PURCHASE TAX (CAR RADIOS) (Hansard, 13 April 1948)

§ Sir John Mellor (Sutton Coldfield)
On 26th January I raised the question of the refusal of the Government to refund tax paid in mistake of law. I raised it with special reference to the Purchase Tax on car radios. The Financial Secretary to the Treasury replied, and his reply raised grave issues of principle and it is proper 932 to refer to some of the implications of his answers. First, I must briefly sketch the facts. The Finance (No. 2) Act, 1940, imposed a Purchase Tax on wireless receiving sets of a domestic or portable type. At that time the use of car radios was prohibited, and remained prohibited until 1944. But in July of 1946 the trade requested the Commissioners of Customs and Excise to give a ruling whether car radios, were taxable under the Finance (No. 2) Act, 1940. The ruling was that they were taxable. In May of 1947, however, that ruling was reversed.
The situation was described in a letter from the Financial Secretary to my hon. Friend the Member for Aylesbury (Sir S. Reed), dated 12th November, 1947, which I read with the permission of my hon. Friend. In that letter the Financial Secretary wrote: Further consideration has led to the conclusion that the statutory heading was not in fact wide enough technically to catch these articles. That is quite clear. There was no doubt at all at that time in the mind of the Financial Secretary that car radios were not covered by the provisions of the Finance (No. 2) Act, 194o, and, therefore, that, until the Statutory Order was made making them taxable in August, 1947, they were not in fact taxable. Moreover, the Excise authorities stopped collecting tax from May, 1947, and they did not resume its collection until 11th August, 1947, when wireless receiving sets designed for use on road vehicles were, by Statutory Order, made subject to Purchase Tax. But, notwithstanding this discovery, the Excise authorities refused to make any refund. In a letter to one firm, dated 24th July, 1947, the Commissioners of Customs and Excise wrote: Payments made to this Department, having been made under mistake of law, are irrecoverable. When I raised this matter in the House on 26th January the Financial Secretary gave certain reasons in an attempt to justify the conduct of the Commissioners of Customs and Excise. His first and principal reason was this: he said it had been the intention of Parliament in passing the Finance (No. 2) Act, 1940, to cover car radios. These were his words: To refuse repayment is not contrary to natural justice, for Parliament clearly intended these radios to be taxed."—[OFFICIAL REPORT, 26th January, 1948; Vol. 446, c. 794.] 933 Surely, the intention of Parliament can be discovered in the words of the Statute and nowhere else. To attempt to find what was the intention of Parliament in any other manner is pure speculation; but if I were to follow the right hon. Gentleman in his speculation of what the intention of Parliament might have been, I would remind him that the use of car radios was prohibited from 29th May, 1940, whereas the Act imposing the Purchase Tax did not come into force until 22nd August of that year. Surely, therefore, if Parliament had thought about the matter at all, it is highly unlikely that Parliament would have imposed the Purchase Tax upon car radios whose use was prohibited at the time.
The right hon. Gentleman, both on legal and moral grounds, claims to justify the retention of this money. Therefore presumably he also seeks to justify its collection upon the same legal and moral grounds. Let me remind him that he admitted in the letter of 12th November, 1947, that the collection was unauthorised by the Statute. Therefore what he is doing is seeking to justify actions which were in fact illegal on the ground that he believes that Parliament meant to make them lawful. If we permit the Financial Secretary to get away with that proposition, then I feel that a highly dangerous precedent is being established.
The Financial Secretary also put up another reason for refusing to make any refund. He said that it would be impossible to trace all those who had paid the tax. That may well be the case, but all I claim is that any ultimate purchaser, who had been the ultimate bearer of the tax, who produces a receipt showing that he had paid the tax should then have the money refunded to him. Because it is not possible to do justice to all is no reason for not doing justice to as many as one can possibly find. The right hon. Gentleman relied, of course, on the perfectly good defence, I believe, in law that money paid in mistake of law cannot be recovered through the courts. It seems to me that if the Government are going to rely on that they are seeking to gain an advantage both ways. I am informed that the Crown claims the right to recover from the taxpayer any amount undercharged or overallowed, owing to mistake of law, even if that mistake has 934 been committed by the Revenue authorities.
It seems an astonishing position that, on the one hand, the Government should refuse to refund money received in mistake of law when that mistake has been provoked by the authorities, and, on the other hand, should seek to recover any amount which has been overallowed through a mistake of law on the part of the Revenue authorities. I feel that the Government should endeavour to follow ordinary principles of decent conduct as established in commercial communities, because, unless they conform to such codes of conduct, taxpayers will delay the payment of their taxes as long as possible when they realise that, if they make a payment under mistake of law, they will never be able to recover the money.

§ Mr. Eric Fletcher (Islington, East)
May I ask whether the hon. Member's proposition is that it is desirable that the law should be changed and that any sums payable under mistake of law should be recoverable instead of, as at present, irrecoverable? Or is he only suggesting that sums paid under mistake of law to the Crown should be recovered?

