§ In estimating the income of the previous year for the purpose of assessment to Supertax there shall be deducted the like sum as, under Section sixteen of the Finance Act, 1920 (as amended by this Act), shall have been allowed or shall be allowable in the case of earned income for the purpose of ascertaining the assessable income of the taxpayer for the purpose of Income Tax for such previous year, and the like deductions as, under or by virtue of Sections seventeen to twenty-three, both inclusive, of the Finance Act, 1920 (as amended by this Act), shall have been made, or shall be allowable, from the assessable income of the taxpayer for the purpose of Income Tax for such previous year.—[Lieut.-Colonel Pownall.]
§ Brought up, and read the First time.
§ Lieut.-Colonel POWNALLI beg to move, "That the Clause be read a Second time."
I know mercy cannot be expected for the Super-tax payer, but I am here to plead for a small measure of justice for the Super-tax payer which at present he does not get. While the great majority of our taxes have been reduced in the last four or five years, the Super-tax, which was increased by Is 3d. in 1920, still stands at a higher figure than it did at any time during the War, and is now 6s in the £in addition, of course, to Income Tax. I have heard from the benches opposite the plea that reduction of Income Tax benefits the rich man unduly. Many people forget that owing to the Super-tax having been increased by, it so happens, the same 1s. 6d. by which Income Tax was reduced, the very wealthy—I regret that I am not one of them—are now paying just as much as they were doing five years ago before Income Tax was reduced. My plea is that those allowances which are given in respect of Income Tax, the allowances for wife and 310 children, should also be given in regard to Super-tax. To all intents and purposes Income Tax and Super-tax are the same. It is true that for administrative reasons the Income Tax is only deducted at the rate of 4s. 6d. in the £, and Supertax is taken on the larger sums, but to all intents and purposes Income Tax and Super-tax are the same, and therefore it seems only fair that the allowances which are given in respect of Income Tax should also be given in regard to Super-tax. The rather interesting point comes out with regard to this that Section 15 (4) of the Finance Act, 1920, enacts that in calculating Super-tax the one-tenth of earned income which is allowed in the case of Income Tax should not be a deduction from the point of view of Super-tax, and yet although this deduction is automatically barred there is no provision made that a reduction shall not be given in respect of family allowance, wife allowance, or children allowance, and therefore I contend that those allowances, which are not statutorily barred, as are, I agree, the allowances given for earned income, ought to be exempt from the Super-tax point of view. I do not think this Clause, if it were confined only to the family allowance, would run into a very considerable sum and Lord Wrenbury, who first raised this question, had a letter in "The Times" three years ago, and made out a very strong case indeed for this allowance being granted. Since then there have been legal proceedings, and the Judges have found that the law as it now stands can only be granted in respect of Income Tax. It seems to me grossly unfair that that should be the case, and I think the unfortunate Supertax payer is deserving of this small measure of relief, and that if he is 311 married he should have the personal allowance of £225 and the small allowance in respect of each child.
§ Sir H. BUCKINGHAMI beg to second the Motion.
Mr. GRAHAMIt is true that this has been the subject of discussion in the courts of law, and the House is aware that the decision was given against the argument that is now being submitted. My hon. and gallant Friend argues that there is some hardship in the existing position. Surely, that argument proceeds upon a misunderstanding, if not a fallacy, regarding the structure of Income Tax and Super-tax in this country. At the present time, as regards the Income Tax, there is an allowance for earned income, and there is also a family allowance. Super-tax is not something new, separate and distinct from Income Tax. It is, as the. Royal Commission pointed out, a development or continuation of Income Tax, and, accordingly, if we were to adopt this proposal, it would mean that we should give this allowance presumably in respect of Income Tax and also in respect of Super-tax. In other words, the applicant would get a double allowance in circumstances which I say without hesitation are those which would not entitle the applicant to such additional allowance, because when we pass into the realm of Super-tax we are dealing with people who have a certain ability to pay.
That is the practical and fatal objection to this new Clause. The Clause would undermine the whole system of graduation recommended by the Royal Commission in 1919. These arguments on the Finance Bill lead inevitably to the question of cost. If allowances were given as suggested on the basis of earned income allowance, together with family allowance—I suppose my hon. Friend would, if necessary, suggest separation—it would cost no less than £4,000,000 in a full financial year. At this late hour, and at this stage of our proceedings, I say at once that my right hon. Friend is not able to bear that strain and, accordingly, we must resist this Amendment.
§ Lieut.-Colonel POWNALLCan the hon. Member say what it would cost if 312 the family allowance was given alone and the earned income allowance stood as at present?
Mr. GRAHAMIt is difficult to say offhand, but I imagine that it would be a very large part of the £4,000,000.
§ Question, "That the Clause be read a Second time," put, and negatived.