§ Clause 15 (Grant of duties of income tax.)
§ Motion made, and Question proposed, "That the Clause stand part of the Bill."1519
§ MR. COURTNEY
observed, that he had understood the hon. and learned Gentleman the Attorney General to say recently, in answer to a question from an hon. Member, that any person who occupied agricultural land, and did not make a profit, could escape altogether payment of Income Tax. He could not see how that was reconcilable with this clause of the Bill, which was a repetition of the clause always inserted in the Income Tax Bills ever since the imposition of the tax. He wished to know whether the statement of the hon. and learned Gentleman was reconcilable with the clause? He should also like to be informed whether, if, as he had said, a farmer who did not make profit would escape being assessed for Income Tax altogether, he would, on the other hand, if he made additional profit, be bound to pay Income Tax upon more than the amount of half his rent? Could he, in such a case, be charged in addition to that rent? He should have thought that the principle of assessment was that the assessment of half the rent was to cover good and bad years alike, and was to be paid in all cases. If a farmer were not to be taken at his assessment of half his rent in England, and one-third in Scotland, when he made no profit, he thought some explanation should be given to the Committee of what happened when he made a large profit.
§ THE ATTORNEY GENERAL (Sir JOHN HOLKER)
said, that the answer he had given on the former occasion was made by him from instructions he received. That answer he thought to be accurate. But if the hon. Member would allow him to consider the operation of this particular clause of the Bill, he should be happy to give him his opinion. As at present advised, he thought that his former answer was accurate—that if a farmer did not make any profit out of his farm he would, then, escape the payment of Income Tax. Still, it might be that the answer was not accurate; and he should like his hon. Friend to give him a short time to consider it, in connection with this Bill, before he pledged himself to the accuracy of the answer. If his hon. Friend would repeat the question, either in the course of that evening, or at some other time, after he had considered the matter, he should be happy to give him his opinion with regard to it.
§ MR. RYLANDS
considered that the reply of the hon. and learned Attorney General had placed the Committee in a most extraordinary position. The mode of assessment in the case of farmers for every 20s. of the annual value of the occupation of the land implied that a farmer, however large his profit might be, should not be charged on any larger sum than that determined by the amount of his rent; and, on the other hand, if he made a loss, that he should not be charged less than the sum provided for by the Act; and, in this way, he had always understood the amount chargeable upon farmers to be fixed and permanent, inasmuch as, unlike the charge upon ordinary trade profits, it did not fluctuate. But in what position had the Committee been placed? The Government, through their mouthpiece, the most learned authority in the House, had told the Committee that the clause was not understood, and that with regard to its meaning no answer could then be given. In answer to the hon. Member for Liskeard (Mr. Courtney), the Attorney General had asked that the Committee would allow this matter to go forward, and had promised at some future time, perhaps in answer to a Question put upon the Paper, to give the result of his mature judgment upon the point raised by the hon. Member. But, by that time, he (Mr. Rylands) wished to point out that the Bill would be passed and the clause enacted. If it was to be understood that during periods the most flourishing for agriculture, when farmers might make incomes considerably over the amount represented by half their rental, they were not to pay any more than the amount chargeable by this mode of assessment, the adoption of such a principle was, in his opinion, grossly unfair to other classes of the Income Tax paying community. Unless the hon. and learned Gentleman could tell the Committee what was the meaning of the clause, he hoped the hon. Member for Liskeard would move to report Progress, in order that the Committee might not be placed in the position of passing a clause of the meaning of which they knew nothing.
§ MR. SAMPSON LLOYD
said, as far as he remembered, the terms of the present Bill were precisely the same as those of the Acts hitherto in force; and he wished to point out that the difficulty 1521 raised by the hon. Member for Liskeard (Mr. Courtney) had nothing to do with the question whether the Committee should proceed to pass the clause then; under consideration in the usual way. The assessment under Schedule B was very much in the same position as that under Schedule D, by which a man assessed at more than his profits had a right to show, on appeal, that he had been over assessed. The Attorney General had expressed his opinion that a farmer had this right of appeal, and that the question was determinable by the Courts of Law. He (Mr. Sampson Lloyd) trusted that the clause would not meet with opposition, as all previous enactments had been in the same form as that now presented to the Committee.
§ MR. THOMSON HANKEY
had always understood that the Schedule referred to by the hon. Member for Plymouth (Mr. Sampson Lloyd) was agreed to as a compromise in view of the exceeding difficulty of ascertaining the profits of a farmer in the same way as those of a mechanic. But the Attorney General had put the Committee into confusion, by saying that he did not understand the meaning of the clause; surely, therefore, it would be better to report Progress, in order to give the Government and the Attorney General time to consider what it really meant. He had no objection to the clause as previously understood; but if a new interpretation was to be put upon it, it should be made perfectly clear.
