«THE HAMLYN LECTURES Thirty-Third Series INTOLERABLE INQUISITION? REFLECTIONS ON THE LAW OF TAX H. H. Monroe STEVENS THE HAMLYN LECTURES THIRTY-THIRD ...»
It also reminds us that it is a question of policy to be resolved by the Administration what arrangements are appropriate for deciding a particular set of claims. For instance, the Government decides to introduce a State scheme of unemployment benefits. It works out how the money is t o be raised and prescribes the qualification for benefit, and the manner of making payments. It has t o meet the situation where a citizen claims benefit and a government official does not accept his claim. It is purely an administrative m a t t e r h o w the Act is going to handle those contested issues. That matter will be resolved, not by laying it down that because there is a dispute it is a judicial question for a judge, but by asking what in the circumstances is the most efficient manner of performing this administrative task."
Pitt effectively anticipated Lloyd George by over a century: he instituted a system of tribunals manned by unpaid citizens whose tasks were to fix the quotas of the contributions to be made by their fellow citizens for public purposes and, in the event of any dispute between government official and individual taxpayer, to resolve the contested issues. These tribunals were to be distinct from the ordinary courts; no provision was made for their determinations to be referred to the courts. It would be 75 years before the code included a right of appeal to the courts from a determination of the commissioners. This appears to have been quite deliberate. There was such a right in relation to the assessed taxes. For example, a Consolidating Act of 1803 relating t o the taxes on windows, Harry Street Justice in the Welfare State (Stevens & Sons, 1968).
43 Geo. Ill, c. 99.
10 The Backdrop of History inhabited houses, servants, carriages, horses, mules and dogs provided by section XXIX in relation to appeals heard by the commissioners responsible for those taxes: "Appeals once heard and determined shall be final. No alteration [was to be admitted] except in such Cases where the Opinion of the Judges shall be required according to the Provisions of any Act or Acts concerning the same." Doubtless, if he even gave the matter a moment's thought, Pitt regarded the income tax as a temporary expedient and privacy as more important than points of law.
Not only were the tribunals so established distinct from the ordinary courts but, as a matter of policy, the manner in which claims were to be decided bore little resemblance to common law procedure. First, it was for the taxpayer to declare his income. Pitt contemplated that he would merely declare that the proposed figure was adequate, a proper discharge of his quota, but in course of time this was modified: the making of a return of income by the taxpayer was from the outset and is today the first step in the process of fixing his liability. If there were doubts, the surveyor was to raise them. Then the commissioners would decide. Today surveyor has merged with inspector (originally, as the name suggests, a senior officer who oversaw the work of surveyors, a part of the internal processes of the Revenue which still exists today), and the inspector has taken over the task of making assessments from the commissioners. But if the citizen claims benefit of exemption or abatement or challenges the inspector's assessment, he must still, as under Pitt's arrangements, disclose the details of his affairs. The onus is on him, not on the inspector to prove what tax is due. The underlying assumptions as to how tax will be imposed and how disputes will be resolved are as they were in 1799 and they have little to do with the common law.
Pitt's Income Tax Act lived up to the prospectus. Section II provided that "... there shall be raised, levied, collected and paid annually... upon all Income arising from Property in Great Britain belonging to any of His Majesty's Subjects, although not resident in Great Britain, and upon all Income of every Person residing in Great Britain... the several Rates and Duties following." What followed provided for tax at 2/- in the £ on any income over £200 with such familiar features as abatements for children and exemption for charities. Guidance was given on who was to be regarded as resident and who as not resident in Great Britain. That guidance is still The Backdrop of History 11 offered in today's code.21 Conceivably age has dimmed its clarity;
the words used have not been altered.
The oath to be taken by Commissioners, in the form promised, was contained in section XXII: "that I will judge and determine upon all Matters and Things which shall be brought before me under the said Act without Favour, Affection or Malice and that I will not disclose any Particular contained in any Schedule of Income or any Evidence or Answer given by any Person who shall be examined or make Affidavit respecting the same, except in such Cases and to such Persons only when it shall be necessary to disclose the same for the purposes of this Act or in order to, or in the Course of, a Prosecution for Perjury committed in such Examination or Affidavit." The oath is still in the code today,22 its language altered to a more insipid and less robust formula but its sense unchanged.
Commissioners who undertook to execute the Acts dealing with the assessed taxes swore to do so without Favour or Affection but the requirements of secrecy were absent. Theoretical justification for extreme secrecy can, of course, be provided. But, as R. H. Tawney once commented2 : "Englishmen are incurious as to theory, take fundamentals for granted, and are more interested in the state of the roads than in their place on the map." Pitt was interested in getting his tax accepted; it would not be unless the bugbear of disclosure was outfaced. So, secrecy became part of the income tax code.
Section LXV of Pitt's Act gave a right to appeal to the "higher" commissioners. The substance of it is unimportant for, as has been mentioned, it seems that the right was seldom, if ever, invoked.
But the form of the section is significant since it contains words and expressions still found in the code and lays down a procedure for pursuing appeals in cases of dispute which still governs the prosecution of appeals today. The section provides that "... in any case where the party assessed shall have verified the Particulars contained in his or her Schedule of Income upon Oath, and when the Surveyor or Inspector shall nevertheless apprehend the Determination made by the said Commissioners to be contrary to the true Intent and Meaning of this Act, or that they have disallowed any Surcharge, or allowed any Deduction contrary to the same, and shall then declare himself dissatisfied with such Determination, it shall and may be lawful for such Surveyor or Inspector to require ss. 49 and 51 ICTA 1970 (1970, c. 10).
See Sched. 1, TMA 1970 (1970, c. 9).
