§ 47. Sir WILLIAM DAVISONasked the Chancellor of the Exchequer whether it is the practice of the Inland Revenue to make ex gratia payments to a taxpayer who has been forced to pay taxes under a mistaken interpretation of the law by the Inland Revenue in the event of a legal decision putting right the mistaken opinion of the Inland Revenue?
§ The CHANCELLOR of the EXCHEQUER (Mr. Philip Snowden)No, Sir. Speaking generally, the power of a taxpayer to require the reopening of an assessment to Income Tax or Surtax which has become final and conclusive is governed by the provisions of Section 24 of the Finance Act, 1923, which deals with certain cases of error and mistake; a judicial decision has no retrospective effect in relation to assessments which have become final and conclusive under the law.
§ Sir W. DAVISONHaving regard to the fact that the Government have demanded this tax, as it has been proved, illegally, surely, while admitting that they are entitled to retain the money, they might, as representing the State, make an ex gratia payment to the taxpayer who has paid owing to an error on the part of the State?
§ Mr. SNOWDENThe provision in the Act to which I have referred, which enables errors to be corrected, was accompanied by a proviso that there should be no such retrospective effect. That was in the Finance Act, 1923, which was passed by the party opposite.
§ Sir W. DAVISONDoes the right hon. Gentleman say that no ex gratia payment can ever be made, even if it is found that the State made a mistake as to the law?
§ Mr. SNOWDENThat is not quite the right way to put it. It is not that the State has made a mistake. The State has simply acted on the interpretation of the law.
§ Sir BASIL PETOWould the right hon. Gentleman consider the application of that principle of retrospective legislation in connection with Clauses 29 and 34 of the present Finance Bill?
§ Sir K. WOODIs not the State, like the individual, presumed to know the law?