§ THE ATTORNEY GENERAL (Sir JOHN HOLKER)
thought that as the hon. Member for Liskeard (Mr. Courtney) had only called attention to the question as he was on the point of leaving the House, he might have been excused from expressing an opinion without some further consideration. But he begged to protest against the statement of the hon. Member for Peterborough (Mr. Thomson Hankey), that he had put the Committee in any difficulty with regard to this question; for if there existed any doubt as to the proper construction of the clause, it certainly was not he who had caused it. The question of the liability of farmers, under the circumstances indicated, would have to be considered by the Courts of Law; and all that was required of him, and all that could be expected of him, was to express an opinion as to what construction would 1522 be placed upon the clause by those Courts. The whole question turned upon the meaning of the words "annual value of the occupation." Some hon. Members were of opinion that the annual value of the occupation of land was the amount of the rent; but to that conclusion he could not assent, because if he found sufficient evidence that the rent was not the annual value of the land, but that, on the contrary, the tenant had been making nothing by it for a considerable period, he should conclude that the rent was very much higher than the value of the occupation of the land, and that the tenant who made nothing out of it, or who made less than the rent, would not be liable to pay the tax. That view might not be a correct one, and the hon. Member for Liskeard (Mr. Courtney) might be able to satisfy him that it was not. What he had stated, in answer to the Question put, not the other day but some time ago, was that—"If a tenant did not make any profit out of his farm he could escape payment of the Income Tax," and to that opinion he still adhered.
§ MR. RAMSAY
thought, whatever might be the result of the discussion, that the question involved, and the opinion given by the hon. and learned Attorney General, were of very great importance. Whatever might have been the law, the practice had always been to charge farmers in respect of the rent paid for the occupation of the land, and from that practice he had never known of any case of appeal. Now, if it were the intention of the Government, as he understood from the observations of the Attorney General, that farmers should, in future, have the right of appeal in cases where it was found that no profit had accrued from the land in their occupation, that right ought to be made so clear as not to admit of doubt. Upon these grounds, therefore, and for the purpose of enabling the Government to make such change in the terms of the clause as would provide that farmers either should or should not have the right of appeal against an assessment in respect of the rent which they paid, he thought that the Government should agree to report Progress. No doubt, the hon. and learned Attorney General was quite correct in his view of the law; but it was of great consequence that the question should be definitely 1523 settled. He thought that those acquainted with the operation of the law in this country must be aware whether or not there had been any cases of appeal with regard to assessment on rental. As the case now stood, farmers had never within his knowledge been recognized by assessors of Income Tax as having any such right, and for that reason the law ought to be placed beyond all doubt.
§ MR. FAWCETT
said, that the Government, and not the Attorney General, were held responsible in this matter. So far from being liable to blame, the Attorney General was entitled to the thanks of the Committee for pointing out the obscurity which existed in the wording of the clause, which certainly could not be interpreted by the Committee if it could not be interpreted by either the Government or the hon. and learned Gentleman. Without, on that occasion, attempting to express any opinion as to what ought to be the mode of assessing farmers for Income Tax—whether they should be treated in the same manner as ordinary traders, or be charged on half the rental of their land—the contention raised was simply that the law should be made clear, definite, and precise, so that it might not only be interpreted by the Attorney General or by the farmer in a certain way, but be understood by any ordinary man of business. When, therefore, the Attorney General rose in his place to say that he could not interpret this clause, and expressed the opinion that it would lead to litigation, he supplied an argument absolutely without answer in favour of reporting Progress, so as to give Her Majesty's Government the opportunity of bringing up a clause clear and intelligible, and which would embody their views upon the subject. The Committee ought to know—and the great agricultural interest ought to know—whether it was, or was not, the intention of the Government that the old rule should be rigidly kept—that farmers should be treated exceptionally, and that, unlike other traders, they should not pay Income Tax on their profits, but pay on a fixed proportion of their rents. If that was the intention of Her Majesty's Government, let it be so stated; and if, on the other hand, the Government intended to change the system which had been in operation ever since the Income Tax had been imposed, and to treat 1524 farmers in future in the same way as other traders were treated; if, when a farmer should go to the Commissioners and say—"I have made no profit; you must not charge me with any Income Tax," the Commissioners were to have power to say—"You have made profits, and we shall charge you upon an amount equal to the rent, or more than the rent," the Government should state that also clearly and explicitly, and embody the principle in the Bill in such a manner as would render misunderstanding impossible. The Attorney General, he trusted, would not suppose that the smallest blame was intended to be cast upon him; on the contrary, thanks were due for the manner in which he had come forward and frankly stated that he could not interpret the clause in the Bill introduced by the Government of which he was a Member. Under those circumstances, he (Mr. Fawcett) thought that no other course was open to the Committee but to further consider the matter; and, with that object in view, he begged to move that Progress be reported.
§ Motion made, and Question proposed, "That the Chairman do report Progress, and ask leave to sit again."—(Mr. Fawcett.)
