WAR WEALTH
LEVY.

Report from the Select Committee on Increase of Wealth (War). White Paper 102, price 1d. net.

The Report sets out by emphasising the great complexity of the subject, which affects widely varying interests, and explains that the Committee commenced their investigation by examining a carefully considered scheme prepared at the suggestion of the Chancellor of the Exchequer by the Board of Inland Revenue. The Board of Inland Revenue came to the conclusion that the only practicable method of approaching the problem was by a comparison of the aggregate wealth of individuals as ascertained by a valuation at two fixed dates, and they contemplated that (subject to certain allowances) duty would be charged at graduated rates on the increase shown by those two valuations. The dates suggested by the Board were June 30th, 1914, and June 30th, 1919.

The Report gives the following explanation of the Board of Inland Revenue's scheme :

"Under the suggested scheme, taxpayers liable would be required to furnish returns giving particulars of their wealth both at home and abroad at the two dates, and stating the value of the assets at each date. In order to avoid delay, provisional assessments would be made on the basis of the values shown in the returns. In any case where, after the return had been properly examined and any necessary check valuation had been made by the Inland Revenue, it was found that the provisional assessment was incorrect, that assessment would naturally be subject to revision. It is contemplated that the duty would be payable either in cash or by the transfer of Government Stock or other approved securities and that in cases where the payment of the duty in lump sum would involve the taxpayer in difficulties, e.g., in cases where a taxpayer's resources are locked up in business, payment would be accepted by instalments with interest over a period of years. The scheme provides for the constitution of a strong appellate body to decide disputed questions (subject to an appeal to the Courts on points of law) and for the imposition of heavy penalties to check evasion. In the memorandum in which this scheme was placed before your Committee, the Board of Inland Revenue submitted for purposes of illustration two graduated scales of duty. Under these scales, duty would be charged at rates ranging from 28 per cent. to nearly 80 per cent. on the amount of the increase shown by the two valuations, subject to a general tax-free allowance, in one case of £2,000, and in the other of an amount equivalent to 10 per cent. of the pre-war wealth. Under both scales it was suggested that persons whose post-war wealth did not exceed £5,000 should be exempt from the tax. It was estimated that the yield of duty under these illustrative scales would amount to £900,000,000 and £1,000,000,000 respectively. The Board of Inland Revenue estimate that the aggregate of the individual increases of wealth for the whole population of the United Kingdom is £4,180,000,000, and that if the increases in the hands of those persons whose post-war wealth does not exceed £5,000 are excluded, there remains

an aggregate increase of £2,846,000,000 in the hands of 340,000 persons, and it is only to this reduced sum that the original scheme would apply." The Report proceeds :

"On a close examination of the suggested scales, it became evident to your Committee that, unless far heavier tax-free allowances were granted than those for which provision was made in these two scales—

(a) The proposed tax would fall, not only on the class who hau made large profits owing to the exceptional conditions arising out of the war, but equally on those citizens who had increased their wealth by hard work and severe economy; and

(b) Liability to the tax would arise in cases where the only increase of wealth was an increase in money-value due to the general reduction in the purchasing power of money.

In the opinion of your Committee it is clear that factors of this kind require to be dealt with by means of substantial general allowances, and they consider that, if a tax on the proposed lines were imposed, it would be impossible to justify a scheme which did not make provision for such allowances. As the result of a suggestion made by the Chairman of your Committee while the original scales were under consideration, several new scales were prepared in which provision was made for largely increased tax-free allowances. The selection of a suitable scale is necessarily a matter of some difficulty, as several conditions require to be satisfied. For instance:

(a) Such a scale must, as stated above, provide substantial taxfree allowances;

(b) The rates of tax must be so framed as not to press inequitably or too heavily on any section of taxpayers;

(c) At the same time the rates must be high enough to yield an amount of revenue sufficient to compensate for the trouble and disturbance which the imposition of the proposed tax would cause.' The Report goes on to say that after considerable discussion the Committee adopted as a basis of enquiry the scale known as Scale C (2). Under that scale there would be deducted from the increase of wealth an abatement equivalent to a percentage of the pre-war wealth. The percentage would be 100 per cent. where the pre-war wealth did not exceed £25,000, and would diminish by small steps until it reached a limit of 30 per cent. in cases where the pre-war wealth exceeded £500,000. After this abatement the following rates of duty would be charged :

Amount of pre-war

Rate of duty where amount of post-war wealth (in thousands) lies between

C (2):

The following table shows the sliding scale of abatements under

The Committee's Conclusions.

The Report sets out the conclusions of the Committee thus :

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:

They are of opinion that, although the administration of a tax of this character would involve many difficulties, yet those difficulties should not be insurmountable, and in its main features the scheme of the Board of Inland Revenue, as now amended, is practicable in an administrative sense, inasmuch as:—

(a) The examination of taxpayers' returns, valuation of property, and assessment and collection of duty could be carried out in an effective and impartial manner;

(b) The cost of administration and collection, having regard to the amount of the estimated yield, would be small.

On the other hand, the duty of the taxpayer to furnish a return of his wealth at the two dates, and a statement of its value would involve him in both trouble and expense. The effect of the large abatements now proposed is that the burden of taxation would, in the main, be cast only upon those individuals who could most justly be called upon to make the sacrifice and that the tax would discriminate against those who had made exceptional profits in consequence of the war conditions.

