§ Mr. Selwyn Lloyd
I beg to move, in page 36, line 32, at the end, to insert:(4) Notwithstanding anything in section fifty-four of the Finance Act, 1948, interest on unpaid contribution shall be chargeable only from a date within twenty-eight days from the passing of this Act.This Clause deals with the extension of the special contribution to Northern Ireland. When the Finance Act, 1948, was passed there was a provision in Section 82 (9), which stated that:Save as otherwise expressly provided, such of the provisions of this Act as relate to matters with respect to which the Parliament of 120 Northern Ireland has power to make laws shall not extend to Northern Ireland.I rather gather from the fact that it has been thought necessary to insert Clause 46 into this Bill that the Special Contribution has not hitherto been extended to Northern Ireland. I hope that the Solicitor-General will tell me if I am wrong in that assumption.
§ The Solicitor-General
There is a doubt about it, and it was thought desirable to put it completely beyond doubt.
§ Mr. Selwyn Lloyd
My Amendment really deals with a small point arising under the original Special Contribution. I do not propose to go in detail into the merits for or against the Special Contribution, but in so far as this new Clause applies Section 54 of the Act of 1948, it seems to me that it may well be that considerable injustice would arise. In Section 54, it is provided that:Where contribution, whether already assessed or not, is not paid by the first day of January, nineteen hundred and forty-nine, it shall carry interest at the rate of 2 per cent. per annum from that date to the date of payment.One can quite understand that it is equitable to make an assessment carry interest from the date upon which the taxpayer received the assessment. There was also a proviso in the 1948 Act whereby, if the taxpayer paid the Special Contribution in advance of the due date, he got interest at 2 per cent. Therefore, it might well be said that if he had not paid by 1st January, 1949, it was equitable that he should have to pay interest at the rate of 2 per cent.
In fact, that was a considerable injustice. I am told that of the 120,000 assessments which had to be made under the 1948 Act, only 36,000 had been made by 31st December, 1948. That meant that the remainder who had to pay—a 121 very large proportion of the total—were expected to pay interest before they had received an assessment of the tax they were due to pay. That is bad enough. That it is a considerable injustice is borne out by the fact that at 31st March of this year only 63,000 of the 120,000 had received their assessments. I suppose that it could be argued that a taxpayer would know the provisions of the Act and, therefore, could roughly calculate his liability and make a payment on account. It could be argued, that, therefore, this procedure was not particularly unjust.
So far as this matter affects Northern Ireland, a very different principle arises. If heretofore they have not been legally liable to pay the Special Contribution—if that is the position, or if there has been a doubt whether or not that is the position—it seems monstrous to make these people liable to pay interest in respect of a tax as from 1st January, 1949, when it has not been made legally clear until July, 1949, that they will have to pay the tax. That is retrospective legislation with a vengeance. It is wholly inequitable. People in Scotland, Wales and England, under the Act passed in July, 1948, had something like five or six months in which to pay the Special Contribution before interest became due. In this Amendment I suggest that people in the North of Ireland should have 28 days as from the date of the passing of this Bill. They will not have anything like as long in which to pay as people in England, Wales and Scotland had, but they will have 28 days as from the passing of this Bill.
My point is that it seems wrong to make people liable to pay interest from a date before it was legally obligatory upon them to pay the tax in respect of which the interest is levied. It would be just if the Government would give way on this comparatively small matter. There cannot be very much money or very many cases involved.
§ Lieut.-Commander Braithwaite
I beg to Second the Amendment.
The Solicitor-General in his intervention a few minutes ago told us that Clause 46 had been inserted in this Bill because there was some dubiety about the position under last year's Act. It would help if he could tell us what the extent of the dubiety had been. For instance, have there been assessments made and issued in Northern Ireland which have 122 been challenged as being unenforceable in view of the position under last year's Act? If that is not so, I am sure that the right hon. and learned Gentleman will see the force of the argument behind this Amendment. Those resident in the United Kingdom were liable for this 2 per cent. interest charge as from 1st January of this year whether or not an assessment had been made.
The Solicitor-General will recall that Questions have been put to the Chancellor on this subject during the past month, and the ruling given has been that, whether the assessment had been made or not, if there was a liability then as from 1st January of this year, the 2 per cent. interest charge would operate. The Chancellor said that those whose assessments were in doubt could always "make a shot"—I think that was the phrase—by making a payment to the Exchequer, and the matter could be ironed out later. Obviously, with this doubt existing as to what the situation in Northern Ireland is, that argument cannot apply in any kind of equity to those resident there. I am not aware, though I have no doubt that the Solicitor-General can tell us, whether or not there have been any cases of assessments being levied and disputed. It seems to us on this side of the House that this is a useful subsection for the purpose of clarification.