§ MR. NEWDEGATE
said, that the Income Tax was assessed by the Legislature on land in occupation in respect of the rent at the rate of half the rent, for the reason that land was an instrument, and it was thought unfair to tax an instrument of trade twice over—that was to say, first in respect of its possession, and again in respect of its occupation. It was admitted that the tenant farmer derived additional profit from the employment of capital, and it was thought that the capital ought to be assessed; but, inasmuch as the land already paid under Schedule A, and the capital belonged partly to the landlord and partly to the tenant, a compromise was effected, and the tenant was assessed at half the amount of the rent. Assuming that the Government intended to abide by the principle of assessment, which he had endeavoured to describe—and he should be surprised to learn that they proposed to place any additional burden upon landed property and the agricultural interest—he wished to ask, whether it was their intention to give the tenant 1525 farmer the right of appeal against his assessment, and the right to prove, if he could, that he had made no profit?
§ THE CHANCELLOR OF THE EXCHEQUER
Sir, I cannot help thinking there is some confusion in the minds of the Committee with regard to this clause. It is said that its meaning is not understood by the Government; but I do not think that is a fair description of the clause as it stands in the Bill. The clause is one for fixing for the current year the rate of the Income Tax which it is proposed to continue, and that rate is fixed in the terms which have been employed for a great number of years, very nearly in the same words as those used in 1842, when the tax was originnally imposed. All that it does is to provide—That there shall he charged, collected, and paid for the year commencing on the Sixth day of April One thousand eight hundred and seventy-nine, in respect of all property, profits, and gains mentioned or described as chargeable in the Act of the Sixteenth and Seventeenth years of Her Majesty's reign, chapter thirty-four, the following duties of income tax; (that is to say,)For every twenty shillings of the annual value or amount of property, profits, and gains chargeable under Schedules (A.), (C), (D.), or (E.) of the said Act, the duty of fivepence:And for every twenty shillings of the annual value of the occupation of lands, tenements, hereditaments, and heritages chargeable under Schedule (B.) of the said Act,—In England, the duty of twopence halfpenny.These words are intended to have, and, no doubt, they must have, the effect of continuing for the year the charge at these rates upon the descriptions of property named. Clause 16 provides that all provisions which were in force on the 5th of April last shall have full force and effect for another year from that time. There is no intention whatever by this Bill to make any change in the manner of raising the Income Tax upon Schedule B, or upon any other Schedule; and I cannot, therefore, understand why this Bill should be charged with anything like obscurity. Again, the question is raised as to what might be the effect of an appeal which might be made by an occupier of land, under Schedule B, against the assessment upon the principle on which he has always been assessed? But that is a question of a rather speculative character; and I am not aware that any such 1526 case has arisen, or that any such appeal has been made; but if such a case should arise, no doubt, the appeal would be properly heard and determined according to the law which has existed since the year 1842. The Government have no intention whatever to put any construction upon the law other than that which has been placed upon it since the time when the tax was originally enforced; and, therefore, no charge of any kind will be placed upon the tenant farmer, under Schedule B, beyond such as has been enforced already. But the question may be raised upon the point now suggested, which, perhaps, never occurred before—that is to say, whether it might not be open to a tenant farmer, who was charged according to the practice hitherto prevailing, to raise the question whether he was rightly charged, and, perhaps, appeal, and say that he ought to be charged less because he had made no profit. But, in that case, either he would be able to support his appeal or he would not; if he could not, nothing need be said; but if he could, he would get the advantage of his appeal, and, of course, the Exchequer would be losers in that proportion. If we thought there was any probability of appeals being made which would entail loss upon the Exchequer, and if we thought that it was not the wish of Parliament that such loss should be entailed, it would, of course, be open to us to propose a clause to meet the imaginary case which I say has not arisen. We are quite prepared to allow the law, as far as the collection of taxes is concerned, to stand upon its present footing; nobody is damnified, and no occupier of land is in any way injured thereby, because the law will continue to be the same as it has always been, and the Government do not apprehend that they will suffer any loss. For these reasons, I think there is no case whatever, either for our adjourning or, for putting off the progress of the Bill. All we are asking the Committee to do now is that which has been done for 37 years—namely, to continue the Income Tax from year to year upon its original footing.
