§ But whatever has been done already to lighten the burden of Income Tax, and whatever more it may be possible to do in the future, prompt payment of whatever tax is due is both the duty of good citizens and a condition of successful financial administration. I am concerned at the large amount of tax arrears which are outstanding. I am glad that the Public Accounts Committee, in a recent report, have drawn attention to this question. They have observed that the total arrears of Income Tax, Surtax and Excess Profits Tax outstanding at the end of 1945–46 were about £780 million. There has been some misunderstanding of this figure, and I am anxious to correct it. This figure represents not only arrears of tax in the proper sense of the term, namely tax which is admittedly due but has not yet been paid, but includes also 400 a considerable sum in respect of tax assessments which are still, for one reason or another, not yet settled—some of which may lead to litigation in the courts and so on. They are included in the total. Much of the total of £780 million—this point has been made quite clear in evidence before the Public Accounts Committee, and I hope that hon. Members will read it, in addition to the Reports, which are necessarily rather summary accounts of the position—will turn out in the end, for a variety of reasons, not to be payable.
§ None the less, after taking all that into account, the total of genuine arrears is large, much larger than it ought to be. I, therefore, urge all taxpayers who owe money to the Exchequer to pay up now, and so to help their country at this critical time. But, as we are often told, admonition alone is not enough. I, therefore, seek to reinforce admonition by incentive. I propose that, as from 1st January, 1948, arrears of Income Tax under Schedule D, and also of Surtax, Profits Tax and Excess Profits Tax, shall bear interest at the rate of 3 per cent. This interest will not be allowed as a deduction in computing income or profits. It will be charged upon all genuine arrears, in the sense which I have described, where the tax due exceeds £1,000—we are not looking for ha'pence—and where the arrears have been outstanding for more than three months from the date when the tax fell due. On tax not paid within this period of three months, interest will be charged as from the due date, or from 1st January, 1948, whichever is the later.
§ It is difficult to make any close estimate either of the yield of this new interest charge, or, more important still, of its effectiveness in stimulating quicker payment. But I hope to get some £15 million, and perhaps a bit more, through accelerated collection in the last quarter of this financial year. There are precedents for such an interest charge, particularly in regard to Death Duties. Those precedents date back—for those who are conservatively-minded—to 1894 for the Estate Duty and to 1868 for the Legacy and Succession Duties. I am now proposing to give them a wider extension.