HC Deb 08 July 1924 vol 175 cc2041-7

In estimating the income of the previous year for an assessment of Super-tax, there shall be deducted the amount of Income Tax for each previous year which the individual shall have paid or be liable to pay.—[Mr. Hannon.]

Brought up, and read the First time.


I beg to move, "That the Clause be read a Second time."

This Clause brings before the Committee and the Chancellor of the Exchequer what I think is a very old grievance in relation to Income Tax administration. The Clause simply seeks to re-arrange the present methods of collecting Income Tax so as to give the Super-tax payer some credit for the Income Tax which he has previously paid, and which, in point of fact, never came into his possession at all. One would imagine that, in strict equity, if a man has paid, or is liable to pay, Income Tax he should be allowed that measure of abatement in the calculation of his Super-tax.

The Chancellor may say that Super-tax is graded according to income, and that in the fixing of the gradation of Supertax, account was taken of the fact that no concession had been made on Income Tax previously paid or due to be paid, but even the gradation of Super-tax is not a justification for making the Income Taxpayer pay upon income which never goes into his pocket at all. We have had this question before the House several times. It affects a very considerable number of people who are largely concerned with industrial enterprises, and is a burden imposed upon those whose incomes are mainly contributing to the enlargement of the available working capital for industry. I would ask the right hon. Gentleman, notwithstanding the differences which are so apparent between us from time to time, to consider this Clause from the point of view of equity and of common sense. He knows better than anyone that one of the canons of taxation is that it must be just to the individual. Here you are actually taxing a man upon income which never goes into his pocket at all and from which he will derive no sort of benefit except contributing to the maintenance of the State. It is only fair to ask that some sort of consideration should be given to the Income Taxpayer from that point of view.


The point of the Clause, which I can dispose of in a very few sentences, is to relieve Super-taxpayers of a very considerable part of the Income Tax and Super-tax which they pay under the existing method of assessment If the suggestion were adopted it would add to the injustice which may be felt by certain grades of Super-taxpayers. It would destroy the fairly regular grading which prevails at present in the assessment of Super-tax. The operation of this Clause would be to give far greater relief to Super-taxpayers with large incomes than to Super-taxpayers who have smaller incomes. For instance, the tax relief which would be given under the Clause to a. Super-taxpayer who was just above the exemption limit for Super-tax, say with an income of£2,100 a year, would be 1.86 per cent., but in the case of an income of£4,000 the effect would be a reduction of 10 per cent., and when we get to an income of£50,000 a year there would be a reduction of 14 per cent. The hon. Member would have no reason for saying that if this concession were made it would be a relief to the Income Taxpayer. It would not. I do not know if he knows what his proposal would cost. It would cost£20,000,000 a year. If I made that remission I should have to find the revenue from some other source, and there is only one source from which I could find it. I should have to impose increased taxation upon the same class that I have relieved by accepting this Clause. In the last two years Income Taxpayers have had remissions of taxation amount to£80,000,000 a year, and an enormous part of that has gone to the very people for whom the hon. Member is now pleading, and for whom he is asking a further remission of£20,000,000.


And whose capital is invested in the industries of the country.


Not necessarily. At any rate there have been remissions of£80,000,000 in the last two years and the hon. Member is now suggesting another£20,000,000. I think the demand is perfectly preposterous and I am sure the Committee will not entertain it.


Does the right hon. Gentleman really think the present proportion between direct and indirect taxation is fair?


That does not arise at all. We have had that question debated almost ad nauseam.


I do not take the same line as my hon. Friend below me, but the Chancellor of the Exchequer has gone off very adroitly at a tangent, and I should like to put my own point of view about the Clause. I support it but I do not ask for any remission of taxation. I do not ask for a single penny to be taken off so far as I am a Super-tax payer. All I ask is that I should pay Super-tax on what I have received. If you need to put the tax up do so and, if the small Income Tax payer who becomes a Super-tax payer receives by the new arrangement a less benefit than the big Super-tax payer, adjust the tax rate so that the taxpayer, whether big or small, pays to the State exactly the same amount that he contributes now. Suppose, for example, that I have£3,000 a year. The Income Tax at 4s. 6d. on that would be roughly£700. But I am assessed to Super-tax on£3,000, which I have not received. I have only received£2,300. I may be assessed for Super-tax at X shillings in the£. Let us call it 3s. I would rather pay the rough equivalent, say, 4s. in the£and be assessed on£2,300 than pay 3s. in the£and be assessed on£3,000. Let it be seen by the public that those who pay Super-tax are paying a higher rate on their incomes than the present rate of figures show. If I pay 4s. 6d. in the£Income Tax and 3s. more for Super-tax, people say I am paying 4s. 6d. and 3s. on my income. I am not. I am paying more likely 4s. 6d. and 4s. I am willing to pay the State what I am paying now but I ask to be assessed so that the truth shall come out as to what I am receiving and what I am really paying.