§ MR. COURTNEY
observed, that the Attorney General gave an answer to the Question put to him on the former occasion without the least hesitation or doubt. He said, most certainly, that if a farmer, 1527 like any other trader or professional man, did not, in the exercise of his occupation, realize a certain amount, described as the hypothetical profit which he had made, he could obtain a reduction of his assessment. He listened to that statement of the hon. and learned Gentleman with perfect astonishment. Looking now to the clause, he believed that answer to be an entirely erroneous interpretation of it. But the statement having been made by him in that House, it would be repeated in all parts of the Kingdom; and could they believe that some farmers in the country would not raise the question, and have the Attorney General for their authority? Could it be doubted that farmers would claim to be assessed in the way in which the Attorney General said they could be? He thought that this matter ought to be decided before they proceeded further; for until that year there had never been any doubt raised upon the subject, although farmers had realized handsome profits, and sometimes made no profits at all. The statement of the hon. Member for North Warwickshire, he thought, was accurate, that the assessment of the farmers in England on half their rent, and in Scotland on one-third, was taken as a compromise on the matter, and was intended to be paid in good and bad years alike. The Attorney General had now informed them that a farmer could take that assessment if he made profit, but could reject it if it were to his disadvantage. The question was, was it right that they should only have Income Tax from farmers upon the assessment of half their rental in good years, and allow them to make a claim for no assessment at all when they had realized no profits? If that were the case, before they went further the matter ought to be made perfectly clear. If the Attorney General thought fit to re-consider his statement, let him do so. The Attorney General was a Member of the Government, and represented the Government; and if he told the House that a farmer could claim to be assessed at a lower rate, his statement would operate considerably in reducing the amount of Income Tax paid into the Treasury. It seemed to him either that the statement of the Attorney General should be retracted, or this clause should be made clearer.
§ MR. SAMPSON LLOYD
did not wish to trouble the Committee again; but he 1528 must express his opinion that the Committee was proceeding in a wrong direction. The hon. Member for Liskeard (Mr. Courtney) asked the Committee to determine a question which might arise out of the Bill, but which its language could not determine. The compromise which the hon. Member for North Warwickshire (Mr. Newdegate) had alluded to was made for the purpose of allowing a man to be assessed, in the first instance, at half his rent, whether he had made any profits or not. But the question as to whether he should obtain a reduction of that, if he did not make profits, belonged entirely to another branch of the law. The objection raised was entirely foreign to this Bill, which did not deal at all with the question of profit, but only provided that a farmer should be assessed, in the first instance, upon half his rent.
§ MR. THOMSON HANKEY
said, that after the speech of the right hon. Gentleman the Chancellor of the Exchequer, he, for one, was quite satisfied to abide by his opinion as to the clause, which for 36 years had been in operation in every Bill which had been passed. A view had been expressed by the hon. and learned Attorney General that he did not think the Committee had anything to do with it. They might pass this clause, and yet agree with the Attorney General. It was clearly the intention of the Act that a farmer should pay upon his assessment of half his rent. That was a compromise which had been well understood, and had lasted from 30 to 35 years, and he did not think there was any chance of an appeal arising on it.
§ COLONEL RUGGLES-BRISE
, having been one of the Commissioners for Income Tax for many years, could state that it had sometimes happened that occupiers of land had appealed, upon the ground that they had not made any profits. In some cases they had admitted their objection, and in others not. They had had three or four applications from tenant farmers, showing clearly that they had not made any profits on the land, and that they had not even made their rental. In those cases relief had been given. He might say that this had happened not only recently, but seven years ago.
§ MR. RAMSAY
thought that a very important question arose from the fact that the hon. and learned Gentleman 1529 the Attorney General had stated his opinion that the farmers had a right to appeal; he did not only give it as his own opinion, but stated that he had consulted with the heads of the Revenue Department who had charge of the administration of the Income Tax in the country. The hon. Member who had last addressed the Committee had told them that the Income Tax Commissioners, of whom he was one, had remitted Income Tax upon farmers in some cases. There might be cases of that sort in England; but he thought it had been so generally understood in Scotland that there was no right of appeal by tenant farmers that none had ever attempted to do so. He considered it of great importance that it should go forth that tenant farmers had a right to appeal, for there would be numerous instances forthcoming, which would show that they had not made the profits to justify the imposition of the assessment. It did appear to him that it was most desirable that it should be known that if the tenant farmers did not make profits they would be relieved from the payment of Income Tax. He had known himself instances of tenant farmers who had lost in one year more than their rent. Yet, such was the opinion in the district, that they were charged the Income Tax assessment irrespective of their loss, and no such right of appeal was given them; indeed, they had never tried to raise the question. He therefore thought that this question was of great importance to the agricultural interests; and he hoped the right hon. Gentleman would take the matter into his consideration, and make the law such that there could be no doubt upon the subject. If a right of appeal were inherent in the farmers, as the hon. and learned Gentleman had said, yet he must say that the farmers throughout the country generally had no idea that that was the case. The examples that had been given to the contrary seemed to him only to prove the rule; for all acquainted with the operation of the law must be aware of the fact that farmers generally had regarded themselves, and the public and the Commissioners regarded them, as subject to the assessment payable in respect of the annual value of their farms, without regard to any profit or loss they might make. He thought that this matter should be set clear, that no doubt might remain in the law. The language 1530 of this section was the same as before; yet, after the statement of the Attorney General, that farmers had a right of appeal if they chose to exercise it, there was sufficient reason to change the practice, as it was, in effect, changing the law.
