HL Deb 12 May 1842 vol 63 cc459-71
The Marquess of Lansdowne

rose, in pursuance of the notice he had given a few evenings previous, to move for certain returns relating to the exemptions granted to foreigners, under the acts commonly called the Income-tax and the Property-tax Acts. In doing so, it certainly was not his wish to hurry the House (which could not be otherwise than exceedingly inconvenient) into any premature discussion as regarded the merits of the general question. He should confine himself strictly to the particular point to which the returns for which he was about to move related. He did not apprehend that her Majesty's Ministers would raise any objection to the making of those returns, but as the subject to which they re- lated was one of considerable importance, he hoped to receive their Lordships' indulgence whilst he offered a few observations in respect to it. He was the more induced to ask for this indulgence because he found not only that his own authority, but the authority of other men much more eminent than himself, and with whose opinions he had had opportunities in earlier life of becoming intimately acquainted, had been referred to in connection with this subject in another place. The reason why he felt it necessary to call their Lordships' attention to the subject, at this particular moment was this—that unquesionably this was the first time that the income enjoyed by foreigners in other parts of the world, arising from property vested in this country, had been made the subject of taxation under any act of the description of that now under the consideration of Parliament. There were, he believed, soon after the Revolution, certain imperfect and obscure attempts made to impose a tax upon income; but these attempts were not carried into effect; and as the history of them was but very imperfectly known, it was difficult to find out either why they were made or why they did not succeed. But early in the course of the first French war Mr. Pitt introduced an Income-tax upon all income enjoyed by his Majesty's subjects in England. It never occurred to Mr. Pitt at that time, at least there was no trace, no record of its ever having occurred to Mr. Pitt, that it was just, equitable, or expedient to include foreigners in the operation of that tax. Shortly afterwards the tax terminated with the war. In the next French war, Mr. Addington, being then the Minister in the House of Commons, proposed what was called the property-tax, which, though differing in name, was in almost all respects similar to the previous tax introduced by Mr. Pitt. The tax so proposed by Mr. Addington did not extend to foreigners. Two years afterwards it fell to his lot, in a very early period of his public life—too early, perhaps, to be employed in a situation so high and important as that which he had then the honour of filling—to propose a considerable alteration and modification of the property-tax which had been introduced by Mr. Addington—he would not say that it never occurred to him, because in speaking upon the present occasion, he wished to lay aside his own authority altogether —but it never occurred to those under whom he acted-—above all, it never occurred to Mr. Fox that it would be expedient or just, to extend the operation of the act to foreigners possessed of property in this country. And here he would state the ground upon which he felt himself' particularly called upon to direct their Lordships' attention to the subject. At the time of which he was speaking, a very material and a very beneficial change took place—a change which he was humbly instrumental in carrying into effect; and which, without altering the principle of the act, did so far alter its form and appearance with respect to its application to the funds, as to suggest, for the first time, the principle of taxing foreigners. It had been found that a great deal of inconvenience had been experienced in consequence of the tax not being levied at the Bank of England, where the income derived from the funds was paid. To remedy this inconvenience, it was arranged by the consent of all parties, that the Bank Directors should be enabled to act as commissioners, and to receive at the Bank that portion of the funds which was subject to the tax. The tax so received by the Bank directors in the character of commissioners was not a tax upon the funds, but a tax upon income derived from the funds. This was carefully provided for in the clauses of the act constituting the Bank directors commissioners. The tax was not levied upon the funds as funds, but upon income as income, and the Bank directors were made commissioners of the tax for the purpose of collecting it with the least amount of inconvenience to all parties. However, the appearance of the tax being deducted from the funds, was such as to suggest, for the first time, to two or three able and ingenious persons in the House of Commons that it would be expedient to include foreigners resident in other countries, and not being subjects of his Majesty, in the tax. A proposition to that effect was accordingly brought forward in the House of Commons, and in the course of what passed upon that occasion, the strongest opinions were expressed that it would be both unjust and inexpedient to subject foreigners to the tax. He adverted particularly to that fact, because he had heard that it had been stated in another place, that Mr. Fox