HC Deb 17 June 1936 vol 313 cc1049-57

Sub-section (5) of section thirty-seven of the Finance Act, 1931, is hereby repealed, and the following sub-section shall be substituted therefor:— (2) This section shall not apply to collectors in and for Scotland and Northern Ireland, or to the appointment of collectors by, or to collectors appointed by, any Commissioners acting under section sixty-nine of the Income Tax Act, 1918."—[Mr. Benson.] Brought up, and read the First time.

5.35 p.m.


I beg to move, "That the Clause be read a Second time."

The new Clause standing in my name, next on the Paper—(Duties of Clerk to the General Commissioners)—although not strictly consequential on this new Clause is complementary to it and with your permission, Sir Dennis, perhaps we might discuss the two together.


If the Committee raise no objection, it may be convenient to discuss these two new Clauses together, but it will be understood, in that event, that when the first new Clause has been disposed of the second one would not be called unless for the purposes of taking a Division upon it, should that be desired.


The proposal in the new Clause, the Second Reading of which I now move, is purely a machinery proposal dealing with the collection of Income Tax, and the object is to bring the form of our machinery of collection into consonance with the facts of the present day. Owing to the modern developments, we find that the form of the machinery for the collection of Income Tax is, in a large number of places, out of date. Our present Income Tax system is about 130 years old. When the tax was first imposed it was regarded as a grave invasion of personal rights and was accepted only as a matter of dire necessity. In order to prevent tyranny by the Executive careful safeguards were devised along these lines—that although the tax was imposed by the Exchequer, the whole machinery of assessment and collection was local and was placed in the hands of a number of private gentlemen known as the General Commissioners. These Commissioners were appointed for specific areas and were in actual personal possession of the machinery of assessment and collection. To this day, all books of assessment and all assessment notices remain the private property of the General Commissioner of the specific area to which they refer.

Since Income Tax was first imposed two great developments have taken place. First there is the development in the complexity of our business life and second there is the tremendous development of Income Tax law. The result of these developments is that the machinery which was adequate a century ago is not now adequate. Indeed if it were put into operation and maintained rigorously it would lead to a breakdown of the system of collection. Actually, Income Tax assessment and collection are now so complicated and technical that we have had to develop a highly-trained class of specialists. In each locality the head of the department is the inspector of taxes and he is the real assessor. He is the only person who has either the technical knowledge or the authority to settle assessments. Theoretically, however, the assessments are made by a gentleman known as an assessor who is the servant of the General Commissioners and not appointed by the Government at all.

There are, of course, many exceptions to this system. For instance in Manchester the clerk to the commissioners has abandoned all his duties except his real duty, which is to be clerk to the commissioners and to deal with appeals. In Manchester the inspector is the person to whom the taxpayer applies and by whom his assessment is settled, and an enormous amount of cumbersome and almost unworkable machinery has been got rid of there. But in other places, owing to the insistence of the clerk to the commissioners, or for some other reason, this creaking, out-of-date machinery remains. It causes considerable inconvenience and delay to the taxpayer, particularly in connection with the obtaining of rebates and repayments and it causes an equal amount of inconvenience and hindrance to the inspector of taxes who is the real lynch-pin of the machinery. The proposals which I am now making are in consonance with the report of the Commission on Income Tax and no one who reads the evidence given before that commission can deny that the reforms proposed are essential reforms.

I do not know whether hon. Members have read the evidence given to the commission on this matter. If they have not, I assure them that it is not the dull and dreary kind of evidence which is usually given before a commission dealing with such a subject as Income Tax. Indeed, it is really amusing. One of the main witnesses on this point was a gentleman named Mr. Copley Hewitt, who was clerk to the commissioners in London. He came before the commission armed cap-a-pie to fight for the maintenance of the old-fashioned machinery. I have read a fair amount of evidence but never in my experience have I read a more devastating cross-examination than that which fell to the lot of Mr. Copley Hewitt. Indeed it does not read like the report of the cross-examination of an expert witness by a group of learned commissioners. It reads for all the world like a joyous account of a dog-race with Mr. Copley Hewitt as the electric hare. If hon. Members have not read that evidence I may say that it is available to them should they wish to do so. They will find that there is an enormous amount of waste of time in the way in which documents go backwards and forwards between the commissioners, the assessor, and the inspector, and in the whole of that machinery there is only one person with either adequate technical knowledge or authority to make a decision, and that is the inspector.