§ MR. CLARE READ
was able to corroborate the hon. and gallant Member for East Essex (Colonel Ruggles-Brise) in the fact that farmers had successfully appealed against their assessments. Twenty-five years ago a friend of his, who kept a remarkably accurate farm account, succeeded in establishing his case before the Commissioners, and the whole of the tax was remitted. The right of appeal was seldom exercised, as the majority of farmers considered that the compromise entered into was right and just, and if they suffered a loss in one year they did not, as a matter of course, appeal; but he should say that if the present condition of things continued they would come to the conclusion that the balance was so entirely against them that they ought to exercise the right, which he believed they possessed, to appeal.
§ MR. WHITWELL
, after the observations which had been made, thought it absolutely necessary that this matter should be settled. Hitherto it had been considered that this matter was settled; but after what had taken place, it was impossible to revert to the former condition of things. They had, at present, a great many laws regulating these matters. The Income Tax Commissioners required everyone to make a return, although Schedule B provided that certain classes of persons were to be charged, and not assessed, for payment of duty. But now the hon. and learned Gentleman the Attorney General said that there was some doubt about what had been the universal practice; and it had also been stated that the right had been put in force. He thought the necessity was clear for the interference on the part of the Government to protect the public Revenue in this matter. Before they moved in the matter with their eyes open, he did think that they should have this matter thoroughly settled.
§ MR. W. HOLMS
observed, that the Chancellor of the Exchequer had stated that there was no difficulty in construing this clause; but the Attorney General 1531 had thrown great doubt and difficulty into the matter, and there was the greatest danger that farmers would try to be quit of Income Tax by appealing. If it were desired by the agricultural interests that there should be an alteration, and that in future farmers should be treated as tradesmen, by all means let it be so. If they made no profits, let them not pay for any; but, on the other hand, if in one year they made a profit two or three years greater than their rental, let them pay upon it. It was unreasonable to say that they should pay Income Tax on half their rental in good years, but in bad years they would pay none at all. He ventured to say that, upon the whole, the present system was a good one; and up to the present time few or no complaints had been made against it.
§ MR. SHAW LEFEVRE
had been surprised to hear from the hon. Member for South Norfolk (Mr. Clare Bead), and the hon. and gallant Member for East Essex (Colonel Ruggles-Brise), that farmers had been in the habit of appealing; in his opinion, that had not been the universal practice of the country. He had listened to the explanation of the Attorney General, and it seemed to him that he had given two explanations. He said that if a farmer proved he had made a less profit than his rent for a considerable number of years, his rent was not to be taken at the annual measure of value; but he also said that if, in any particular year, a farmer could show not to have made any profit, then his Income Tax was to be remitted. If the second interpretation of the Attorney General was to hold good, in the long run it would turn out a very good thing for the farmers. The one generally acted upon was, he believed, the right interpretation of the clause as it stood. Before altering the clause, he thought it would be desirable to hear something more definite about the matter.
§ THE ATTORNEY GENERAL (Sir JOHN HOLKER)
denied having used such expressions as were attributed to him. What he stated was, that the question turned upon the meaning of the term "annual value." Upon that he ventured to express the opinion that the annual value did not necessarily mean rent. He held that if a landlord chose to let a man a piece of land worth £2 1532 an acre for 5s. an acre, then the rent would not necessarily represent the annual value of that land. The whole question was, what was the annual value of the land? If a tenant for a number of years, or for one year, did not make anything out of the land, then that was a piece of evidence which went to show that the land was worth less than the rent he paid for it. In some cases land was let for more than it was worth; but in many cases the rent was good evidence of the value of the land. In ordinary cases it might be taken as conclusive that the value of the land was what the tenant chose to pay for it. Nevertheless, as a matter of law, it was not conclusive that the rent was the annual value of the land. That was all the opinion he expressed.
§ MR. SHAW LEFEVRE
ventured to agree with the hon. and learned Gentleman the Attorney General upon this particular point, so far as he had just stated his opinion; but he would point out that what he now said differed from his statement the other night, and also differed from what he had said later in his remarks that evening. If a man paid rent beyond the annual value of the land, then he ought to be assessed at the annual value of the land.