had objected to the subjecting of foreigners to the tax as a matter of expediency only, and not of justice. In con- sequence of this assertion, he had been induced to refer to the record of the opinions expressed by Mr. Fox; and with their Lordships' permission, he would read the words employed by Mr. Fox, and then leave their Lordships to judge whether it could be fairly stated that Mr. Fox's objection was one of expediency only. Mr. Secretary Fox was astonished at the opinion expressed by the hon. Gentleman (Sir Philip Francis) on this subject. For his part, he should consider an act, such as the hon. Gentleman recommended, a shameful confiscation. The bill under the consideration of the committee was not for taxing foreigners, but British subjects. So unjust did he consider such a measure (involving in it too, as he conceived, a flagrant breach of the national faith), that if the revenue resulting from it were ever so great, he should think it his duty to reject it. Now whether Mr. Fox were right or wrong in that opinion, it could not, with any justice be said by those who advocated the imposition of the tax upon foreigners, that the high authority of Mr. Fox could be quoted as opposing the proposition only upon grounds of expediency and not of justice. He had shown from Mr. Fox's own words that his opposition to the proposal was specifically based upon the grounds of justice. And however high the sole and unsupported authority of Mr. Fox must ever be held to be, it was to be recollected, that in this instance Mr. Fox was giving an opinion in strict conformity with the course of conduct previously pursued by his political adversaries, Mr. Pitt and Mr. Addington, and which, when Mr. Fox unhappily ceased to exist, was afterwards pursued by Mr. Percival, when the question was again brought under the consideration of Parliament. Here, then, was a mass of authority, to show the injustice and inexpediency of including foreigners in an Income-tax levied in this country. But even if there were a doubt as to the justice of adopting such a course, when the bills were first introduced to tax property and income in England, the very recurrence of the exemption through so many successive Parliaments, and so many succeding administrations, was calculated to give to foreigners the idea and expectation, that by becoming creditors of this country, they would be creditors free from any deduction in the shape of direct taxation. It had been said, that the foreigner ought to pay the tax on account of the security afforded to his property, but did a mortgagor ever tax his mortgagee for repairs, or could a mortgagee deduct from the interest of the mortgage money on account of any species of improvement which added to the value and security of his property? It had also been said that if the foreigner was discontented, he could sell out. That was an argument which went to a frightful extent indeed, because it might be applicable to the English creditor also, and some day he likewise might be told if he were discontented or dissatisfied with some great deduction that "he might sell out." It seemed that this consideration had been forgotten throughout the present discussion, that if the English creditors were affected, it would be their awn faults, because they were represented in Parliament. But the foreigner was not represented in Parliament, and had no means of making his case known and heard. He had lent, or been a party to lending, his money upon the faith of this country that he should receive his dividend free from all deduction. That was the opinion he entertained of the justice, or he might rather say, the injustice of this case. But if he entertained a strong opinion as to the injustice, he also entertained a strong opinion as to the inexpediency of imposing this tax upon the foreigner; because, for the sake of adding some 18,000l. or 20,000l. to a tax amounting to some millions, it was not worth while to impair in the least degree that high credit and reputation for the scrupulous fulfilment of engagements which had hitherto distinguished this country in every part of the world. It was, he conceived, a part of the policy of this country to maintain that high character. A case might occur, and that at no distant period, when this country might be called upon to uphold British securities in other countries, and when we might, if we could, have to use the argument, that in the midst of all our deprivations and distresses we had carefully guarded against the slightest deduction from that interest we were bound to pay the foreign creditor. He had seen with great sorrow any attempted deviation from that course which had been adopted for so many years in this country, and which had the sanction of so many Parliaments. He had taken the opportunity of stating his opinion on this matter, in moving for these returns. He did not know whether the papers for which he moved could be produced; he knew it was very likely that a great part of them had been involved in the grand auto da fe which took place when the Income-tax was abolished. If, however, they were not destroyed, they might perhaps be obtained from some returns which had been moved for in the other House. The noble Marquess concluded by moving, for an Account of all exemptions granted to foreigners in respect of income arising from property in the funds under the 23rd and 26th of George the Third.

