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«THE HAMLYN LECTURES Thirty-Third Series INTOLERABLE INQUISITION? REFLECTIONS ON THE LAW OF TAX H. H. Monroe STEVENS THE HAMLYN LECTURES THIRTY-THIRD ...»

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So the proof of the pudding was in the eating. Addington had attained a more extensive effect than had Pitt. He had done so, in effect, by treating sources of income rather than receivers of income as the subjects of charge and by throwing on to the distributors of income the obligation to collect and account for the tax attributable to those to whom the income was distributed. This technique for diminishing the occasions of evasion by the means of exaction was admirably suited to the shape which the income tax then had and to the majority of the forms of income to which the tax then applied.

It was to work well for three-quarters of a century. It was, of The Backdrop of History 15 course, the wicked Liberals with Lloyd George's 1909 Budget and the introduction of super-tax who would upset the well-balanced apple cart—but that is to anticipate.

Meanwhile the income tax settled down. There were, of course, amendments. But in 1806 the Income Tax Act28 brought together the various strands, made a few amendments and set a pattern which would serve as the basis of income tax from then until now. The tax was not of course popular but, while the War lasted, tolerable. Came Waterloo and the end of the War and the Government of the day was soon reminded that Mr. Pitt's tax had been a wartime measure and Mr. Addington's was, in terms, to end when peace returned.

Debate took place in Parliament regarding the possibility of retaining the income tax. The discussion reveals the extent to which the notion had flourished that there was something off-side and un-British about income tax. The whole thing smacked of inquisitorical oppression. That these notions should flourish is not surprising. The propaganda was powerful, the mytlis strong. We read that when Pitt's income tax was repealed, Parliament ordered all documents and records relating to the tax to be destroyed on the basis that too much information had been given to the representatives of Government by the private citizens of the country, particularly as the total income of each contributor had been revealed. The records were to be cut into small pieces, taken to a paper manufactory and there committed to the mash tub. One of the Commissioners for the Affairs of the Taxes (later the Commissioners of Inland Revenue) was to stay and see the job done properly. The laudable and energetic researches of the late William Phillips have disclosed that the Commissioner may have failed in his allotted task since it appears that a set of records were retained.

But the accuracy of the story is of no significance: the strength of the myth is what counts.

As has appeared from section LXV of the 1799 Act already quoted, part of the system, retained after 1803, involved the Surveyor, a government official, proposing a surcharge if he considered the taxpayer's figures inadequate. This struck fire from William Cobbett, robust purveyor of British sentiments. "Hired informers of the government, whether surveyors, inspectors, or by whatever fashionable appellation they may be called, surcharge "A New Light on Addington's Income Tax," William Phillips, [1967] B.T.R. 271.

Cobbett Political Register, January 10, 1807.

16 The Backdrop of History without mercy. Surcharges made upon mere speculation! What degradation must an innocent man suffer even should he succeed in satisfying these gentlemen that he has made an honest return." We have journalists, authors and publicists today who write on the same items with as much fury but, perhaps, with less felicity.

Small wonder, then, that the Chancellor of the Exchequer of the day, Nicholas Vansittart, later Lord Bexley, should have adopted a defensive posture in February 1815 when seeking to persuade the Committee of Ways and Means that the income tax should be retained. "A right honourable gentleman [It was in fact Mr. Tierney] not long since, had begged pardon of God, and of the public, for the part he had taken in imposing this tax in 1806.

They had been told of the inquisitorial nature of this tax, and of the tyrannical manner in which the powers derived under it were exercised. He, however, believed that the commissioners (and here he spoke of men subject to human infirmity) had always acted according to the fair dictates of their judgement. He was convinced that their motives were most pure, patriotic and laudable. It should be recollected that the duties created by the Act, were not performed by men appointed or paid by the Crown, or having any interest divided from the mass of their fellow subjects. They were performed by the same sort of gentlemen to whom the country was indebted for the preservation of tranquillity; by that set of gentlemen who were in the commission of the peace, and who administered the internal affairs of the Kingdom in a way highly honourable to them, and no less beneficial to the nation in general.... " The Chancellor then went on to discuss inquisitorial powers given to Commissioners to support the collection of taxes in the time of Queen Anne. No doubt these were those powers of which Blackstone was so critical. 32 As has been known to happen in our own day, the Chancellor defended his position by pointing out how bad the situation was in the time of Queen Anne. He then went on to deliver a reasoned defence of the structure of income tax as it stood in 1815—and, incidentally, was to be restored in 1842—"Now with respect to the property tax [the name commonly given to the income tax] it would be found that wherever it was possible to make an estimate by reference to the property to be charged, and without ulterior enquiry, it was always preferred. Like all other Hansard February 20, 1815.





See above n. 7.