§ MR. RYLANDS
observed, that at the time the Income Tax Commissioners granted relief in the cases mentioned the Surveyor of Taxes must have been present, and if any question had, in his opinion, arisen, he would have required a case to be stated to be carried to a higher Court. The cases to which allusion had been made proved that the officials for the collection of the Income Tax put such an interpretation upon the clause as corresponded with the opinion of the Attorney General. From what the hon. and learned Gentleman had said, he gathered that he not only stated his own opinion as to the meaning of the words, but that, after consultation with the heads of the Department, he had given their opinion also. He wished to point out to the Chancellor of the Exchequer that the interpretation which he had given to these words in the Customs and Inland Revenue Bill differed from the custom which prevailed in most parts of the Kingdom, and which was almost, if not generally, universal throughout the country. In consequence of this discussion the point would, no doubt, be 1533 hereafter raised; and there would be appeals in many districts where they had not hitherto taken place. If the Department was of opinion that the effect of the clause was not what it was understood to be, then relief would be granted in a much larger number of cases. There might be a farmer, paying a rental of £1,000 a-year, who had been assessed at £500; he might claim relief because he had not made £500, but only £400 a-year; and, having kept accurate accounts, he would get assessment reduced to £400 a-year. But, upon that £400 a-year, he would have to pay 2½d. in the pound; whereas a tradesman, making £500 a-year, would have to pay 5d. in the pound. It was clear that if there was any meaning in this, it meant that under Schedule B a tenant farmer would be charged upon half his rental, and was to pay 2½d. in the pound. There could also be no doubt that a tradesman, making £400 a-year profit, would be charged 5d. in the pound. In his opinion, there ought to be a distinct understanding with the Government that this new interpretation of the Act should be made perfectly clear.
§ THE CHANCELLOR OF THE EXCHEQUER
said, that the speech of the hon. Member for Burnley (Mr. Rylands) showed clearly how the Committee had allowed itself to fall into a misconception in its idea of the law. The hon. Gentleman had spoken of farmers being charged upon half their rents, and had then gone on to say that they would pay 2½d. in the pound upon half their rent. The fact was that this was a charge made upon the annual value of the land; and that the occupier of that land paid 2½d. in the pound upon that value, which was equivalent to 5d. in the pound upon half of it. In that way, it would be seen that the difficulty suggested by the hon. Gentleman was got rid of. He would call the attention of the Committee to the real question under discussion. What this section of the Bill did was to affirm that there should be payable for every 20s. of annual value 5d. in the pound by the owner, and that the occupier of the land should pay 2½d. But 5d. in the pound was charged upon the annual value of the land. The annual value of lands, tenements, and hereditaments charged in Schedule A was to be deemed to be the rent paid for them within a period of seven years preceding the assessment. 1534 But if the sum were not a rack rent, then they were to charge at such rack rent as the same would be worth if let from year to year. The provisions which were laid down in the Act he apprehended to be such as had been found to work satisfactorily and clearly. They had been asked to make some change in the law with regard to the power of appeal which, undoubtedly, existed, because it might be put in force, and appeals in certain cases would have to be allowed. But, supposing they did make a change, what was the nature of the change which hon. Gentlemen wished? Did they wish the Government to take away the power of appeal? On the part of the Government, he might say that they did not wish to take it away, but to leave the matter as it stood. He thought they would be wasting the time of the Committee by reporting Progress at that hour. The Government was satisfied to leave the matter where it stood, and there could be no reason for postponing the discussion.
§ MR. M'LAGAN
supposed that farmers were treated like other traders, so that if they made no profits for successive years they could obtain a reduction in their assessment. The reason for appeals not having been frequent arose, no doubt, from the fact that farmers were not good book-keepers; but after the bad years they had experienced, no doubt, farmers would find it to their interest to keep their books accurately, in order to get their appeals allowed.
§ MR. HERSCHELL
said, that after the explanation given by the Chancellor of the Exchequer, it would be seen that this discussion was of no small importance; for, if his view were correct, it was obvious that certain Commissioners of Income Tax had been illegally reducing the Income Tax. If such misapprehension prevailed, it was desirable to investigate the matter, and to set it at rest. He understood the view of the Chancellor of the Exchequer to be that farmers were assessed upon the annual value of their land. The annual value appeared to him to be something totally distinct from the profits made by farming. When the intention was to take the profits eo nomine, there was no doubt or question about the matter. But the taxation was not upon the profits of the farmer, it was a tax upon the occupation of his land, for whatever purpose and in 1535 whatever way it was occupied. A sort of compromise was come to by which occupiers of land were taxed in a certain way; they were taxed upon the annual value, and not upon the profits made for any particular period. Because a man did not make any profit at all in one year, that was no element in considering the annual value of the land he occupied. The Chancellor of the Exchequer had pointed out that there was an Interpretation Clause in the Act which showed the meaning of the term annual rent. The test was, if the land had been let for several years at a rack rent, that was the test of the annual value; and if the land had not been let at a rack rent, then what it would have let for at the rack rent. Whether a man made much, or little, or no profit, was nothing to do with what the land was let for, or what it could have let for; and it was upon that annual value so ascertained that tenant farmers were to pay Income Tax. If that principle were thorougly understood, there could be no difficulty in the the matter; if this rule were borne in mind, he did not see that there would be any difficulty or danger in leaving the matter as it was. The difficulty had really arisen from the expressions of his hon. and learned Friend the Attorney General, which had led to an idea that the profits in any particular year were a test of what the farmer had to pay; but he thought that the real test was what the particular land he occupied let for at a rack rent, or would have let for at a rack rent.
