§ (1) Income Tax for the year beginning on the sixth day of April, nineteen hundred and fifteen, shall be charged at the rate of two shillings and sixpence, and Super-tax shall be charged, levied, and paid for that year at double the rates mentioned in Section three of the Finance Act, 1914.772
§ (2) All such enactments relating to Income Tax, including Super-tax, as were in force with respect to the duties of Income Tax granted for the year beginning on the sixth day of April, nineteen hundred and fourteen, shall have full force and effect with respect to any duties of Income Tax hereby granted:
§ Provided that—
- (a) Sections four and six of the Finance Act, 1914, which confer relief with respect to earned income and small incomes respectively, shall have effect as though the rates mentioned in those Sections were doubled; and
- (b) Sub-section (1) of Section twelve of the Finance Act, 1914 (Session 2), shall not have effect with respect to any duties of Income Tax hereby granted.
§ (3) The annual value of any property which has been adopted for the purpose either of Income Tax under Schedules A and B in the Income Tax Act, 1853, or of Inhabited House Duty, for the year ending on the fifth day of April, nineteen hundred and fifteen, shall be taken as the annual value of such property for the same purpose for the next subsequent year; provided that this Sub-section—
- (a) so far as respects the duty on inhabited houses in Scotland, shall be construed with the substitution of the twenty-fourth day of May for the fifth day of April; and
- (b) shall not apply to the Metropolis as defined by the Valuation (Metropolis) Act, 1869.
§ Mr. PETO
I beg to move, at the end of Sub-section (1), to add the words "except upon the pay of sailors and soldiers serving in the armed forces of the Crown, on which Income Tax shall be charged at the rates mentioned in Section three of the Finance Act, 1914."
On the Committee stage of the Bill an Amendment designed to give a certain amount of relief from special war taxation in respect of the pay of officers who are serving in the Army and Navy was moved by the hon. and learned Member for Leamington (Mr. Pollock). Certain arguments were put forward by the two right hon. Gentleman on the Treasury Bench in opposition to that Clause, and I think I have in my Amendment entirely avoided them. The Chancellor of the Exchequer criticised the Clause of my hon. and learned Friend as not being very ably 773 drafted to correspond with the arguments which were put forward in support of it. I frankly admit the justice to some extent of that criticism, because we really wished to relieve officers in the Army and Navy from the exceptional war taxation; in fact, from the additional 1s. 3d. Income Tax imposed in large measure to meet the cost of their own pay and that of the men of the Army and Navy. I would like in justice to my hon. and learned Friend to point out that by his Clause he would have done rough justice; he would have given something more than relief from war taxation to those officers below the rank of major who were in receipt of quite small pay, less than £400 per year, and he would have done something less than justice to those officers of higher rank in respect of their pay. The first objection to that Clause made by the Financial Secretary to the Treasury was that it actually increased the pay in the case of junior ranks of officers. That was so. His second objection was that the cost to the Treasury would be £970,000; and his third objection was that it would be unfair to the privates. I think his third objection has been sufficiently dealt with in Committee, but I would remind the House that the main additional war taxation which is borne by the working classes, who roughly represent the privates in the Army, is upon alcohol, tobacco, and tea, and, except in respect of the third, those who are serving at any rate in the Expeditionary Force not only do not pay the additional taxation, but they get off practically the whole of the taxation on the consumable article which was imposed in peace time.
The Chancellor of the Exchequer said that the Amendment of my hon. and learned Friend did not propose to relieve officers of the extra Income Tax during the War, but to relieve officers with incomes under £400 of all Income Tax, and it was therefore in effect and in intention a proposal to increase the pay of officers. I concluded from the right hon. Gentleman's remarks that had we drafted our Amendment in a somewhat different form and had we simply asked him to remit the extra 1s. 3d. Income Tax which was imposed subsequent to the Finance Act of 1914 he would have willingly, and I may say joyfully, met us. He admitted by the whole tenor of his speech that there was a genuine and obvious grievance and hardship. He said, in effect, that in peace time we raised our Income Tax at an equal rate upon all salaries and pay and profits 774 and gains of all sorts which are earned by the civil population and the military alike, because all alike benefit pari passu in the expenditure of the revenue derived from the ordinary peace taxes. He would also admit that it is obviously unjust, and I think I may say without exaggeration absurd, when it is necessary to double the Income Tax and when one of the extra charges which necessitates that doubling of the Income Tax is actually the pay of the military forces of the Crown, to ask the officers—who in many cases are new men who have left their civil vocations and have volunteered for this novel form of duty to defend their country—to pay the full rate of war Income Tax, and to say to them, in effect, that although in peace time they were entitled to the pay of, say, £1, with a deduction of 1s. 3d., yet when they are risking their lives in war we think it right to pay them £1 with a deduction of 2s. 6d. That is what we are doing if the Chancellor of the Exchequer cannot see his way to accept the Amendment.
Clause 9, which I propose to amend, raises the Income Tax to 2s. 6d. in the £. and provides for its being deducted from all profits and gains and so forth at that rate. I make the exception that it shall not be deducted from the pay of soldiers and sailors serving in the armed forces of the Crown, on which Income Tax shall be charged at the rates mentioned in Section 3 of the Finance Act, 1914. I leave the pay of soldiers and sailors serving the Crown subject to the ordinary Income Tax as it was levied before the declaration of War. If it is contended that some officers in the Army are in receipt of very large private incomes, which perhaps make their pay quite a negligible part of their total income, and that men of that kind really do not require any relief such I propose and would not welcome it and even would not care to accept it, I quite agree that there are those exceptional cases, but I had to consider what was practicable, and it would enormously complicate and render more difficult the actual deduction from the Income Tax to make any such restriction. If the right hon. Gentleman, however, feels that the principle of the Amendment is right, but that it ought to be hedged round by a provision that the remission should not apply to anybody in receipt of an income, we will say, at such a level as would subject it to Super-tax, I will very gladly see the Amendment restricted in that sense, but I know from 775 many representations made to me that large sections of the civil population feel very strongly that this burden ought to fall upon them and not upon those who are actually carrying on the fighting of the country. With that proviso, I move the Amendment, feeling confident that as it meets the whole of the objections the right hon. Gentleman put forward to the Clause moved in Committee by the hon. and learned Member for Leamington, he will accept it.
