§ Mr. CHURCHILLI have now apprised the Committee of the task which lies before us this afternoon, and of the very large amount of new revenue which has to be found for the services of the year. It towers up against us; but before I proceed to indicate the steps by which we shall presently attempt to scale together that formidable precipice, and, while the Committee is gathering its strength and courage and breath for the attempt, I will turn aside to deal with a few interesting topics not directly related to our main problem. A year ago I made the following statement:
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."—[OFFICIAL REPORT, 26th April, 1926; col. 1704, Vol. 194.]The foundation of the British Income Tax is deduction at a standard rate at the source from every form of income capable of being so treated. From this foundation it would be rash to depart. It follows, therefore, that those whose incomes are wholly taxed at the source must claim repayment from the Inland Revenue. Those whose incomes reach the Super-tax level must make further payments, and those who have sources of 83 income some of which are not taxable at the source must submit their cases to adjustment. Thus a very large amount of correspondence and many complications are inevitable. The limits to simplification are fixed by our adherence to our well tried system of deduction at the source, with adjustment up or down. Last year we took an important step towards simplification. We reduced the four bases of assessment under Schedule D to the single basis of the preceding year. Now I am in a position to take several further steps.The first is the transfer of Schedule E, which deals with salaries, to the basis of the preceding year. The second step is more important. What we now call the Super-tax for 1926 is charged at this moment on the same basis as the Income Tax for 1925. Viewed in this light, the Super-tax is nothing more than an additional Income Tax for the previous year. I propose that in the future Super-tax shall be assigned to the year to which it rightly belongs, that is to say, the one prior to that in which it is paid. This assignment of Super-tax to a different year does not affect either the basis on which it is assessed, the rate at which it is charged, or the date at which it falls due for payment. But, although the change is one of form rather than of fact, it makes it possible to express the Income Tax and the Super-tax in the form of a single graduated tax on income—a tax which will rise in a smooth progression and by a harmonious curve from the lowest rates to a maximum of 10s. in the £, a tax which will be charged on a uniform basis on every income, whether large or small. This change merges the burden of Income Tax and Super-tax in one graduated scale far more intelligible alike to those who pay this tax and to those who have not yet attained that distinction. It removes any ground there may have been for the grievance that Super-tax was charged on income which has already been absorbed by Income Tax, and it reveals the Super-tax in the form which it has always been intended to take, and on the basis on which it has always been in principle levied, namely, that of an additional graduation in the higher ranges of income.
My third proposal for simplification is in itself simple; I believe it will also be 84 welcome. It is that a single annual return should be made to serve as nearly as possible all purposes, and that that return should be given by the taxpayer on the simplest of all bases, namely, his total income for the preceding year. These reforms involve no alteration in the duties and functions of the various local bodies of Commissioners of Income Tax, no alteration in the duties of any of their officers save as regards the ingathering of returns, and no alteration in the dates at which the duties are payable by individual taxpayers. The details of the scheme will be set forth in the Clauses of the Finance Bill in language which I may say with safety very few people will understand. I shall also set forth in the Finance Bill, not this year, but next year—for the scheme cannot be brought into force till next year—the rates for the combined Income Tax and Supertax, and they will be in a form which will carry immediate conviction to all concerned.
Our progress in these matters must be gradual; I am advancing step by step; and my object will not be attained until arrangements are made to enable Income Tax-payers liable to several direct assessments in respect of sources of income arising in different parts of the country to receive a single demand, and to make payment at a single place. This will be dealt with next year. I have unfolded the scheme of simplification on which we are engaged, and by the normal end of this Parliament I trust we shall have attained one scale and one return for Income Tax and Super-tax together, and one demand and one payment for direct Income Tax assessments throughout the whole country.
§ Sir JOHN SIMONDoes that apply to limited companies?
§ Mr. CHURCHILLYes, Sir.
I have one more step in simplification to propose, and it is one of which we shall not see the fruition for several years. It is long overdue. The Income Tax law has been built up stage by stage for the last 85 years. Although it was consolidated in 1918, it has not been codified. Much of the old language still remains, and invests the whole system in obscurity and baffles the layman. It is high time that an attempt was made to re-write the Acts governing the Income 85 Tax in a clearer and more intelligible form. I propose to ask a body of experts of the highest qualifications to take the task in hand. Their labours will be long, but I hope when they fructify the fruits will be found to be both rare and refreshing.