The Earl of Ripon

did not apprehend that there could be any objection to the motion of the noble Marquess. The subject was undoubtedly one of great importance; and the noble Marquess was perfectly justified in availing himself of the present opportunity to express his opinion upon it. He confessed, however, that, with all the respect he entertained for the authorities quoted by the noble Marquess, and for the noble Marquess himself, he had not been satisfied by the reasoning of the noble Marquess, that the proposal to subject the property of foreigners to the same impost as other property, was unjust. He did not think that there would be any violation of the principles of justice in calling upon all parties who had an interest in the maintenance of the public credit of this country to contribute to the public burdens. Mr. Pitt had, no doubt, exempted the property of foreigners from the Income-tax; but it appeared to him that in doing so, Mr. Pitt had been influenced, not so much by considerations of abstract justice, as by the considerations of policy and public expediency. At the time when Mr. Pitt's property-tax was imposed, the expenditure of this country was vast, and it was subjected to great and unusual burdens; and it was necessary to meet the additional expenditure by loans. At that time the funds were low, and it was necessary for the maintenance of the public credit that every means should be taken to increase the facility for raising the supplies that might be necessary. Under those circumstances, he could conceive it would have been unwise to allow the operation of the tax to extend to the funded property of foreigners. The same observation applied to the case of 1806, for, at that time, there existed the same considerations of expediency with regard to the position of this country and the state of the public funds, which appeared to have influenced Mr. Pitt. Upon the last occasion, moreover, it was not the question of imposing a property-tax, but merely of adding to the amount of one already imposed; and foreigners having been exempted on the original imposition, it might have been unjust to take the opportunity created by raising the per centage, to include a set of persons who had previously been excluded. In that point of view, therefore, he entirely concurred with his noble Friend opposite. At the same time he could not see the application of that argument to the abstract justice or injustice of imposing a new tax. Now that it was proposed to endeavour to equalize the revenue and expenditure of the country by means of direct taxation, it was for the purpose of avoiding perpetual recurrence to the system of borrowing. That system of borrowing if persisted in would have the effect of depreciating the value of funded property. Therefore the value of that funded property appeared to be essentially connected with any plan of finance the object of which was to avoid the necessity of perpetual borrowing. If the foreigner had the same interests in the maintenance of the public credit that every other person had who possessed property in the funds, there appeared no ground for the accusation of abstract injustice in calling upon him to contribute to the general taxation upon that property. He confessed he did not feel the force of the arguments either as applied to the injustice or the inexpediency of the case.

Lord Monteagle

would trouble their Lordships with only a few words. His noble Friend who had just sat down had not made any reply to the observation of his noble Friend (the Marquess of Lansdowne) as to the altered state of the country since the Property-tax was first imposed. He would admit, but only for argument sake, that foreigners had been exempted on selfish grounds—that was for the purpose of keeping up the funds. Was that a reason why they should be taxed now, in time of peace? In the first renewal of the tax, the exemptions remained the same. In every subsequent renewal of the Property-tax foreigners were exempted; and by the acts of every succeeding Government they were led to form the just expectation that they would be protected against any future legislation, as they had been against any previous provisions. He felt more strongly persuaded than ever that the views of his noble Friend were founded in justice and sound policy; and he was peculiarly strengthened in this when he recollected the enormous mass of British capital which was invested in foreign funds, and which was dependent altogether upon the conduct of foreign governments. To place the argument upon no higher ground than that of mere selfish expediency and prudent policy, he must say it appeared to him that nothing could be more unwise than to disregard the recommendations of his noble Friend. At anterior times anterior Parliaments and Governments had been very scrupulous as to imposing taxes upon foreigners, and he confessed that he could not understand how they should be less scrupulous now, when the matter in question was merely a miserable sum of from 20,000l. to 30,000l. a year; it could not amount to more. These considerations, then, induced him to say, that the more he looked at this part of the subject the more did he view it with extreme apprehension. It was quite obvious that if the arguments of the noble Earl opposite were to prevail, it would establish a principle most injurious to the British holders of all foreign securities.

