HC Deb 11 April 1927 vol 205 cc96-8

We are getting on. We are still some distance from the summit, but we shall now get there very quickly—in fact, shall only need to trouble the Committee for a very few minutes more. Last, but not least, I come to Income Tax. Sixpence on the Income Tax would give me all that I require for this year, but it would give us much more than we require for next year. Income Tax is bending under the strain of recent years. The emergency with which we are confronted is one which will be greatly diminished next year, and next year the advantage of having an Income Tax based on a single year will come to hand just as the disadvantage of it being based on a year of misfortune oppresses me at the present time. I have thought it my duty to find some means whereby the revenues of this year could be sustained without unduly burdening the future, and without throwing a tax on the country which would injure industry and trade. So I have come to Schedule A of the Income Tax, the "Landlord's Property Tax," as it is called. Five-sixths of Schedule A deals with urban property, and one-sixth with agricultural property.

Income Tax Schedule A, as everybody knows, is ordinarily paid by the tenant into the Exchequer, and deducted by him from the next payment of the rent which he pays quarter by quarter to the landlord. Before the War, when Income Tax stood at little more than a shilling in the pound, the tax for the whole year was paid in a single instalment due on the 1st January. But when Income Tax, under pressure of the War, was raised above 5s. in the pound, one quarter s rent was no longer sufficient to defray it. When the tenant had paid the whole of the quarter's rent into the Exchequer, there might still remain a further sum for which he could not recoup himself until the next quarter's rent fell due. In consequence, in 1918 a concession was made, and the tax was allowed to be paid in two instalments, one on the 1st of January and the other on the 1st July. As soon as the Income Tax fell below 5s. the reason for this concession disappeared, and it would, in the ordinary course, have been withdrawn. It has, however, up to the present escaped the notice of nay predecessors, and is in consequence happily available in our present need. I propose therefore to revert to the pre-1918 practice of collecting the Income Tax Schedude A in one instalment payable on the 1st January.

Now let us see what is the actual weight of the new burden which the withdrawal of this concession will impose on this class of taxpayer. He will lose six months' interest on half the amount of his tax. For instance, suppose a man has an income of £1,000 a year from rents—I leave out for the sake of simplicity the question of his personal allowances—the tax on this at 4s. in the £ would be £200. Under the existing system he would pay £100 in January and £100 in July. I propose that he shall pay £200 in January and nothing in July. That is to say, he will lose the interest on £100 for six months. At 5 per cent. this interest is £2 10s. On an income of £10,000 from rents the additional burden will be £25; and over the entire field of the tax, which covers nearly £40,000,000 of revenue, the actual additional burden amounts to about £500,000 a year. This represents the permanent financial burden which I am now imposing upon this class of taxpayer. I do not underrate the inconvenience, and in some cases the hardship, that will be caused by the earlier collection of the tax; but there are inconveniences and hardships confronting me in whatever direction I turn. After the year of change, the tax will have adjusted itself to the new basis, and the Schedule A taxpayer will pay only 12 months' taxes every year. I should mention that the present instalment system will not be disturbed where the Schedule A tax is levied on income forming part of a man's emoluments, such as a clegyman's tithe.

The financial burden of the taxpayer is, as I have said, limited to £500,000 a year, but the results of the change are very important to the revenue. Another instalment of Schedule A is brought into the finance of the present year, and this is done without depleting or forestalling the revenue of future years. The operation indeed is one which in several respects resembles the shortening of the brewers' credit. Like that, it is a wartime concession which is now withdrawn. The whole series of payments is pulled forward to an earlier financial year, and while it is continued on that basis in perpetuity all that will happen is that at the end of the world, if that date should fall between December and July, the Chancellor of the Exchequer—whoever he may be—will be found with one additional instalment of Schedule A in his possession. As to the taxpayer, if the end of the world come to him between these dates, December and July, he dies having already paid one instalment which, under the existing system, would remain to be paid by his executors. His personal position is not therefore, through the change I am making, further damnified either in this world or in the next. The result of making this change is to bring into the Exchequer in the present year no less than £14,800,000.