§ 4.8 p.m.
§ Order of the Day for the Second Reading read.
§ THE LORD CHANCELLOR (LORD DILHORNE)
My Lords, your Lordships may perhaps think it somewhat surprising that it should fall to my lot to move the Second Reading of this important measure. I hasten to assure your Lordships that for a Lord Chancellor to support a Bill of this kind there is an excellent but ancient precedent. When income tax was first introduced—which, as your Lordships will remember, was as a temporary measure to finance the Napoleonic wars—my predecessor, Lord Chancellor Loughborough, was so enamoured of the Bill that he concluded his speech in its support by saying that why any noble Lord should object to the Bill being immediately read a second time he could not imagine. Tempted as I am to follow this precedent, and to say no more, whatever may have been the affection felt for income tax in 1799, there is, I fear, little or none now. None the less, I commend this Bill to your Lordships, for it contains some valuable improvements in administrative procedure in relation to income tax and profits tax.
Clause 1 relates to General Commissioners. Since the passing of the Tribunals and Inquiries Act, 1958, the appointment of General Commissioners has been almost entirely the responsibility of the Lord Chancellor. After 1958, twelve cities were left with power to appoint Commissioners themselves. In some cases this power dated from 1799. This ancient right is taken away by this Bill as, on its enactment, the Lord Chancellor will he responsible for the appointment of all General Commissioners.
The clause also provides that the office of Commissioner should be held during the pleasure of the Lord Chancellor. It was recommended by the Royal Commission that there should be a power 871 of dismissal and this provision secures that. I hope, however, that little use will have to be made of it. The clause also gives power to alter the boundaries of Commissioners' divisions. This is very important as these boundaries, like local government boundaries, require revision from time to time.
My Lords, it was not so very long ago that the noble Lord, Lord Morrison of Lambeth, thought fit to attack me, alleging that the Lord Chancellor and his Office were engaged in a piece of "empire-building" at the expense of the Home Office. On that occasion he appeared in the rôle of a self-appointed champion of the Home Office. I gather that there is not much likelihood of his appearing on this occasion as champion of the Inland Revenue. This measure, during its period of gestation, has come to he referred to—in view of its initials when enacted— as "the I.T.M.A. Bill". If, of course, the noble Lord had intervened in this debate, I should have been inclined to say, in sorrow rather than in anger, something about "That man again".
In any event, my Lords, I would say just two things. The first is that this transfer of responsibility to the Lord Chancellor was recommended by the Royal Commission on the Taxation of Profits and Income, and so there can be no accusation of "empire-building" which could be in the least degree justified; and, secondly, that Mr. Speaker has certified this to be a Money Bill. That means, of course, that your Lordships cannot prevent this Bill from being enacted in its present form. Your Lordships will remember that under the Parliament Act a Bill can be certified as a Money Bill if it contains only provisions dealing with the matters mentioned in Section 1 of the Parliament Act.
While I must say that I never anticipated that the giving to the Lord Chancellor of power to appoint Commissioners, power to dismiss them and power to fix the boundaries within which they worked would be regarded as a provision coming within that Act, it is of course the responsibility, and the sole responsibility, of Mr. Speaker to decide whether or not to certify a Bill as a Money Bill; and should not wish to be thought to ques- 872 tion, nor would it be right for me to question, his decision. But the fact remains that this Bill has been certified as a Money Bill, and so any effort to prevent the transfer of responsibility by Clause 1 of the Bill would be fruitless.
Clause 2 makes provision for the appointment of a Clerk to the General Commissioners, and Clause 3 deals with the appointment by the Board of Inland Revenue of inspectors and collectors of taxes. Clause 5 makes an important change in procedure. At the present time assessments to income tax are signed by the Commissioners. In fact, all the work leading to the assessments is done by the inspector of taxes, and in the general run of cases the signing of the assessment by the Commissioners is little more than a formality. Under the Bill the inspector will usually be responsible for making the assessments, but the Bill contains one important safeguard for the taxpayer in the exceptional case of assessments made outside the normal six-year time limit on the grounds of fraud, wilful default or neglect. In such cases the inspector is required under the Bill to obtain the leave of a Commissioner before he can make an assessment. That is provided for by Clause 6.
Clause 7 makes provision with regard to the main annual returns of income. Clause 8 gives the Inland Revenue power to recover income tax by proceedings in the inferior courts. Clause 9 deals with the procedure for claiming and determining the various income tax reliefs and allowances which may arise, and Clause 10 provides that inspectors of taxes can also make assessments for profits tax. Clauses 11 and 12 deal with procedure. Clause 13 makes it possible, in a case where an appeal is pending, to collect tax which it is agreed is not in dispute.
