CLAUSE 11.—(Assessment and collection of tax under Schedule E.) (Hansard, 8 August 1940)

§ Sir William Davison (Kensington, South)
I beg to move, in page 7, line 15, to leave out "assessment and."
This Clause deals with the collection of tax by employers and its payment over to the Treasury. It, however, makes a. new provision as to the assessment of tax by a Government Department. It provides: The Commissioners of Inland Revenue may by regulations make provision for the assessment and collection of tax chargeable under Schedule E, including in particular provision for requiring employers and other persons to deduct any tax so chargeable from any payments made by them (being payments of or on account of income which is chargeable with tax under that Schedule), and for making them accountable for any tax which they are so required to deduct; and any such regulations shall have effect notwithstanding anything in the Income Tax Acts. I think that taxpayers generally will approve the provisions of the Clause so far as they relate to deduction of tax from salaries chargeable under Schedule E, but I am bound to point out the possibility of a serious change being made in the law governing the assessment of Income Tax as laid down by the Income Tax Act, 1918. The proposal made by the words which I propose to omit cuts at the whole root of the Income Tax system which has been so successful since it was first introduced about 100 years ago, under which the taxpayer is assessed and his tax collected by a body of fellow taxpayers and not by a Government Department. This Clause opens wide the door for fundamental changes of such very wide implications that I think it very likely that the Committee have not fully realised their seriousness and what may be their extent, even though it may not be the Chancellor's present intention to put them into force. Protests have often been raised against legislation by reference. In this Clause an even worse principle is introduced, especially in a matter of this kind. It is legislation by Regulation. It is the more to be deprecated because the House of Commons will not have an opportunity of considering these Regulations, which 475 may materially change the present administration by the General Commissioners and their overseers. A circular was issued on 2nd August, "7a, 1940," to Commissioners of Taxes which bears that out, and points out that assessments are to be made by these officials rather than by the Commissioners. If these two words are retained, the Clause will really give a blank cheque to a Government Department. It is of no immediate importance, because the assessment throughout the country has already been agreed upon for the current year. The Committee are in agreement with the underlying idea of the Clause, but I hope they will not think it right that a change of this very great extent should be introduced into our Income Tax law, which has worked so satisfactorily and has been the envy of all other States in the past.

§ Mr. Woodburn (Stirling and Clack-mannan, Eastern)
The proposal in this Clause probably follows to some extent the suggestion that I made to the Chancellor of the Exchequer in a former Budget Debate. Therefore I should be very sorry if the Clause as drafted was to wipe away some of the safeguards which were provided by former Income Tax Acts. As the Amendment is to some extent to cover the same purpose as an Amendment that I have down, to leave out the last part of the Clause, I support the hon. Member in his plea to the Chancellor that he might give us an assurance that the Clause will be redrafted in such a way as to safeguard the present position. According to advice which I have received, this Clause would give power to the Income Tax authorities to make provision for the assessment and collection of tax, and if the Clause were passed, it might be used to take away the powers of the local Commissioners of Income Tax. While the Chancellor and his Department probably have no intention of doing that, we know that once a thing is in an Act of Parliament, good intentions count for nothing when the matter comes before the courts. Therefore, I feel that before this Clause is passed we should ensure that something is inserted to safeguard the position and guarantee the status quo as far as the Commissioners of Income Tax are concerned. I am satisfied that it is not the intention of the Treasury that the Clause should have the effect which I have 476 mentioned, and I should be glad to have an assurance from the Chancellor.

§ Sir K. Wood
I am glad to have an opportunity of making this matter clear. All that the Clause says is that: The Commissioners of Inland Revenue may by Regulations make provision for the assessment and collection of tax.— Although I will examine the matter, in view of what has been said by my hon. Friend the Member for South Kensington (Sir W. Davison) and the hon. Member for East Stirling and Clackmannan (Mr. Woodburn), the intention of the Clause is quite plain as far as we are concerned, and it does not make any new provision or any revolutionary change. There is no question of making any alteration, or in any way putting an end to the work of the Commissioners of Income Tax.

§ Mr. Woodburn
I think the right hon. Gentleman will agree that the words "make provision" may mean the making of any provision, such as a provision for taking away the existing provisions.

§ Sir K. Wood
The draftsmen did not take that view, but I will examine the matter.

§ Sir W. Davison
The last words in Subsection (1) of the Clause—"notwithstanding anything in the Income Tax Acts" are very disturbing.

§ Sir K. Wood
I propose to say something about that before I conclude my remarks. In the first place, the assessments under Schedule E will continue to be signed by the local Commissioners of Income Tax, who will also continue to deal with appeals against assessments. What is really in mind, and what is, in fact, stated in the circular which my hon. Friend quoted, concerns another matter of a very minor character. The position is this. As a preliminary to the making of the assessments, there is a mass of detailed work, largely of a clerical nature, which must be disposed of, and at the present time this work is done partly in the offices of the Inspectors of Taxes and. partly in the offices of the clerks to the Commissioners. We are apprehensive that this may tend to delay, and there must be no delay in this particular matter; it is of great importance that the work should be coped with in the limited time available. Therefore, it is necessary to 477 make arrangements to secure that the detailed clerical work is concentrated as far as possible under a single authority. Under the existing law, the clerks to the Commissioners are responsible for a great deal of this clerical work, and to effect the necessary concentration of the work there must be powers to enable the Inspectors of Taxes to deal with it. That is the whole idea. It is purely a matter of internal arrangements as far as the necessary preliminary work is concerned. With regard to the last part of Subsection (1) of the Clause— and any such regulations shall have effect notwithstanding anything in the Income Tax Acts "— it will be remembered that under the new provisions the tax will be deducted weekly or monthly, as the case may be. It is necessary, for example, to have this phrase in the Sub-section because otherwise there would be on the Statute Book a provision saying that Income Tax shall be payable on 1st January and 1st July, which obviously would not be in accord with the new provisions. That is the meaning of the last words. I will, however, ask my right hon. and learned Friend the Solicitor-General to have the drafting of this Clause looked at again, in view of the criticisms that have been made, in order to see whether it is necessary to make the matter any plainer than it is.

§ Sir W. Davison
I am obliged to my right hon. Friend. If he will have the drafting looked at again, it will relieve anxiety. It should be possible to insert some words to show that it is not proposed by this change in the method of collection of war taxation to make any change in the century-old method of Income Tax procedure. In view of my right hon. Friend's assurances, I beg to ask leave to withdraw the Amendment.