§ Sir J. Mellor
If I may answer that question, I do not want to try to escape by saying that it would be out of Order to argue on this occasion that the law should be changed. I would not venture into such deep water. My argument is that business people, and ordinary people, do not think of taking advantage of a point like a mistake of law. If people have paid money under a mistake, whether of law or fact, unless there are some exceptional circumstances, it is considered the right thing to repay it. And I am saying that the Crown should behave with at least as high regard for moral conduct as the ordinary citizen.

§ Colonel Gomme-Duncan (Perth and Kinross, Perth)
I am not a lawyer and I do not pretend to know the difference between a point of ordinary law and ordinary justice, but I am sure that if the Financial Secretary to the Treasury paid me money which I should not have received, and he found out that he ought not have paid it, he would expect me to repay. The right hon. Gentleman said 935 his Department is concerned with finance and not with morals. But the House of Commons is concerned with morals as well as finance.
There is no possible justification for the Treasury, because it is the Treasury, expecting to be put upon a different level in the matter of morality. That is the whole basis of the argument of the hon. Baronet the Member for Sutton Coldfield (Sir J. Mellor). We have heard it before here, and we have heard it again tonight. In the course of my military career, by some mistake of the Treasury, I have been overpaid on four or five occasions. I have been called upon to refund that payment without question. There could have been no question about it because it was deducted from my pay the following month. Is there any difference in morality in the payment of a tax that should not have been paid? The Financial Secretary is showing signs of impatience.

§ The Financial Secretary to the Treasury (Mr. Glenvil Hall)
I was not. We have only half an hour, and I do not mind not speaking at all. We have already dealt with this matter at least once, and if the hon. and gallant Gentleman cares to use up the rest of the time, it is quite all right.

§ Colonel Gomme-Duncan
It is not a matter of using up the time, but of putting forward an injustice with which this House is concerned, and because the right hon. Gentleman thinks that time is going on he forgets that a gross injustice is being placed upon a subject of this country. It is his job as a Minister to accept that, or to give some explanation if he does not.

§ Mr. Donovan (Leicester, East)
There are two sides to this question. There is the case of the taxpayer, who, having overpaid his tax and wants it back, thinks that a great injustice is being done if the Crown relies on a technical defence. There are also cases—and I have seen them myself—where Treasury officials, through mistakes, sometimes blameworthy sometimes not, have overpaid money, and the subject has relied on the technical defence that this is money paid under mistake of law and, therefore, the Crown cannot recover. That answer was quite 936 good. Nevertheless, although the Treasury is entitled as a matter of strict law to say, "We have been overpaid by mistake of law and, therefore, we will not repay", I hope that the Treasury will not do that as a matter of rigid rule. I hope that they will put the taxpayers of the country in their debt to the extent of examining each case on its merits. A matter of a few pounds may mean very little to the Treasury, but a good deal to the individual taxpayer. Therefore, I hope that the Financial Secretary will be able to say tonight that, although it is impossible to adopt a universal rule, the Crown will never rely upon the defence of payment under a mistake of law, but that each case will be carefully examined on its merits, with a bias in favour of repaying whenever that course is possible.

§ Mr. Keeling (Twickenham)
I support my hon. Friend the Member for Sutton Coldfield (Sir J. Mellor) on the broad, general ground that if the Government swindle the citizen, the citizen will be provoked to swindle, whenever he can, the Government. We saw that only yesterday in the case of Dr. Joad, who might have been, and for all I know was, inspired to swindle his fellow taxpayers by this example to which my hon. Friend has drawn attention. I think it is very serious that the Government should adopt a lower standard of morality than they expect from the citizen.

§ Mr. Glenvil Hall
We have, as I have just said, already dealt with this matter once, and I can really say no more than I said on that occasion, particularly as the hon. Baronet the Member for Sutton Coldfield (Sir J. Mellor) has made practically the same speech he made on that occasion, and has used the same arguments. He has brought forward no new facts in support of his case. I think that my hon. Friend the Member for East Islington (Mr. E. Fletcher), in the question he put to the hon. Baronet, showed the hollowness of the hon. Baronet's case. He had much to say about illegality and immorality, but when the question was put to him as to the exact grounds upon which he was basing his case tonight he was quite unable to answer.

§ Sir J. Mellor
That was not the question.

§ Mr. Glenvil Hall
The facts are that in 1940 Purchase Tax was instituted, and, amongst other things, it was put on radios, whether they were portable or what was called domestic, or formed part of a car. Everybody at that time—and since—down the years to 1946, when the matter was queried—believed that car radios of all kinds were subject to Purchase Tax. If that had not been so, if it had been the will of Parliament that a certain type of radio which was bolted into a car was to escape the tax while the radio in some cotttage in the country was to bear it, it would have been grossly unfair, and I am positive that someone at that time would have pointed that out, and objected.