My Lords, I do not think I need say more about the contents of this Bill. I should like only to add that when it was considered in another place—and I am sure it was most fully considered—this Bill was welcomed by all political Parties. It has been examined in detail by the main professional bodies concerned, and has been discussed between them and the Board of Inland Revenue. As a result, I understand that the Bill in its present form is generally acceptable. It re-states in modern terms the 873 main administrative provisions and repeals a host of provisions which are spent or obsolete. I should perhaps add that in Scotland the power to alter the divisional boundaries for the Commissioners will rest with the Secretary of State, while the appointment of the Commissioners will remain the function of the local authorities.
It is, of course, necessary that the General Commissioners should do their work in secrecy: only by so doing can the confidentiality of individual taxpayers' affairs be preserved. One therefore does not see in the Press reports of the cases that they consider, and I think it is right now to pay a tribute to the Commissioners, to the thousands of them up and down the country, who do invaluable work in determining the liability of members of the public and companies to the taxes imposed by Acts of Parliament. The general public probably do not appreciate fully the importance of the work done by the Commissioners and the amount of time they devote to it. I should like to express my thanks to them for the services they render.
I would also pay tribute to the Advisory Committees which assist me in making appointments. There are Advisory Committees in each county and county borough, similar to the Committees which advise me on the appointment of justices of the peace. This system is, I think, working well, and I am grateful to the members of the Advisory Committees for the great help they give me. My Lords, I beg to move that this Bill be now read a second time.
§ Moved, That the Bill be now read 2a.—(The Lord Chancellor.)
§ 4.16 p.m.
§ LORD LATHAM
My Lords, I am sure we are all indebted to the noble and learned Lord, the Lord Chancellor, for his lucid explanation of this complicated measure—inexplicably complicated, I think, because, as the Lord Chancellor said, it deals with the administrative procedures relative to assessment to income tax and profits tax. As the short title indicates, the word "management" is perhaps not inapt, for, as taxpayers, we feel, sometimes, 874 that we make the income and the Inland Revenue manages it. This Bill, however, has the merit that it casts no additional tax upon the people, nor does it deal with any questions of relief. The Bill repeals more than it enacts. It is a useful Bill. It is harmless, if anything can be said to be harmless which is connected with income tax or profits tax. It does, however, have the merit that it sweeps away a number of procedures which are no longer appropriate to the conditions of business or of incomes. It clears away a measure of the cluttered confusion of procedures of well-nigh a century ago.
We often say that a Bill is long overdue. As regards this Bill, that is a bottomless understatement. The Lord Chancellor went into some minor incident of history with regard to income tax and administative procedures, but it is the case that this Bill is 43 years late, which, I think, is perhaps an unequalled achievement in procrastination. The Royal Commission on Taxation in 1920 recommended most of the main provisions of this Bill. The Government of the day accepted those recommendations and introduced a Bill in April, 1921. The Bill, however, was not proceeded with. It was incontinently withdrawn by the Government, and it was stated at the time that that was largely owing to the pressure of a well-known newspaper, owned then by an equally well-known newspaper proprietor; and the objections were supported by the Commissioners of Taxes for the City of London.
Nothing positive was done until 1952, when the income tax provisions were consolidated and thus were preserved the old laws and the old anachronisms and archaic nonsenses qualifying the ensemble to be regarded as a museum piece. The procedures were perpetuated, although some of them, in action, were not actually applicable; and, thanks to the ingenuity and adaptability of the Inland Revenue, things worked reasonably smoothly. I should like to associate my friends on this side and myself with the tribute which the noble and learned Lord the Lord Chancellor paid to the Inland Revenue for their work in connection with their rather onerous tasks.
875 The next point in the long march of standing still in connection with this matter was the Royal Commission on Taxation of Profits and Income of 1951, to which the Lord Chancellor has already referred. That Commission, known as the Radcliffe Commission, recommended in 1955 the proposals which are now the main purposes and proposals of this Bill; but, despite that impressive recommendation, nothing was done. It is the case that, by the provisions of the Tribunals and Inquiries Act, 1958, the power of the Lord Chancellor to appoint and remove General Commissioners was, if I may use the term, formalised—almost fortuitously, I think. Clearly, such a provision was out of place in that Act, and this Bill brings it back into the family of income tax management legislation, where it properly belongs.
The next stage of this slow march was the consideration by the Seventh Select Committee on Estimates in 1961. That Committee strongly endorsed the main recommendations of the Radcliffe Commission (which are, as I have said, the main proposals in this Bill) after the Select Committee had taken evidence from organisations representing professional accountants, business and industry, and from representatives of taxpayers and of the staff; and, as a result of the powerful influence of the Select Committee, this Bill emerges after, as I have said, 43 years.