§ The Solicitor-General
It was always intended that the Special Contribution should apply to Northern Ireland, and no question was raised as to whether it did until October of last year. Then attention was drawn to a certain wording in Section 82 (9) of the Act which seemed to give rise to some doubt. That question was investigated and the Government came to the conclusion that on balance in a matter of considerable doubt it would seem to be that the tax had not been effectively imposed upon Northern Ireland. The Chancellor of the Exchequer answered Questions about that on 18th January, 1949. Attention was called to the doubt raised and it was suggested that it was desirable to put the matter beyond any doubt in the Finance Act of the coming year—that is the Finance Bill we are now discussing. In the course of his answer the Chancellor said:Meantime, in accordance with the view hitherto held, assessments to contribution will 123 continue to be made in Northern Ireland."—[OFFICIAL REPORT, 18th January, 1949; Vol. 460. c. 5.]I would agree that there was force in this Amendment if this rate of interest was, or was intended to be, a penal rate as under Section 8 of the Finance (No. 2) Act, 1947, which imposed interest on arrears of payment of Income Tax and Surtax. That was a rate of 3 per cent. This is a rate of 2 percent. No deduction is allowed for Income Tax purposes, but the gross rate is allowed as a reduction for Surtax purposes. That being so, it is analogous to the 2 per cent. interest charged in the case of Estate Duty. There interest at the rate of 2 per cent. is charged as from the date of the death, although the actual Estate Duty is not assessed and charged until some considerable time later.
The purpose of that interest charge on Estate Duty and this interest charge is not at all a penal one. It is simply to compensate the Exchequer for the fact that the taxpayer does have in his possession, and, of course, can use, money which is destined ultimately to go by way of Estate Duty or Special Contribution when it is assessed and charged. The situation is that the taxpayer knows that sooner or later he will be called upon to pay a certain amount of tax. He does not know exactly what it will be. Of course, he could calculate almost exactly what the Special Contribution will be. Until he actually has to pay, he has the use of the money. Indeed, it is kept in the form of some sort of investment which brings him in a dividend or income of some kind. The rate of interest is charged simply to compensate the Exchequer for being out of possession of this sum of money which remains in the hands of the taxpayer until it is paid in the form of tax.
§ Mr. Selwyn Lloyd
The right hon. and learned Gentleman says that there has been this uncertainty whether or not people are legally liable to pay the tax. May they not have had this money on deposit in a bank, awaiting some provision such as this, in which case the money would not be earning anything?
§ The Solicitor-General
I suppose the vast number of taxpayers keep their money in some form of interest-bearing 124 securities, whatever they may be. No doubt, it is earmarked to pay the tax, but it is invested in some securities bearing interest and from which they derive income during the time in which it remains in their possession. It is in order to compensate the Exchequer for being out of that money during that time, in the case of Estate Duty and Special Contribution, that it was thought right that this interest should be charged.
I see the force of the argument that there was doubt whether it was chargeable at all, but there is no doubt in the mind of anybody that it was intended to be charged, and it was only an accident which gave rise to the doubt. That being so, we think it is being conveniently imposed, and we can see no reason, this not being a penal charge, but one different in scale in regard to the charge for interest on arrears of Income Tax and Surtax, why the Exchequer should be deprived of taxation which it would normally expect to have, and which was the object of the charge for interest at 2 per cent. in the Finance Act, 1948. There is no reason to deviate from that view, as every taxpayer who was liable knew at that time that he was intended to be included in it, and it was only an accident that there was any doubt whether he was or not.
§ Mr. Nigel Birch (Flint)
We are becoming very accustomed to this contest of wits between the learned Solicitor-General and the Financial Secretary as to who can give the worst answer, but I think the Solicitor-General really got several lengths in front tonight. He started off by saying that it was always intended that this tax should apply to Northern Ireland, and that only the incompetence of the Government's draftsmen did not make it appear that it was so. To say that the drafting was wrong is perhaps not a wholly satisfactory answer, but I think there was additional reason, not only to question what was said in the Finance Act last year, but also what appeared in the Government of Ireland Act, 1920, which I think, if carefully studied, might make it appear doubtful whether such a tax could be imposed upon Northern Ireland by the Imperial Parliament. That is the first point. It was the fact, not only that the Government had drafted the Bill wrongly, but that it might well have been supposed by those living in Northern 125 Ireland who were familiar with the Government of Ireland Act that they were not so liable.
The Solicitor-General goes on to say that, in any case, it does not matter, because the rate of interest charged is not a penal rate. That really is a very remarkable argument, because it would authorise the Government to charge interest on almost anything, whether due or not. If somebody is not liable for tax, or has a good reason for supposing that he is not liable, and he has not been assessed for that tax, to say that it does not matter because the rate of interest is not very high, seems to me to be the last word in nonsense. It also shows that this particular tax was a capital levy, which was generally denied by hon. Gentlemen opposite. If it were not, we would not expect the money to be paid by the taxpayer to be earning anything at all, because it has to come out of income. The right hon. and learned Gentleman now admits that it was a capital levy, and he says, "We have done wrong; we have drafted our Bill wrong, and also misled those who knew the Government of Ireland Act, 1920. But we are not really doing anything very wrong, because we are only charging 2 per cent."
That is the old argument which hon. Members will remember to have heard from the other side; it is the old argument that, after all, it is only a little one. It is about time that that sort of thing was stopped. Hon. Gentlemen opposite are now ruining their country deliberately and are putting up this wholly immoral argument in favour of doing so. It is time this sort of thing was stopped. No doubt, we shall be beaten on this, but I hope the country will notice the injustice which is being done here and also the arguments supporting it, which are not only intellectually despicable but immoral.
§ Amendment negatived.