Lord Brougham

quite agreed with his noble Friend that it would be exceedingly unwise to impose a tax upon foreigners. From the announcement of the proposition to the present moment, he was all along of opinion that this part of the measure was not only inexpedient and unjust, but in a very high degree unwise and imprudent; and for this, amongst other reasons—that it would give foreign governments a handle for dealing in a similar manner with the funds of others. It would be but a very trifling addition to the revenue, while it would do an injury to British interests so manifest and so irreparable, that no substantial argument could" be raised in its favour. He found it hardly possible to touch upon those topics without calling the attention of the House to the fact that the sum which British subjects had invested in the foreign funds was infinitely greater than that which foreigners had in the English funds; he therefore hoped that the subject would be well and carefully considered before it was too late; he earnestly hoped that those who had the management of the bill in another place would turn their attention to the subject, for when it came up to their Lordships' House it would be too late to make a change in any of its clauses. He agreed to the measure of an Income-tax with the utmost possible reluctance, but he entertained a decided objection to it accompanied by the present provision; if, then, it came to them from the other House unchanged in this particular, their Lordships would have no alternative; they must either throw out a necessary measure, or they must agree to the unwise and unjust course of taxing foreigners. He should not trouble their Lordships any further than to express an earnest hope that the considerations which had been urged upon this point would have their due weight in the proper quarter.

Earl of Wicklow

contended, that as to this tax, there was no difference between British subjects and foreigners. When the latter derived profit from investing money in the British funds, there appeared to be no reason whatever why they should not assist in bearing their fair share of the public burdens. It was quite true that this impost was, generally speaking, a war tax, and it also happened that in time of war it was the practice of foreigners to invest a smaller amount of money in the British funds than in time of peace; but to him it appeared that those subjects bad nothing whatever to do with the matter—nothing, at least, that should influence the decisions of Parliament. One consideration which he was sure must be obvious to every noble Lord was this, that if foreigners were exempted a door would be opened to fraud; for Englishmen residing in other countries, or even at home, might invest money in the English funds in the names of foreigners, and pro tanto there would be a diminution of loss on all sales to foreigners. It was said, that if we laid a tax of this nature upon foreigners the governments of other countries might retaliate. That was an argument which with him had no sort of weight. If foreign governments wanted taxes they would not hesitate to lay them on, without the slightest reference to British interests. For his part, he thought the proposed arrangement an act of justice, and he thought, that as the bill had proceeded so far as it had done, it was not likely to be altered.

Lord Brougham

did not refer to the probability of foreigners following our example to the letter—they might not retort upon us by an exact imitation of what we had done, but unfortunately human nature was so constituted that one act of injustice frequently led to the perpetration of another in another direction.

The Duke of Newcastle

was inclined to think that an Income-tax was not altogether necessary, but then this was not the proper time to go into that argument. He thought that our financial difficulties might be remedied without the imposition of this tax, and he should be glad if the Government could see that it was advisable to abandon it, because he was persuaded that it would be injurious to the best interests of the country. He objected also to the other measures which the Government had introduced, for they had adopted the principle of free-trade—a principle to which he had almost all his life objected. He objected to Lord Liverpool's Government, when it introduced a similar measure, because he thought it was a tax which it would be unwise to put into the hands of any Minister, whoever he might be, and because it was one the consequences of which the country could not foresee. If it could be placed in the hands of any Minister, he was of opinion it could be placed in the hands of the present Minister; but still he thought it ought not to be placed in the hands of any Minister whatever. He thought it would not have been honest, as an opportunity presented itself, if he had not expressed his opinion on the subject. Agreeing in all other things with the present Government, and sincerely wishing that it might conduct the affairs of the country with every advantage and success—but as the whole experiment in our present circumstances was so new, and in his view so fearful—he could not help expressing this warning, and imploring the Government to do something which would avoid the necessity of imposing on the country a measure which would not be conducive to its interests, though those who brought it forward most unquestionably thought it would.

