbury) as to why I did not adopt a suggestion which he has made, and in which he seemed almost to think he had a patent right, although he was willing that I should work his patent right, a suggestion for simply amalgamating Super Tax and Income Tax. Has my right hon. Friend read this invaluable work, the Report of the Royal Commission on Income Tax? May I refer him to paragraph 573, which says:
Some witneses have proposed that the Income Tax and the Super-tax should be merged and assessed together. If taxation at the source were abolished, and if Income Tax were invariably chargeable by direct assessment on the income of the year of assessment, it would, of course, be possible to charge the taxpayer in one sum at the effective rate appropriate to his total income. So long as taxation at the source is maintained at a standard rate—less than the highest effective rate—there is no possibility of emerging the ordinary Income Tax with 1378 the Super-tax. Take the case of a man who has £40,000 a year for taxed sources and no other income. Unless tax is to be deducted at the source at 10s. in the £, which is an impossible supposition, that taxpayer must continue to bear Income Tax by deduction at the standard rate and pay his Super-tax separately by way of a direct assessment. The suggestion that the two taxes should be completely merged and dealt with as one is plausible, and conceivably desirable in the abstract, but we are satisfied that there must needs be a separate assessment unless the foundation of the Income Tax are modified in a far more radical manner than we are prepared to recommend.It is not pure obstinacy which prevents me from adopting my right hon. Friend's suggestion, but it is because in the first place I am now fortified by the Report of the Royal Commission, and I am convinced that it is impracticable. May I now make an appeal to the Committee? There has been no obstruction. I do not suggest it for a moment, but there has been very full discussion, and we have made very slow progress, and I beg the Committee to help us to get on.
§ Sir OWEN PHILIPPSI wish to support the right hon. Member for the City of London (Sir F. Banbury), in the appeal he has made to the Chancellor. I have read the Report of the Income Tax Commission, and I do not think it in any way prevents the Chancellor accepting that proposal. I would appeal to him to give this matter further consideration before next year. The matter can be met in this way, that all that I think is necessary is that the whole 12s. should be known as Income Tax, but that only 6s. should be deducted at the source. I think that will get over the difficulty of the Chancellor, and the moment the House of Commons decides to call the whole of the 12s. Income Tax, we shall be prevented from hearing the sort of speeches that came from the Labour Benches this afternoon, saying that the rich man did not pay a fair share of the taxation of this country. I would therefore urge the right hon. Gentleman to give this question his consideration.