I propose in these Clauses to introduce the recommendations of the Royal Commission, and I beg hon. Members opposite not to think that I am taking away any safeguards from the taxpayer. These proposals are already in operation in Manchester and in a number of other large cities, where they work smoothly and efficiently. All that I am suggesting is that we- should get rid of out-of-date machinery, dating from a century ago, which was improvised at a time when, as I say, Income Tax was regarded as a gross infringement and an invasion of private rights. These proposals would introduce efficiency in the collection of taxes, and they would be for the convenience of the taxpayer and certainly for the benefit of the Exchequer, because they would cut out an enormous amount of waste labour, hindrance, and inefficiency.

5.47 p.m.


The hon. Member for Chesterfield (Mr. Benson) wishes to upset an arrangement which was come to in 1931. He is aware of the terms of that arrangement, which was made by Lord Snowden when he was Chancellor of the Exchequer, and it was enshrined in the Finance Act of 1931.


This first new Clause is only one small portion of the whole change of machinery to which I am referring. It is the minor part of it.


The special part to which I am referring is that for making the City of London a unit for tax collection. That was introduced by Lord Snowden in 1931, and he then stated very clearly why he wanted the City to be a self-contained unit. I would like to read that part of his speech from the OFFICIAL REPORT. Mr. Snowden, as he then was, said: The reason why the City of London has been left out is that it is the largest tax-collecting centre of the country. One-sixth of the total Income Tax is collected in the City of London, and therefore they must of necessity have the most perfect organisation. Here is the point to which I wish to draw special attention. He went on: I have no feeling in the matter, however, and if it be the wish of the House to bring the City of London within the Bill, I am perfectly willing to do it"— [OFFICIAL REPORT, 23rd June, 1931; col. 313; Vol. 254.] Shortly after that a Division was taken, and the hon. Member for Chesterfield voted against bringing the City of London into the Bill and for the arrangement that now prevails. I am bound to say that at that time I did not like the arrangement, and I was in the opposite Lobby. I did not like it then, but five years have gone by since then, and an agreement has been come to in the City whereby a more centralised system has been set up, and it has the complete concurrence, I understand, of the Board of Inland Revenue. The hon. Member opposite is five years too late. Mr. Snowden invited the House of Commons to express its opinion and gave a clear indication that he would be guided by what the House of Commons wanted. On that occasion the hon. Gentleman, for extremely good reasons, voted for the arrangement which he is now condemning.


The opinions of both of us have changed in the last five years.

5.50 p.m.


The hon. Member for Chesterfield (Mr. Benson) said that he had derived a lot of amusement from the evidence given before the Royal Commission on Income Tax. It was amusing today to find that someone on the benches opposite was rising for the purpose of complaining, on behalf of the Income Tax payers of this country, of the present method of assessment as being insufficiently fair and of the method of collection as being insufficiently efficient. I have had a good deal of experience among the Income Tax payers of this country, and I have never yet found that any taxpayer complained that the method of assessment was inefficient or that the method of collection was not severe. As a, matter of fact, the hon. Member is right in saying that at the present time, although our ancient laws with regard to the assessment of Income Tax and collection still remain, the work is really done by the inspector of taxes in each district. In other words, as has so often happened in this country, while we allow our ancient laws to remain, we modernise the machinery and carry out the work in a thoroughly efficient manner. I venture to think that the Committee might reject these Clauses and leave the present very efficient system to continue, because, although the things to which the hon. Member referred very infrequently come into operation, they do provide a measure of protection for the individual taxpayer in cases of hardship.

5.53 p.m.


We have had a very interesting conversion, because the hon. Member for Chesterfield (Mr. Benson) and my right hon. and gallant Friend the Member for Ripon (Major Hills) have shown that in the course of a very short period of time they have altered their respective views on this question. I do not blame them for that, because I agree that a foolish consistency is the hobgoblin of little minds, and if these hon. Members have changed their views, that is nothing to the point. For my own part, I think the hon. Member for Chesterfield is introducing these Clauses with a sincere desire to benefit the collection and the administration of the Income Tax, and there is no doubt, if one looks at it from the point of view of symmetry, that there is a great deal to be said for his proposals, but the short answer which I must give him is that both these matters are controversial subjects. As the hon. Member for Harwich (Mr. Holmes) has just said, the present method has worked well. It may be a little illogical, but it works well. As both these proposals of the hon. Member would be controversial, I must ask the Committee to support my right hon. and gallant Friend the Member for Ripon in the view that he takes. As they are both matters of less importance than others, I think we should not enter upon such controversial subjects at this late stage of the Bill.