§ MR. FAWCETT
remarked, that as he had moved to report Progress he wished to say one or two words in reply to the Chancellor of the Exchequer. He would be one of the last to waste the time of the Committee, or to oppose obstructively in any way. The Chancellor of the Exchequer seemed at a loss to know what they were contending for; and for that reason he wished to be allowed to explain the principle for which they were contending. The Chancellor of the Exchequer had stated that it was the intention of Parliament that farmers should be assessed in a particular way; and he had further said that that had been the intention ever since the Income Tax had been first imposed. No one doubted but that it had always been the intention of Parliament to assess farmers upon half the 1536 annual value or rent of their land, and not upon their profits. The question they had to consider was, whether the Bill which they were now asked to pass would give effect to what the Chancellor of the Exchequer said was the intention of Parliament? They had had a most unanswerable argument in support of the opinion that the Bill would, not give effect to the intentions attributed by the Chancellor of the Exchequer to Parliament. The hon. Member for South Norfolk (Mr. Clare Read), and the hon. and gallant Member for East Essex (Colonel Ruggles-Brise), spoke from their practical experience, and showed that appeals from farmers had been allowed, and that farmers were allowed to be assessed upon their profits. They could not go further than the Income Tax Commissioners; but since the sense and authority of the Attorney General had been given to this interpretation of the law, the appeals which had taken place as yet in only a few instances in the past would, considering the present state of agriculture, be very numerous in the future. He believed that tens of thousands of farmers in the country could prove that they had made no profits during the past year; and they would have the authority of the Attorney General in claiming to have their Income Tax assessments made, not upon half the annual value of their land, but upon the profits they might make. Was it to be supposed that the farmers would be so wanting in common sense as to hesitate to avail themselves of any doubt in the law and to appeal to the Income Tax Commissioners, when there was a great probability of success? What they were contending for was simply this—They did not wish to dispute the accuracy of the interpretation placed upon the intentions of Parliament by the Chancellor of the Exchequer; but all they contended for was that the Bill did not accurately represent those intentions. Supposing some months hence an appeal were made to the Income Tax Commissioners, they would have to interpret this Act—they would have to administer the law; and though the Chancellor of the Exchequer had stated his opinion of what the intentions of Parliament were, yet the Commissioners would have quoted to them the opinion of the Attorney General, to the effect that the Bill did not accurately represent the in- 1537 tentions of Parliament. They simply asked that this Bill should be put beyond the possibility of dispute, and that the intentions of the Chancellor of the Exchequer and the Government in that House should be given effect to. It seemed to him to be absolutely impossible for anyone who had listened to the discussion to say that the Bill accurately represented the intentions of the Chancellor of the Exchequer and of Parliament with regard to the mode of assessing the Income Tax upon farmers. Under these circumstances, they desired, not in the slightest degree for the sake of obstruction of Public Business, but with a view to facilitate it, to be allowed to report Progress. On another occasion, perhaps, the Attorney General would be able to inform them that what they know to be the intentions of the Chancellor of the Exchequer and of Parliament were carried into effect beyond the possibility of doubt.
§ Question put.
§ The Committee divided:—Ayes 29; Noes 57: Majority 28.—(Div. List, No. 114.)
§ MR. W. HOLMS moved that the Chairman do leave the Chair.
§ Motion made, and Question proposed, "That the Chairman do now leave the Chair."—(Mr. William Holms.)