§ Mr. Glenvil Hall
I looked up the previous Debate, and I found that the hon. Baronet interrupted me at least four, if not five, times. I shall not give way. That was the situation. It is the view of Customs and Excise and of legal opinion—high legal opinion—that the definition laid down in the 1940 Act does cover this particular type of radio which is carried into and bolted into a car. However, late in 1946 or early in 1947, a doubt arose on the part of certain people in the radio industry whether the form of words used was sufficiently wide to cover one particular kind of radio which, as I say, was carried into and bolted into a car.
There were two ways of resolving that doubt. One was to go on charging the Purchase Tax and let those who believed the wording not to be wide enough to take the matter to the courts. The other way, and the quicker way, to resolve the doubt was to put through a new Statutory Rule and Order. That is exactly what the Treasury has done. That is the situation, and there is not the slightest doubt legally as to the position. I challenge the hon. Member on this. I understand that he is a barrister, and if he refers to the legal authorities—Chitty, Leake, or any other of them—he will find that for over 100 years—for this is not, as he said, a new and highly dangerous precedent being established—it has been the law that money paid in this way could not legally be recovered. That is the legal situation 938 not because of something done by this Government, but in accordance with the law as established for many years.

§ Colonel Gomme-Duncan
Grossly unjust.

§ Mr. Glenvil Hall
The question however arises whether, outside the legality of the matter, something should be done to return this money to those who paid it. I have already said that obviously it was proper that people, should pay tax on these sets. I must say, that that being so, on moral grounds there is everything to be said for retaining that money. The taxpayers expected to pay it; those who bought these radio sets knew that part of the price they paid was to be passed on as Purchase Tax by the retailers from whom they bought the sets to the Exchequer. They bought the sets believing that they were paying a proper tax as laid down by this House; and I repeat that no one has demonstrated that the House had any intention of excluding these sets. One firm in which the hon. Baronet is interested—

§ Sir J. Mellor
I am not interested in it.

§ Mr. Glenvil Hall
—claims to have paid over in this way to Customs and Excise no less a sum than£12,000. The hon. Baronet suggested in one of his earlier Questions to me on the subject that we should repay to that firm that£12,000. That firm was nothing more than an agent for the Government in this matter; they did not find this money at all.

§ Sir J. Mellor
They would return it to their customers.

§ Mr. Glenvil Hall
They took it from their customers. I think that any hon. Member—and certainly the vast majority of people outside this House—would agree that it would be quite impossible for this firm to pass on to those who had been subjected to that tax the amount which they, the firm, had taken on behalf of the Government. The same would apply not only to that particular firm but to all retailers who collected the tax.

§ Sir J. Mellor
The right hon. Gentleman must not misrepresent what I said. I asked only that any one ultimate purchaser who paid a tax, and who produced a receipt showing that fact, should have the money repaid to him. I ask no more than that.

§ Mr. Glenvil Hall
But why should that be? Legally, the money was properly taken. It was the intention of Parliament that that money should be taken; and, as I say, it would be impossible to find every purchaser and pay back to him this tax, even were it accepted by all concerned that the form of words was incorrect and did not cover this kind of radio. Those are the facts which, as my hon. and learned Friend the Member for East Leicester (Mr. Donovan) said, march with the other legislation on the Statute Book.
The hon. Baronet quoted the Income Tax Act to show that where an assessment is made and afterwards found to be wrong the inspector of taxes can make another assessment. Well, that is not a mistake of law. That is a mistake of figures and of fact as to what the assessment ought to be. Frankly, I do not follow that analogy at all; but, in any event, I would point out that Section 24 of the Finance Act, 1923, provides for the very thing which Customs and Excise have done in this case. Where the public is under the impression that the law says one thing, and then later on a case is taken to the courts and the judges decide that it means something else, money paid in the meantime under a mistake of law is irrecoverable: it remains where it was. Therefore, if the hon. Baronet calls to his aid, as he did tonight, the mechanism and machinery which govern the collection of taxes, I can assure him that the examples are all against him, and not for him at all.

§ Sir J. Mellor
I was not referring to the case where the law was changed. I was 940 referring to the case where an Income Tax inspector had gone wrong in his law and then found what the position really was.

§ Mr. Glenvil Hall
There might be a case of an Inspector of Taxes going wrong in his law, but I know of no case of that kind. It might be a case where the way in which a particular Act of Parliament is construed may be upset later on by being taken to the courts. But the case which the hon. Baronet is visualising is where the Inspector of Taxes makes a mistake in assessment and, obviously, that is not on all fours with the type of case we are discussing.
Therefore, on legal grounds, on moral grounds, on every ground, I do not think the hon. Baronet has established his case. If we were to allow this one particular firm to be repaid on the basis of their claim, it would still be quite impossible to discover their customers at this date. This tax has been levied since 1940 and one firm alone claims to have taken£12,000 as agent. If that amount has been collected by them, goodness knows how much more has been collected! We have not the faintest notion how much was collected for radios of this type. Apart from anything else, the physical difficulty of repaying these sums makes it impossible for me to accede to the request the hon. Baronet has made tonight.