CLAUSE 39.—(Provisions as to date of pay- ment, assessment, &c., of Surtax).

HC Deb 30 June 1927 vol 208 cc750-6

Sir COOPER RAWSON

I beg to move., in page 26, line 13, at the end, to insert the words Provided that, if an individual liable to surtax under section thirty-five, paragraph (b), hereof died during the year of assessment, no surtax shall be assessed or charged in respect of such year of assessment, and if he die during the year next following the year of assessment a part only of this surtax shall be payable, proportionate to the part of the year next following the year of assessment as shall have elapsed before the date of death. The object of the Amendment is to prevent injustice to the estates of deceased taxpayers in consequence of this Act in connection with the change over from Super-tax to Surtax, and also to bring Surtax practice into the same line as case law with regard to Supertax. The present practice is governed by Section 6 of the Income Tax of 1918, and, if a Super-taxpayer dies during any year for which Super-tax is chargeable, his estate is liable only for a proportion of the Super-tax up to the actual date of his death. As an illustration, if under the existing tax a Super-taxpayer is liable for £200 Super-tax payable under this Bill on 1st January, 1930, and he dies on 5th April, 1929, his estate pays nothing, but if he dies on 5th October, 1929, his estate pays one-half, or £100, or pro rata according to when he dies.

Under this Bill, if he dies on the same date, and his estate is liable to the same amount, his estate is liable for the whole amount whether he dies on 5th April or any subsequent date. The only object of the Amendment is to bring the law with regard to Surtax into the same line as the law regarding Super-tax.

The ATTORNEY-GENERAL

I am afraid it is not possible for the Government to accept the Amendment which has been moved by my hon. Friend. The position, the Committee will appreciate, is that by virtue of the charges proposed in the Finance Bill Super-tax disappears and another tax called Surtax takes its place. Surtax is only really an additional Income Tax, the levying of which is deferred for a certain period. Under the Clause nobody will pay Surtax for more or less years than he has a Surtax income. Everyone will pay Surtax on exactly the number of years for which he enjoys an income which renders him liable to Surtax. Under Super-tax, people paid the tax for a year less than they ought, for they paid it not in the year they first entered it, but the year after. Now we are changing the system. The Surtax, which is only a deferred amount of Income Tax, is going to be levied in every case for exactly the number of years for which a person is liable to pay it—for exactly the period during which the person surtaxed enjoys an income which entitles him to the Surtax. We could not accept the Amendment, the effect of which would be that people liable to the Surtax would pay less Surtax.

Sir FRANK MEYER

I am sorry the Government have not seen fit to accept this Amendment. I hope they will carefully consider it before the Report stage, because I do not think the Committee, or the country, has fully realised that under the guise of simplification, and making the Super-tax combine with the Income Tax into one tax, the Government is getting an extra year, just as the Chancellor of the Exchequer, by shortening the brewers' credit, has got two months in the last two years, and under Schedule "A" in one year he is getting six months ahead. It will not be recovered until the Day of Judgment. Only people who have studied the question have realised that he is going to get an extra year's Super-tax. Whereas it has been one year in arrear, it is now brought forward and people will be mulcted to that extent. The estates of people who die shortly after the end of the financial year will have to pay the full year's tax. That seems to have been brought forward without the attention of the country being closely drawn to it. Between now and the Report stage the Government should consider whether they have been quite fair to the hardly-pressed taxpayer.

Sir COOPER RAWSON

Will the right hon. Gentleman reconsider this matter between now and the Report stage, so that we can put before him new facts? Anybody who dies after this year suffers a great disadvantage. People who die before this Act are more fortunate. I do not see why anybody should have to pay extra Death Duty in consequence of this Act. I hope he will allow me to put before him further facts.

Mr. CHURCHILL

In the general scheme of simplification there are various aspects which must considered together and balanced against each other. It happens in this particular aspect that there is a gain of revenue to the Exchequer, but in another aspect there is a counterbalancing loss. But, on the whole, I contemplate, in consequence of the scheme of simplification, that the burden on taxpayers as a whole should be virtually unchanged. In these circumstances I think it would be a great pity to make a change which would disturb this balance, and, although between now and the Report stage I would be willing to give my attention to any considerations which my hon. Friend may bring before me, I cannot hold out any hopes that I can in satisfy his desire that I should surrender the gain of revenue which results from one part of the scheme while, at the same time, I should still have to give back to the tax- payers in respect of another part of the scheme a revenue which almost exactly equals that gain.

Mr. GILLETT

Does the right hon. Gentleman agree with the statement of the hon. Member whom I understood to imply that everybody is going to be liable to pay an extra year. That was the point the hon. Member meant. I was under the impression that what happened was that the year's Super-tax was going to be put forward so as to be one year closer than it was originally, and that ultimately the number of years would be no different from what it was before. The hon. Member implies that it would mean paying an extra year, if not in a lifetime at any rate at the time of death. I think we ought to have the position stated quite clearly to-night.

