§ I have already explained that the yield of the Income Tax this year will suffer from the fall in profits in 1930, due to trade depression. This fall in the yield of the Income Tax is, however, temporary and we can look forward to a higher revenue as the depression passes away. As I have said, I cannot ignore the psychological effect on trade and commerce of any increase in direct taxation at a time when they are, I hope, on the point of emerging from an unprecedented slump. I have, therefore, decided not to propose any increase in the Income Tax. I propose, however, to tide over the temporary period of low yield of that tax by partially withdrawing a concession which was made in the second Finance Act of 1915. Before that time, Income Tax was payable in one sum on the 1st January. In the second Finance Act of 1915, a concession was made under which in the case of certain Income Tax payers charged 1406 under Schedules B, D and E, it became payable in two instalments, on the 1st January and the 1st July. It will be remembered that in 1927 my predecessor balanced his Budget by withdrawing a similar concession in the case of Schedule A, and by making the whole Income Tax under Schedule A payable on the 1st January. I am not proposing to go as far as he did. The modification which I shall ask the House to approve is the substitution for the present equal instalments of tax under Schedules B, D and E, of a first instalment of three-quarters on the 1st January next and a second instalment of one-quarter, that is the remainder of the year's tax, on the 1st July following. In other words, as the law now stands, the taxpayers in question would pay the 1931 Income Tax on their profits or emoluments, one half on 1st January, 1932, and one-half on 1st July, 1932. I now propose that they should pay three-fourths on 1st January, 1932, and one-quarter on 1st July, 1932. The result will be that the Exchequer will get in these cases an extra quarter of the year's tax within the present financial year. It is estimated that the gain on this year will be £10,000,000. Next year's yield will not, of course, be affected by this change, for what is lost on the 1st July, 1932, will in fact be regained on 1st January, 1933. The taxpayers concerned are individuals and firms engaged in trades, professions or husbandry, and employés: weekly wage earners whose Income Tax is assessed half-yearly will not be affected by the change.
§ I cannot expect that this modification of the concession made in 1915 will be welcomed by the individuals affected, but I feel confident that they will realise the difficulties which have occasioned it and will be willing to make this contribution to our present national needs. They will have eight months within which to arrange their affairs in order to make the additional payment in January, and they will have a correspondingly reduced payment to make in the following July. I think that most of them will at any rate feel that this arrangement is preferable to an increased charge in two equal instalments. The proposal affects only a small proportion of the produce of the Income Tax, as the amount of tax collected from the second instalment represents only about one-tenth of the total annual payment. The great bulk 1407 of the Income Tax is collected either by deduction at the source at the time of receipt of the income or by direct payment on the 1st January, and to the extent that one-quarter of their tax will still remain payable on the 1st July, the taxpayers affected by this proposal will continue to enjoy an advantage. The estimated deficit is thus reduced by £30,000,000, leaving me still £7,500,000 short.