§ The other matter in connection with the increase in the Income Tax to which I must refer is the collection of the tax 646 charged on salaries and wages. For the salary or wage earner whose income is derived wholly or mainly from his employment, the tax is payable in two equal instalments on 1st January and 1st July, and the task of finding enough money to pay his Income Tax when it becomes due in January and in July has in recent years become increasingly difficult. In 1931, when the rates of tax were increased, a voluntary scheme of deduction of tax from salaries was devised so that employés could spread their tax liability evenly throughout the year. The Committee may be aware that all officers paid out of public funds, including the Fighting Services and the Civil Service, have their tax collected in this way. All railway officials are in the same position. The voluntary scheme was directed to extending to local authorities, and over industry generally, this method of paying tax by way of instalments deducted from pay throughout the year; and in fact, it has been adopted by a number of local authorities and large industrial concerns and has been working smoothly and to the great advantage of the employés who participate.
§ The time has now come, I suggest, to extend the principle of deduction at source to the whole range of salary and wage earners from the manual wage earner paid weekly to the company director. Unless tax is deducted at source, a married man with £600 a year would have to pay in Income Tax in January next £56, which is more than the whole of his salary for that month, and he would have the same problem again next July. If he is to be able to pay and the Exchequer is to get in due time what it wants, the burden must be spread. Spreading the burden throughout the year is, therefore, I believe absolutely necessary, and the only saris-factory and workable method is deduction at source month by month or week by week. With the added burden of taxation which I have been compelled to propose, this problem of spreading the burden throughout the year becomes too serious and too extended to be left to voluntary arrangements, and I accordingly propose to make deduction of tax from salaries and wages compulsory.
§ I realise that this proposal will impose extra responsibility and extra work on employers, but, at the present time, it is of vital importance that the machinery 647 for collecting revenues should work smoothly. Therefore, I appeal to all employers, and I believe I can rely upon their giving me their fullest co-operation in this important task of collecting the national revenues. I would like the Committee to know that in all cases the work of determining the amount of tax due will continue to be done by the Income Tax authorities, and the employer's duties will be confined to deducting by equal instalments the tax notified to him by the Collector of Taxes and to paying to the collector once a month the amount so deducted. The employer will have nothing to do with the computation of the liability of the employé nor will the tax officials disclose to him any information given on the employé's returns; he will simply deduct the figure of tax notified to him. The employé will therefore be completely safeguarded and need have no apprehension that particulars relating either to himself or to his family will be made known to his employer. In these circumstances I feel sure, myself, that the proposal for deduction of tax at source will be recognised and appreciated as a desirable method of relieving an employé from the burden of arranging to provide a heavy payment of taxation at a given date.
§ Sir Henry Morris-Jones (Denbigh)rose—[Interruption.]
§ The ChairmanThe hon. Member knows that he cannot insist on intervening if the right hon. Gentleman refuses to give way.
§ Sir K. WoodIn addition, there are one or two minor matters of detail relating to Income Tax and Excess Profits Tax for which Resolutions are required. I need not explain these at this stage; they can best be dealt with when the Finance Bill is under discussion.