"As regards the question of practicability in its wider sense of expedience and desirability your Committee feel that this question is one which can only be determined with regard to national and financial conditions in general. If the financial position of the country is such that it becomes a matter of urgent necessity to raise a sum of the magnitude of £500,000,000 which cannot be obtained by other means, the objections raised against a tax of this character should not be allowed to stand in the way of the imposition of such a tax to meet the national emergency. Moreover, although the suggested tax is strongly opposed by the financial and commercial world, there is, on the other hand, a very large body of public opinion which regards it not only as expedient but as a just and necessary attempt to equalise the losses suffered during the war.

"Your Committee desire to point out, however, that since they were appointed the financial conditions governing the problem have been largely modified,

(a) By the Budget proposals of the Chancellor of the Exchequer, including the proposal to increase the rate of Excess Profits Duty as an alternative to a tax on war-time increases of wealth.

(b) By the offer of the new 5-15 years Treasury Bonds.

"Whether in the present financial position a tax of this description is desirable or expedient as an alternative to Excess Profits Duty or to the taxation of profits in any other form is a matter on which your Committee feel that it is not within their province to pronounce an opinion, and they must therefore leave that question to the decision of the House of Commons.

As regards the form which a tax on war-time wealth should take if it were imposed, your Committee are of opinion that Scale C (2) might form the basis of charge of any such tax. That scale appears to them to indicate in the main a satisfactory solution of the difficulties of the problem so far as those difficulties are capable of solution, although your Committee have not made a complete examination of the scale in every detail. For the rest, the scheme put forward by the Board of Inland Revenue might be adopted, subject to modification on certain points. Among these are the following, to which your Committee attach considerable importance :-

(a) That special relief be granted in the case of combatants who have been disabled as a consequence of the war and of dependants of those who have lost their lives while fighting.

(b) That war securities be accepted in payment of duty at not less than the issue price.

(c) That the large general abatements granted under Scale C (2) render it unnecessary to grant special allowances to taxpayers who are married and have dependent children.”

ACTS OF THE SESSION OF 1920.-I.

The following public Acts have received the Royal Assent and been placed on the Statute Book since the opening of the present Session of Parliament. Where no date is stated for the beginning of an Act, it came into operation on receiving the Royal Assent.

Army and Air Force (Annual) Act, 1920 (10 George V., c. 7).— Provides for the maintenance of land forces of 525,000, including those to be employed at the depôts in the United Kingdom for the training of recruits, but exclusive of the numbers actually serving in India. Amongst the amendments of the Army and Air Force Acts is one which abolishes regimental courts-martial.

Coal Mines (Emergency) Act, 1920 (10 George V., c. 4).—Makes temporary provision on account of the emergency arising from the war as to the profits and control of, wages in, and advances in

respect of, colliery undertakings. Deals with the distribution of profits of undertakings, with provisions for effecting distribution of profits, with the definition of profits and standards, with a prohibition against parting with assets, paying dividends, &c., with provision as to wages and the power to make advances, and with accounts and audit. Prescribes the date of termination of the coal mines control agreement as April 1st, 1919. The Act is to be deemed to have had effect as from that date and is to continue in force until August 31st, 1920.

Coinage Act, 1920 (10 George V., c. 3).-Alters the standard of fineness of silver coins.

Consolidated Fund (No. 1) Act, 1920 (10 George V., c. 1).Provides for the issue of £28,727,126 out of the Consolidated Fund for the service of the year ended March 31st, 1920, and for the issue of £353,984,850 for the service of the year ending March 31st, 1921.

Merchant Shipping (Amendment) Act, 1920 (10 George V., c. 2). -Provides that the power of His Majesty, under Section 659 of the Merchant Shipping Act, 1894, by Order in Council to fix the annual or other sums to be paid out of the General Lighthouse Fund in respect of the establishment of the general lighthouse authorities, shall extend to fixing the annual or other sums to be paid out of that fund to members of the general lighthouse authority for England and Wales.

Treaties of Peace (Austria and Bulgaria) Act, 1920 (10 George V., c. 6). Gives power to His Majesty to give effect to the provisions of the treaties of peace with Austria (signed at St. Germain-en-Laye on September 10th, 1919) and Bulgaria (signed at Neuilly-sur-Seine on November 27th, 1919). It is ordained that any Order in Council made under the Act may provide for the imposition, by sum,nary process or otherwise, of penalties in respect of breaches of the provisions thereof, and shall be laid before Parliament as soon as may be after it is made, and shall have effect as if enacted in this Act, but may be varied or revoked by a subsequent Order in Council: provided that, if an Address is presented to His Majesty by either House of Parliament within the next twenty-one days on which that House has sat after any Order in Council made under the Act has been laid before it praying that the Order or any part thereof may be annulled, His Majesty in Council may annul the Order or such part thereof. It is provided that any expenses incurred in carrying out the Treaties shall be defrayed out of moneys provided by Parliament.

War Emergency Laws (Continuance) Act, 1920 (10 George V., c. 5). Continues temporarily certain emergency enactments and regulations, and makes provision with respect to the expiration or revocation of emergency enactments and instruments made thereunder.