§ I shall propose an important modification in the Income Tax law, which will not affect the finances of this year, as 12 months' notice will be needed before it can be brought into operation. Everyone seeks for the simplification of the Income Tax. I have an expert Committee sitting continuously, and have had for many months, under my personal direction, and I trust some day to be able to frame extensive proposals. All I can say at present is that the difficulties do not diminish with careful study. There is, however, one feature common to all schemes of Income Tax simplification—I mean the abandonment of the three years' average, I propose to sweep away the three years' average and the medley of other bases with which Schedule D is encumbered, and to found that Schedule exclusively on the pr ceding year. This, as I have said, will not come into operation until the financial year 1927; it will be impossible for the Income Tax authorities to make arrangements, get the forms, and make their calculations without a full year's notice. The legislation, which will follow very closely the recommendations of the Royal Commission, will include relief for hard cases in the period of transition, and the grant of the right to carry forward losses for six years. It will also include provisions to correct the anomalies which now arise when a business closes down at the end of an exceptionally prosperous year.
§ Assuming that, on a long view, the aggregate profits of business in this country will tend to grow, the Exchequer, on the whole, will be the gainer in revenue from the change. It will, however, be the loser in convenience. The difficulty of estimating for Budget purposes will obviously be sensibly increased. There will be fluctuations which 1705 are now merged in the three years' average. That accuracy on which we now all plume ourselves will be endangered. But this change is one that is desired by the majority of the taxpayers, it is strongly recommended by the Royal Commission on Income Tax, and the time has come to take a definite decision in its favour.