It is true that in 1931 the then Chancellor of the Exchequer, Mr. Snowden, as he then was, dealt with this matter in the way stated by my right hon. and gallant Friend the Member for Ripon, and with regard to the City Commissioners, it is true that in the City of London, which is one of the great places in our country where wealth does congregate, because of the amount of business which is done there and the vast population which surrounds it, they have their own method of collection. We are looking at this matter from a revenue point of view, and there is something to be said for the City Commissioners being left alone, because they have their own special knowledge. I have come to the same conclusion as that come to by Lord Snowden, that the efforts which the Commissioners have made to reorganise their system have worked well, and as the matter is controversial and not of sufficient importance to delay the Committee, I will not go at length into the question.

But I would say a word about the other Clause in the name of the hon. Member opposite, which is a somewhat larger instalment of change. The hon. Member's Clause does not quite perfectly achieve the purpose which he desires. For example, when the Board have given a direction under the first Sub-section of the proposed new Clause, Section 175 of the Income Tax Act, 1918, ceases to have effect. If that were so, that would affect the duties of the collectors, because part of that Section deals with collectors, and I gather that it is not the hon. Gentleman's intention to inter- fere with the collectors as such at all. If that Section would cease to have effect, as the Clause says, he would find the duties of collectors substantially interfered with. If the Clause were accepted in principle, it would have to be redrawn for our purposes, and at this late stage and for the same reasons as I adduced in regard to the City Commissioners, I think the Committee will be well advised not to give these Clauses a Second Reading.

5.58 p.m.


I am not quite sure that I understand what the proposal before the Committee actually does. I dare say that most Members of the Committee are in a better position than I am, as my relations with inspectors of Income Tax have always been of the unfriendliest kind, and I have not much knowledge of what lies behind these rather sinister gentlemen, but if my understanding of the proposal is correct, it is that whereas you have now a number of lay persons who assist the inspector in the discharge of his duties, this Clause would abolish them. My hon. Friend the Member for Chesterfield (Mr. Benson) gave us a long history of what happened in the past, but he did not put me in possession of what changes in the law are actually involved in these proposals. If it is merely a proposal to change the law because it has been 100 years or more in existence, I do not think that convinces me very much. The fact that it is old does not necessarily mean that it is wrong, and before I should vote for these Clauses, I should want a little more than either the hon. Member for Chesterfield or the Financial Secretary to the Treasury has put me in possession of. What actually is proposed to be done? This is legislation by reference, and I want to know what the changes are that are proposed.

6.0 p.m.


The hon. Member asked a very natural question. The answer, apparently, is that in order to make the Income Tax collection symmetrical throughout the country the assessors of Income Tax in the City of London, a body which has performed its duties to the satisfaction of Income Tax payers and of Somerset House for a great many years, are to be abolished and no longer continue to discharge the duties which they have been discharging for all this period. As the right hon. and gallant Member for Ripon (Major Hills) pointed out, this question was raised in 1931. It was all gone into then, and both Mr. Snowden and the House of Commons came to the conclusion that in all the circumstances, especially having regard to the fact that one-sixth of the Income Tax of the country was collected in this area, there was a body of highly skilled men with full knowledge of the facts and of the different companies and corporations in the City, which would not be known to people who were not on the spot and continually dealing with affairs in the City.

Nothing has been said by the Mover of this proposal to suggest that the present practice is in any way inefficient, and I may say that the income Taxpayers' Society, of which I am chairman, has no knowledge of any complaints on the part of Income Tax payers in the City. We are also in close touch with the Inland Revenue, and we have had no suggestion that people were being let off Income Tax who ought properly to be included in the Income Tax net. In fact, I think it is just the other way. The assessors in the City have a detailed knowledge of what is going on which enables them to keep in touch with the Inland Revenue and to see that companies and other public bodies who are liable for Income Tax are included within the Income Tax net. I hope that the Committee will follow the suggestion of the Financial Secretary, that the present system should not, on the very flimsy pretext of bringing the Income Tax collection of the country into a more symmetrical form, be altered, or that this body of assessors in the City should be abolished when it was agreed by the House in 1931 that they were performing useful work.


May I tell the hon. Member for Ebbw Vale (Mr. Bevan) that if he will get a copy of the Income Tax Act, 1918, and read it through from beginning to end, he will arm himself with a complete knowledge of the method of assessment and collection of Income Tax.


I want to disabuse the minds of my hon. Friend the Member for Ebbw Vale (Mr. Bevan) and the hon. Member for South Kensington (Sir W. Davison) that this is a proposal to strengthen in any way the hands of the executive or to take away safeguards from the taxpayer. It is purely a machinery Clause and would not give the Treasury greater power than they have at the present time.

Question, "That the Clause be read a Second time," put, and negatived.