Schedule 6 is, I should think, probably unique in legislative measures, for it cuts away an enormous amount of dead wood. But, my Lords, much remains. It is a pity that the Bill does not go further. Many of the procedures need rationalising, modernising and clarifying. Indeed, the whole structure of management of income tax and profits tax needs to be reviewed with a view to securing its adaptation and simplification, both in the interests of the taxpayer and in the interests of the Inland Revenue and the functioning of its staff. That the machinery works as smoothly as it does, with this cumbersome body of proscriptions and prescriptions, is a credit to the resourcefulness of the Inland Revenue staff. This Bill is a useful and a necessary Bill. It is a Bill, as I have said, very much overdue. We welcome the 876 Bill, and we will do what we can to aid it on its passage to the Statute Book.
§ 4.25 p.m.
§ LORD MILNE
My Lords, we are grateful to the noble and learned Lord the Lord Chancellor for taking us through the clauses of this Bill with his usual care and clarity. The observations which I intend to make will be more of a general nature. With the noble Lord, Lord Latham, I welcome the Bill for several reasons. It simplifies procedure. It has, in the words of the noble Lord, cleared away a great deal of that which is very archaic. It rewrites practically all of Part II of the Income Tax Act, 1952; and so it paves the way, we hope and trust, for a further consolidation in the not too far distant future. Lastly, it is an example of a procedure which has been advocated for some time, which is that the annual Finance Bill should be relieved of amendments to past law, and that these should be put into a special Bill, to be introduced at a time which is convenient and as often as necessary, the sole purpose of which would be to enact amendments to income tax legislation.
But, having said that, my Lords, I agree entirely with the noble Lord, Lord Latham: the recommendations on which these alterations are being brought forward vary in age from 5 to 45 years. Nothing they are doing is novel. As the noble and learned Lord said, the assessments, except for the special items assessment, are in fact carried out, in practice, by the inspectors of taxes now. The man in the street will not really notice the difference. This is an example of special legislation, and, even though not law, it is nevertheless difficult for the uninitiated. To a certain extent, the passing of this is an act of faith. It is said that income tax law is so complicated, and the wording so involved, that the real effect is not known until it is tested in the courts. Quite definitely, the wording of the income tax law is not the language that Shakespeare spake.
My Lords, on particular matters, there was some comment that the Clerk to the Commissioners was not to be qualified. That, I think, one can understand; but it means that the appointment is laid open to ex-inspectors, and to that extent you might get an inspector who had recently been in the division concerned. 877 The declaration made by the three levels in the Inland Revenue offices has now been extended, but I think there is a certain amount of concern at the wording of the declaration which is to be made by the inspector and the collector. This, of course, will affect inspectors only after the date of this Act. As the noble and learned Lord said, Clauses 9 to 12 and Schedules 2 and 3 lay down a code of new procedures for claims and appeals. I think these will generally be approved.
My Lords, I said that the passing of this Bill is somewhat of an act of faith. As the noble Lord, Lord Latham, said, the Bill, particularly Schedule 6, is a mass of detail, which I confess I have not checked. In such a Bill one must rely on the draftsmen, on the Departments concerned and on the years it has been in the pipe-line. Many interested and learned bodies have submitted evidence and memoranda, and those who are interested in the Bill will have no doubt read the highly-informed debates which took place in another place and at their Committee stage. In conclusion, my Lords, I should like to associate myself with the tributes which have been paid to the officers of the Inland Revenue, and say that we, as professionals, welcome this Bill.
§ 4.30 p.m.
§ THE LORD CHANCELLOR
My Lords, I am grateful for what your Lordships have said in relation to this Bill. I agree with the noble Lord, Lord Latham, that it is a useful and necessary Bill. He said that it might have been enacted some forty years ago. Changes of procedure in relation to income tax, as he knows, usually take quite a time to accomplish, and I think it is a matter rather for pride than regret that it has been possible to introduce this Bill and to make such progress with it this Session. It has already been through another place and I hope that here, too, its passage will not be long delayed. I am grateful to the noble Lord for what he said in his interesting speech in relation to this measure.
In regard to the speech of the noble Lord, Lord Milne, it is, of course, the fact that Parliamentary counsel would have to spend a very great deal of time checking and rechecking Schedule 6 and, indeed, in the preparation of the Bill. I do not know on what grounds he said 878 that really the passage of this Bill will be an "act of faith" or that it has been in the pipe-line a very long time. I am not asking for this Bill to be read a second time as an act of faith; I am putting it before your Lordships and recommending it to you because in my belief it will make a significant improvement in the machinery in relation to the assessment and collection of income tax. It was not so very long ago that in the Finance Bill we reviewed all the penalty procedures and provisions and modernised those. This is another step on the same road.
The noble Lord, Lord Milne, thought that in future we should always make amendments to past income tax law in a Bill other than the Finance Bill. I cannot go with him on that because so often amendments to past law are, in fact, amendments which make changes in the rate of taxation or its incidence under past Statutes. But I think it is useful, when we are revising a complete part of the income tax code, that we should have time to consider it as we have had to-day and, as at this time, in a separate Bill of this kind. I am grateful for the reception that the House has given to this not unimportant Bill.
§ On Question Bill read 2a; Committee negatived.