3 R. H. Tawney he. cit.
12 The Backdrop of History the said Commissioners to state specially and sign the Case upon which the Question arose together with their Determination thereupon; which case the said Commissioners, or the major part of them then present, are hereby required to state and sign accordingly, and to cause the same to be by him transmitted to the Commissioners of Appeal, who are hereby required, with all convenient speed, to return an Answer to the Case so transmitted, with their Opinion thereupon subscribed thereto, according to which Opinion so certified, the Assessment which shall have been the Cause of such Appeal, shall be altered or confirmed." No doubt the procedure for taking a disputed question up upon appeal by way of case stated was based on precedents applicable to other taxes, the example has been mentioned of taking the judges' opinion on disputed questions relating to the application of the Acts imposing the assessed taxes.
There is no reason to suppose that the procedure was not well understood and common enough in 1799. There is a passage in Blackstone's Commentaries which suggests that a system of referring difficult questions of law to a higher authority had respectable antiquity2^: "When any doubt arose upon the construction of the Roman laws, the usage was to state the case to the emperor in writing and take his opinion upon it." Blackstone comments, and the principle is well established, that this was a bad method of interpretation since "to interrogate the legislature to decide particular disputes, is not only endless, but affords great room for partiality and oppression."
Pitt's income tax was not a great practical success. A temporary lull in the War provided occasion for its repeal. By the time the War started up again Pitt was at odds with the King and Addington in the saddle. Back came the income tax, this time with Addington's name attached and certain changes. To spend time on determining who was the father of the infant income tax may appear unprofitable. The popular voice would deny it lawful paternity. For my part I prefer Pitt's claim to be the true begetter since, as it seems to me, it was he who went against the trend and, for all that he wrapped his proposal up, required the citizen to disclose his resources so that government might take its tithe. Those who might wish to pursue the historical details will find them assembled in two erudite and entertaining articles by the late William Phillips in the 1967 British Tax Review.25 He shows that Pitt's embrace of a Blackstone loc. cit. Introduction, Section the Second.
 B.T.R. 177 and 271.
The Backdrop of History 13 general tax on income was all the more remarkable in that it involved what would today be called a U-turn; as recently as 1797 Pitt had advanced, to great effect, the argument that such a tax as he now proposed would involve a scrutiny of property such as was not to be tolerated. Indeed, it was precisely his scruples about this scrutiny which would seem to have led Pitt to hold his hand in
requiring information from the taxpayer. William Phillips comments:
"In 1800, when the extent to which the tax of 1799 had failed, because of the vague form of the general return of income, became known, and the extent to which the secrecy in which Pitt had enshrouded everyone's income had led to wholesale evasion, Rickman wrote: 'I do not see why the exact state of a man's pecuniary affairs should not be known, as well as the colour of his coat, or the complexion of his countenance.' A year later Newberry asked whether secrecy was not 'a prudish delicacy, a solecism in finance,'26 adding 'Notoriety is the antidote to subterfuge and evasion.' " Be that as it may, it is not the case that Addington's solution was to whip off the veils of secrecy: he sought to meet the objections to a return of "total" income certainly, and he introduced, (or resuscitated, depending on where you stand in the historical disputations), deduction at source, perhaps the only really effective method of collecting tax. Let the Commissioners of the Inland Revenue take up the tale. Their Report for the years 1856 to 1869 presented to Parliament in 187027 contains a succinct summary of the relevant history. In passing, it may be worth emphasising that my concern is not with historical accuracy. For me, the myth is important for it contains the message: what was the received view, what the authorised version of events which subsequently shaped men's minds and governed their attitudes? After mentioning the triple assessment Act of 1798 "introduced at the instance of Mr. Pitt" the Report continues: "In the year 1799 by the Act of 39 Geo. Ill, c. 13 the duties granted by the abovementioned Act of 1798 were repealed and in lieu thereof a duty was imposed upon income at the rate of 10 per cent. By this Act all persons were required to make returns of the whole of their income from whatsoever source the same was derived. [This, of course, was Cited  B.T.R. at p. 186.
Report of the Commissioners of Inland Revenue on the Duties under their Management, for the years 1856 to 1869 inclusive, with Some Retrospective History. Presented to both Houses of Parliament by Command of Her Majesty, 1870. c. 82.
14 The Backdrop of History the very impression which Pitt had struggled to avoid.] The produce of the tax in the first year after this alteration was £6,046,624, or about a quarter of a million for every penny of the tax."
"In 1803 the present system of charging incomes upon all property and profit at their first source was introduced, and the return of the whole income, previously required, was abandoned...
This principle [taxing income at its source] is thus explained in some observations on the tax, published at the time under the authority of Government. 'As the former duty was imposed on a general account of income from all sources, the present duty is imposed on each source, by itself, [the 1803 Act introduced the familiar Schedules A to E] in the hands of the first possessor, at the same time permitting its diffusion through every natural channel in its course to the hands of the ultimate proprietor. Instead of the landlord and the various claimants upon him in succession, it looks to the occupier only. Instead of the creditor, it looks to the fund from which the debt is answered. In the place of a complicated account, collected from the various sources from which the income of an individual is derived, it applies to the source itself to answer for its increase. By these means its object is attained with more facility and certainty, and with less intricacy and disclosure, diminishing the occasions of evasion by the means of exaction: thus the charge is gradually diffused from the first possessor to the ultimate proprietor, the private transactions of life are protected from the public eye and the revenue is more effectually guarded."
"To the foregoing remarks," the Report continues, "it might have been added, that the system leaves unrevealed to all those connected with the assessment to the tax the total income of any person except those who claim entire exemption from it, or those who seek to obtain an abatement of duty. The produce of the tax under this system at the reduced rate of 5 per cent, was almost equal to that of 1799, when the rate was 10 per cent."