It is probably my fault, but I cannot possibly follow the hon. Gentleman who has just sat down. I think there is a certain amount of confusion. Whether we pay Income Tax or Super-tax, it comes to the same thing. I think if we look upon it from the point of view that Super-tax is merely an additional Income Tax, we get the right point of view. At present we pay Income Tax up to£2,000 a year at 4s. 6d. in the £ and from that point we have a graduated Income Tax which we call Super-tax. I wish the word were abolished. If we had instead a graduated Income Tax, I think the Exchequer would not suffer and the general public would certainly understand it. Income Tax payers are paying a bigger sum than appears in many returns. I have every sympathy with those who have endeavoured to reduce the Income Tax. I moved to reduce it by 6d. on the Budget Resolution, but the Chancellor could not see his way to accept it. I wish he had. But I have very little sympathy when we come to deal with Super-tax. Those who have to pay Income Tax should not be unduly assessed, but I fail to see that there is any advantage to be gained from the Clause. So far as I understand it, what is proposed is that the sum that is paid in Income Tax shall be deducted from the total amount when it comes to assessment for Super-tax. Surely you are going to give a certain section of the taxpayers an advantage to which they are not entitled. I fail to see why we should be called upon to support this Clause. There are many others on the Paper which appeal to me very much more than this. There are two or three that I shall move myself. I hope the Chancellor may be persuaded to give us something. I am amazed when he tells us this would cast the colossal sum of£20,000,000. That in itself is sufficient to destroy any hope of its being accepted, and I hope that it will be withdrawn.

Lieut.-Commander BURNEY

I agree with the hon. Member who has just spoken in regard to the difference between Income Tax and Super-tax, but it makes very little difference because Income Tax and Super-tax are graded from 4s. 6d. in the£right up to 11s in the £ There is one point the right hon. Gentleman did not deal with at all. Super-tax is paid not in the year in which the income is received, but in the year following. It should be deducted in the year in which it is due, because the fact that it is paid a year later presupposes that there is a stable price level. During the slump in 1920 many individuals and firms earned very large incomes and were assessed to Super-tax a year later, and they had to pay on an altogether different price level from that at which they received their money. In some cases they paid perhaps not 6s. in the£Super-tax, but probably 12s., because between 1920 and 1922 the price level varied from about 330 to 180. That seems to me to raise the whole question of the Budget. We have had no statement whatever as to what is the monetary policy of the Government, and whether they are going to maintain the price level at any given figure. Therefore the Clause has to be viewed not only from the technical point of view, to which the Chancellor very cleverly tried to turn the Committee's attention, but one has to consider it in regard to the whole monetary policy of the Government. It is impossible for any person to deal with any of these Amendments unless they know what is the fundamental basis of the Chancellor of the Exchequer's Budget, and what is the condition precedent to an estimate of any revenue. The whole question of an estimate of revenue must necessarily be based upon the price level in the country. That brings into question what is the attitude of the Government in regard to its monetary policy.


I have been patient with the hon. Member. He seems to have gone wide of the Amendment.

Lieut.-Commander BURNEY

I am sorry if I have gone wide of the Amendment. The point I am trying to make is that so long as taxes are paid in a different year from that in which they are received, and so long as the monetary policy of the Government is unstable, it is impossible to get a fair measure of taxation with any acceptable incidence of any certain tax. It is for that reason that I hope the Chancellor of the Exchequer will arrange, if he is in office next year when the next Budget is introduced, that there shall be some regard paid to that point.

Question, "That the Clause be read a Second time," put, and negatived.