Mr. DENNIS HERBERT

It appears now to be quite clear that it is the intention of the Government to impose a new tax by this Clause. So far as I have been able to discover there is not in the Budget Resolutions any Financial Resolution on which to found this new tax. The particular reason why I raise the question is this—it has been generally supposed by the hon. Member who moved this Amendment, and by myself and many others, that we had discovered what was an obvious mistake. Now we find that it was the intention of the Government to impose this new tax. The Committee is taken completely by surprise, having had no warning through the Financial Resolutions, and it finds that it is the intention of the Government to impose a new tax.

1.0 a.m.

I should like the Chancellor to say a word or two on that. I do not want, exactly at this stage of the proceedings, to raise the question in such a way as to cause serious delay, but I am not sure that I should not reserve my right until after the Chancellor has replied to refer the matter to You, Mr. Chairman, as to whether this Clause can be considered in this way without a Financial Resolution.

The CHAIRMAN

Do I understand that the hon. Member submits that question as a point or Order?

Mr. HERBERT

I was wishing to do so, but I was going to delay in the hope that the Chancellor might say a word on the subject.

Mr. CHURCHILL

I will, indeed, if only for the purpose of saving my hon. Friend the trouble of putting a question to the Chair, as to which I anticipate there can be only one answer. Perhaps it has escaped the attention of my hon. Friend that this part of the Bill does not come into operation this year, but only next year, and, therefore, an omnibus Resolution will be necessary before this set of provisions can acquire any validity and become effective, and, therefore, there will be no breach of that time-honoured and most invaluable element in our procedure, namely, the preceding of the imposition of taxes by passing a special Resolution. The Resolution will have to be passed next year before this tax can become operative.

Mr. HERBERT

May I suggest very respectfully to the Chancellor of the Exchequer that he should refresh his memory as to the exact wording of these valuable Standing Orders of the House? There are two of them, Nos. 66 and 67, which are very much in the same language. No. 66 says: This House will receive no petition for any sum relating to public service, etc. No. 67 says: This House will not proceed upon any petition, motion, or bill, for granting any money, etc. Under these circumstances, I suggest that what the Standing Orders require is not a Financial Resolution before something becomes operative, but a Financial Resolution before this House will proceed to receive a petition or proposals, and that the proposals for new taxation should not be entered upon without a Financial Resolution preceding them.

The CHAIRMAN

If this were a new point, it might cause me some difficulty, but it has been laid down by at least one ruling in the past that, if a tax be not operative in the year in which it is proposed, a Clause can be accepted to take effect in the following financial year, if a Resolution to that effect be brought forward in that year which gives vitality to what up to that point was an academic proposition. What the House is asked now to decide is that a particular proposition can come into effect in a future year, but only if in the following year an omnibus Resolution giving authority is brought forward and carried. I think a former ruling covered that, and I do not feel compelled without notice to say anything as to former Rulings.

Mr. HERBERT

I do not wish to delay the proceedings by a dispute in regard to the Ruling you have just given, but I do ask the Committee to consider the point for one moment.

The CHAIRMAN

I think we had better get rid of the Amendment. If the hon. Member wishes to say anything further, it should be on the Motion "That the Clause stand part of the Bill."

Amendment negatived.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. HERBERT

Before we part with this Clause, I would like to say a word on the aspect of the question of a Clause dealing with a new tax or new charge without a Fnancial Resolution preceding it. I think this is an example of the usefulness of the Standing Orders of the House if interpreted as I suggest they should be—namely, that no Bill dealing with a new tax should be considered or entertained by the House until after it has had warning by and given previous consideration to, a Financial Resolution. This House has always treated with the very greatest respect the Rulings given from the Chair either in Committee or in the House, but no one who has ever occupied the Chair would, I believe, have ventured to do otherwise than to admit that even the greatest of our Speakers or Chairmen has been only human and capable of giving a wrong Ruling.

The CHAIRMAN

The hon. Member may argue that a Clause of this sort should not be brought forward without a Resolution, but he cannot argue against what is now the practice of the House and authorised by previous Rulings. He may argue that this Clause is not one of the nature that should be brought forward in one Session and given validity by Resolution in the next, but I do not think that this is an occasion on which he can argue the whole constitutional question involved. He may argue as to this particular Clause but not on the general question, and he cannot controvert former Rulings.

Mr. HERBERT

I bow to that, and I will only remind the Committee that this does appear to be a case where it is unfortunate that the Committee did not have previous warning by a Financial Resolution, with the result that the Committee has been surprised in discovering that, instead of there being a mistake in the drafting of the Clause, the Government have intended to propose for a future year a new tax of which Parliament has had no previous warning.

Mr. CHURCHILL

I really must take notice of the complaint So far from the Committee not having the usual warning of any new tax being proposed, they are having more than a year's warning. They are having all the warning given by what has taken place now. They will have the whole year to profit by that. They will have all the warning of the Financial Resolution next year, and all the other warnings which my hon. Friend will, no doubt, bring forward.

Lieut.-Colonel Sir FREDERICK HALL

With regard to the question of Super-tax being collected a year after it is earned, are we to be in the position eventually, in order to make up the leeway, of having two years' Super-tax collected in one year?

Mr. CHURCHILL

Only if you are dead.