§ Mr. MACMASTER
I understand the effect of this Amendment would be that the Income Tax as respects soldiers and sailors would remain exactly as it is. The proposal is that they should not be subjected to the increased taxation proposed in the present Bill. When it is proposed to exempt any section of the community from taxation, of course I recognise at once that there must be some special consideration for it. In the present case there is the all-important consideration that those in respect of whom it is proposed are serving the country on sea and on land. But there is more than that. There is in addition the very important consideration that although we are all living in the presence of death at any moment, yet the soldiers in the field and the sailors on the sea are in much closer proximity to it, and are, in fact, contending with the forces of death. They are at any moment liable to death in battle, and in that contingency, which is a contingency to which we are not subject, the estate which goes to their relatives or friends immediately becomes liable to Estate and Probate Duties. For these reasons, I do think, especially at a time of great stress when our soldiers and sailors are fighting a battle for our very existence, a battle which we trust will soon be terminated, we might safely and in discharge of our full duties exempt our soldiers and sailors from the extra taxation imposed upon others.
§ Mr. McKENNA
I regret that this subject has been raised again after the full discussion we had upon it in Committee. It is quite true that in Committee I raised an objection that the form of the Amendment did not support the speeches of the hon. Members who supported it. But I also gave what I thought were strong objections in principle to any Amendment of this kind, and the House will remember that the right hon. Gentleman the Member 776 for Wimbledon (Mr. Chaplin) made an appeal to hon. Members not to discuss a proposal of this kind, which, in his opinion, might be disagreeable, or, at any rate, not agreeable, to the officers themselves. The objection to an Amendment of this kind is one of principle. If this Amendment were accepted it would impose on the Exchequer a loss of £375,000 a year. What does that mean? It means that on a Finance Bill, by a side wind, we should be increasing the effective pay of certain soldiers and sailors by £375,000 a year.
§ Mr. McKENNA
We should be increasing their pay, and if we accept this Amendment the soldiers and sailors this year would receive an increased amount of £375,000. But mark the distribution of this money! Of the additional money which would be distributed amongst soldiers and sailors, not one penny would go to any soldier or sailor whose pay was less than £160 a year! It would go to those whose pay was above £160 a year, and it would be distributed amongst those officers, not according to their means but wholly disproportionate to their means—the higher the pay the greater the relative increase would they get on the total distribution. It would mean, in fact, an alteration of the pay of officers in the Army and Navy. If any alteration is to be made in their pay during war or peace, the proposal should come from the Admiralty and the War Office, and it is not proper that this House should, by a sectional relief of a particular tax, give advantage to sections of individuals. It is not the proper way of dealing with the question, and if hon. Members who support the proposal really think the pay and allowances of our officers in the Army and the Navy are insufficient they should make their proposal in Committee. It is not proper that they should effect their object by a side wind in this way. I really must appeal to hon. Gentlemen not to press this point any further. If they think the pay of these officers ought to be increased, let them make representations to the Secretary for War or to the Admiralty. Any increase which is made in the general rate of pay would never take this form, or any form at all like it. You would never begin to increase the rate of pay above £160 a year. It never has been done, and certainly I am not prepared to give a higher increase, not in proportion to the scale of pay, but 777 a higher rate of increase on the higher scale of pay. I hope hon. Members will not press the Amendment.
§ Mr. BIGLAND
The argument of the right hon. Gentleman does not seem to me to be very sound or solid. I hold in my hand a measure entitled "An Act to extend the relief from Death Duties, given under Section 14 of the Finance Act, 1900."
Under that Act exception is made in favour of the estates of officers who are killed in the present War, and surely if such a rebate is made in that Finance Act there is no reason why it should not also be made in the Bill we have now before us. The logic of the Chancellor of the Exchequer does not seem to me to be very clear.
§ Mr. McKENNA
The hon. Gentleman is under a misapprehension. That rebate is not limited to the estates of officers only. It applies to all estates down to the smallest.
§ Mr. BIGLAND
The right hon. Gentleman is, I think, absolutely wrong. I am the executor of the estate of an officer who has just been killed. If that estate is valued under £5,000 I shall not have to pay any Death Duties on it.
§ Mr. BIGLAND
Yes, that is so. It is under £5,000, but there is a further rebate for officers whose estates are over £5,000.
§ Mr. BIGLAND
It mainly affects officers who have estates of under £5,000. I really feel that the Amendment is solid and right, and provides a righteous rebate. These gentlemen before the War were paying Income Tax at the rate of 1s. 3d. in the £. The War comes on, and while they may have had a slight increase of pay, it is not commensurate in any way. We who stay at home feel that this little rebate should be allowed to these officers under the Finance Act. We could not bring this proposal forward in the way suggested by the right hon. 778 Gentleman because the Estimates have already been passed for the Army and Navy, but I do put it that this is a reasonable proposal. The right hon. Gentleman talks in grandiloquent language about the amount involved—£375,000. I have worked it out and, on his own estimate, it represents but one-eighth of one day's cost of the War, and therefore he is not going to lose such a stupendous amount after all. I really think that this is an Amendment which should be accepted.
§ Amendment negatived.