§ THE ATTORNEY GENERAL (Sir JOHN HOLKER)
wished to say a few words with regard to this question, which he admitted to be one of considerable importance. The opinion he expressed a few moments ago he still desired to adhere to—namely, that the rent paid did not absolutely represent the annual value. No doubt, the Interpretation Clause in the former Act, to which attention had been drawn by the Chancellor of the Exchequer, must be considered; but there might be cases in which that did not entirely set the matter at rest. In some instances, rent did not represent the annual value; and it would be impossible to alter the Bill to make it assume another and a different form from what it now did, in order to make that intelligible. It would not be accurate to use the expression rent instead of annual value; because if they used the expression rent instead of annual value, they would use a misleading term for rent, and would not indi- 1538 cate under what circumstances the rent was to be taken as a criterion. Moreover, if the expression rent was substituted for annual value, they would not subject the tenant farmer to the amount of Income Tax that they desired to subject him to. Exception had been taken to an answer of his given to a Question put some time ago. He had been taken severely to task for that answer, which had been stigmatized as entirely erroneous. At the time he made that answer, he looked into the question as carefully as he could, and he consulted others more competent than himself in the matter. If hon. Gentlemen would refer to the matter, they would find that the answer which he gave was perfectly accurate. He was desirous of satisfying hon. Members fully upon the subject. But it was said that the answer which he gave upon a question of law was entirely erroneous. The question was whether, if a tenant farmer could establish that he had made less profits than the amount upon which he was taxed, had he any remedy? He answered, in reference to the provisions of the Statute 14 & 15 Vict. c. 12—an Act passed subsequent to the similar Statute in 1851—what he thought would take place. He would draw the attention of the Committee to the provisions of section 3 of that Act, which seemed to him to be perfectly plain and distinct. The section of the Act ran thus—That if at the end of the year of assessment of the said duties under this Act, any person occupying lands for the purposes of husbandry only, and obtaining his livelihood principally from husbandry, who shall have been assessed in the said year to the duties chargeable under (Schedule B of the said first recited Act in respect of such lands shall find and shall prove to the satisfaction of the Commissioners by whom the assessment was made, that his profits and gains arising from the occupation of such lands during the said year fall short of the sum on which the assessment was made, it shall be lawful for the said Commissioners, upon appeal made to them in that behalf within three calendar months after the expiration of the said year and of which notice in writing shall be given to the Surveyor of Taxes for the district, to cause an abatement to be made from the amount of the said duties charged on such appellant proportionate to the deficiency of his said profits and gains; and in case the whole sum assessed shall have been paid, the amount of the sum overpaid shall be certified and repaid in like manner as is provided by Section 133 of the said first recited Act in the case of any overpayment of the duties assessed under Schedule D of the same Act.1539 It seemed to him, at the time when he investigated the matter, that this section was exactly applicable to it; and that, under these circumstances, an appeal might be made. He did not at the moment remember the Act upon which he passed his opinion. He would again repeat that, in his view, under all the circumstances, annual value was not an expression of the word "rent;" and that, instead of amending this Bill, they would make it a great deal worse, if they inserted the word "rent" instead of the expression "annual value." Of course, the annual value must be read by the light of the Interpretation Clause of the Act. Upon the answer he had given, to which so much exception had been taken, he claimed the good judgment of the Committee as to its accuracy.
§ MR. W. HOLMS
observed, that the discussion on that clause formed the best reason why the debate should be adjourned. They were now told that there was a provision which was entirely at variance with the first Act, and that the general idea of people as to the meaning in the clause as it stood was contrary to what had been done in connection with it. He thought it was very desirable that the Government should consider this question, whether or not farmers were to be assessed, as hitherto, by paying upon half their rentals, or whether the question of profits was to have any influence in the matter. For that reason, he had moved that the Chairman should leave the Chair.
§ Question put.
§ The Committee divided:—Ayes 26; Noes 62: Majority 36.—(Div. List, No. 115.)
§ MR. MUNDELLA
said, it was clear that the Attorney General had been right in his construction of this clause, and that the Chancellor of the Exchequer had been wrong in his interpretation of it. He would point out that they were at a period when a matter like this would really affect the Revenue. The practice had been that the net annual value of land should be taken as the basis for payment of Income Tax. It had been thought by some that it was a compromise, and was a fixed absolute arrangement, and it had been accepted as such by the agricultural interests generally. But, within the last few 1540 weeks, it had been stated by hon. Gentlemen opposite that instances had come under their notice in which not the annual value, but the net profits, had been taken as the basis for an assessment. In the absence of profits no Income Tax was paid. The tax ought to be paid by someone, and the question was, who was to pay it? They had good reasons in which farmers made a good deal more than the amount upon which they were assessed, and, of course, they had bad ones also. The Chancellor of the Exchequer must see what would be the result upon the reading of such a statement as that made by the Attorney General. They ought to come to some understanding as to what was to be the principle upon which Income Tax was to be levied upon the agricultural community. The Committee ought to have some time given it to consider the matter. For these reasons, he moved—without any desire to impede the Business of the House, but in order that the matter should be settled in a manner satisfactory to all, and in the interests of the agricultural community—that Progress should then be reported.
§ Motion made, and Question proposed, "That the Chairman do report Progress, and ask leave to sit again."—(Mr. Mundella.)
§ THE CHANCELLOR OF THE EXCHEQUER
remarked that, after two Divisions, at that hour of the morning the Government would not oppose the Motion. He wished to put this matter upon a definite footing. They had been challenged as to the meaning of the Act, and it had been thoroughly explained, so that there could be no doubt whatever upon the subject. So far as the Government was concerned, it was entirely satisfied to leave the matter alone as it now stood, and to take the rent as evidence of the annual value, with a provision, inserted nine years after the first Act was passed, giving the occupier an appeal. The only alteration which had been suggested, he believed, by some hon. Members opposite, was that they should repeal that provision of the Act of 1851 for the benefit of the occupier and tenant. If that were the proposal, and hon. Gentlemen wished to do it, they should resist it. In any proposals that they had made, they intended in 1541 no degree whatever to vary the tax as it now bore upon the occupying tenants.
§ Motion agreed to.
§ House resumed.
§ Committee report Progress; to sit again upon Thursday.