Viscount Melbourne:

My Lords, I do not wish to go into the general question which has just been broached by the noble Duke, and which, in a short time, must come regularly before the House. But for this motion, which has been made by my noble Friend, I cannot refrain from expressing my sincere agreement in every part of it. On the ground of justice, I must hold, that if foreigners place their capital in the British funds it is not any breach of justice to exact from them a tax, in return for the advantage and protection which they receive. At the same time, they only receive advantage and protection in respect of their property; they do not receive the protection and advantage which a native of this country receives from the general Government, and, therefore, it may be doubted whether it is fair to call upon them for an equal contribution. As to the policy and expediency of imposing this duty on them, in the present state of the country, and in the present state of the world, I hold the opinion—the settled opinion—that it would be both impolitic and inexpedient. The noble Earl says, that it would be no breach of faith with foreigners, because no expectation had been held out to them. From the proceedings on former occasions—from the general concurrence in exempting foreigners from this tax—from the course that the country has hitherto favourably pursued—a general and reasonable expectation must of necessity have been produced throughout all foreign countries that the same course would be pursued in all similar circumstances. There is hardly any question on which there has been such a concurrence of authority, as on this question of an exemption of foreigners from this tax. It was formerly more than once proposed that they should be included, and that proposition was brought forward by men of considerable talent, weight, and ability in the other House of Parliament. It was objected to by every financial authority of that time—it was objected to by Mr. Rose, by Mr. Huskisson, and I have no doubt that Mr. Long, the late Lord Farnborough, coincided in their opinion. I say, my Lords, that there was a singular concurrence of opinion upon the wisdom and policy of that exemption, and I do now ask your Lordships whether, in the present state of the world, it is wise or prudent to take with respect to foreigners, a more niggardly—a harsher—course than was taken before? I wish to ask the Government whether it be good policy to do that with respect to foreigners now, which you did not do with respect to them then? Are the feelings of Europe in general so very favourable, are they so willing to be conciliated, that it is wise to do that which must necessarily have a contrary tendency? We are going to try a pretty large experiment with regard to our duties on importation, with a view of extending our own trade. One great benefit which we expect, is reciprocity from foreign nations. Now, my Lords, I fear that this point of reciprocity is the weakest part of our case. I am afraid that is the point on which we ought to entertain the least sanguine expectations; but I say, is it wise to do that which must necessarily produce the feeling that foreigners are to be treated worse now than they were in former times? No doubt, the reasons which induced the exemption on former occasions were correctly slated by my noble Friend. We know very well that the great convulsion which had taken place on the continent, had brought a great deal of foreign capital into this country, and that many great capitalists derived their first connection with our funds, and the pecuniary concerns of this country from that source. Though there are no convulsions of that nature at present on the Continent, is there nothing in the money markets of the world at present—in the speculations of other countries—in the insecurity of property which prevails in other parts of the world, (to which I do not more particularly advert)—which may make it in the highest degree wise not to discourage foreign countries from taking advantage of the security which I trust belongs to the financial institutions of this country? On all 'these grounds I cannot but say that I do regret the course taken by the present Government, and that I should be extremely desirous to see it reconsidered.

Lord Wharncliffe

said, that there were circumstances in former times which made it inexpedient to impose this tax on foreigners, but those circumstances did not exist at present. The noble Marquess opposite said, that they ought not to tax foreigners on account of the immense amount of British capital invested in foreign funds. He must confess, however, that that argument had little weight in his mind, for if persons were to invest their money in foreign funds, they must take their chance as to the regulations which might be made by the countries with which they were dealing. With respect to the general question which had been raised by the noble Duke (the Duke of Newcastle), it appeared to him (Lord Wharncliffe) that this was not a proper occasion to enter into that discussion.

Motion agreed to.