The Backdrop of History 17 efforts of legislative wisdom, the Act undoubtedly had its imperfections. With regard to funded and landed property, the mode of charge was clear and plain. With respect to funded property, it might be considered as absolutely perfect, as it admitted no possibility either of evasion or overcharge: and with respect to landed property, it approached very nearly to perfection. But, with reference to trade, it was obviously imperfect. An extensive power was inevitably and necessarily obliged to be given to the commissioners for the purpose of procuring regular returns. If, at any future time, the tax should be renewed, with such an amendment as would ensure true returns without having recourse to the power he had just noticed, he thought that was all the improvement that could be looked for."

The rival merits of a standard rate and graduated rates were also noticed. This part of the defence of the system is material in that there is a case to be made for the claim that it was super-tax and the graduated rates which led to evasion, complication and the multiplication of the ills to which we are heirs today. Perhaps, the situation was simpler in 1815 but, in principle, the essentials were the same. The Hansard report continues: "The second modification suggested to him was, to charge persons possessing very high incomes, at an increased rate, and either greatly to reduce the charge, or to exempt altogether from the operation of the Act, individuals of more confined circumstances. This, however, he considered to be totally impracticable; because the Act gave them no insight into the total income of any person. The principle of the Act was, to charge every species of income, from whatsoever source it might be derived, as a distinct property, without examining the general situation of the proprietor. A person, for instance, might be employed in trade, at a variety of places. He might have a banking house in London, a mercantile establishment at Bristol, a large manufactory at Manchester, £100,000 in the funds, and £5,000 a year in land, (a laugh); and, as the Act was at present constituted, he would be separately and distinctly assessed for every one of these sources of property, without any one assessor being able to say what the aggregate amount of his income was."

But for all Vansittart's persuasiveness the House would have none of it. Dowell attributes the final rejection to a chance comment of Castlereagh —"An ill-timed observation of Castlereagh regarding 'ignorant impatience of taxation' had the same effect in irritating Dowell, History of Taxation, Vol. II, p. 263.

18 The Backdrop of History the minds of the people, as Walpole's observation about 'sturdy beggars' at the time of his Excise Bill, and increased the opposition to the proposal to retain the tax at half rates. The total repeal of the tax formed the subject of innumerable petitions to the House of Commons, a course in which Brougham, as an agitator, and the citizens of London as petitioners, took the lead. And, after prolonged debates in the House, the government reluctantly abandoned their original proposal, and instead of retaining the income tax at half rates, gave it up in toto."

At this point I am aware that by all the canons of relevance I should pass at once to Peel's reintroduction of the income tax in

1842. But why did Peel return to income tax? It obviously was not a popular tax. But consider the alternatives. A mass of customs and excise duties on every conceivable item of consumption. In our own times Purchase Tax softened us up; when Value Added Tax arrived we had little spirit left. But consider how the matter stood 160 years ago. I include the following quotation for three reasons: first there may be those who have not heard or read it before; as a piece of satiric prose it simply is unsurpassed—the name today is fearless investigative journalism; secondly, it illustrates much more effectively than anything I can say the point which I seek to make, that a tax in whatever form it is introduced, to a pronounced degree has to withstand a barrage of brickbats, catcalls and downright opposition, so much is inevitable; and thirdly, it. emphasises the difficulty which must always confront the legislator who seeks to impose a tax, that tax is much more easily opposed, ridiculed and guyed than it is proposed, imposed or justified. Sydney Smith, writing in the Edinburgh Review in 1820 had this to say of the formidable list of taxes then in force: "We can inform Brother Jonathan what are the inevitable consequences of being too fond of glory. Taxes upon every article which enters into the mouth or covers the back or is placed under the foot. Taxes upon everything which it is pleasant to see, hear, feel, smell or taste. Taxes upon warmth, light and locomotion. Taxes on everything on earth or under the earth, on everything that comes from abroad or is grown at home. Taxes on the raw material, taxes on every fresh value that is added to it by the industry of man. Taxes on the sauce which pampers man's appetite, and the drug which restores him to health; on the ermine which decorates the judge, and the rope which hangs the criminal;

on the poor man's salt and the rich man's spice; on the brass nails of the coffin, and the ribbons of the bride; at bed or board, couchant or levant, we must pay. The schoolboy whips his taxed top; the The Backdrop of History 19 beardless youth manages his taxed horse, with a taxed bridle, on a taxed road; and the dying Englishman, pouring his medicine, which has paid 7 per cent., into a spoon that has paid 15 per cent., flings himself back upon his chintz bed, which has paid 22 per cent., and expires in the arms of an apothecary who has paid a licence of a hundred pounds for the privilege of putting him to death. His whole prosperity is then immediately taxed from 2 to 10 per cent.

Besides the probate, large fees are demanded for burying him in the chancel. His virtues are handed down to posterity on taxed marble, and he will then be gathered to his fathers to be taxed no more."

In passing three questions occur to the mind: (1) Did we suppose that in our contemporary world there were new ideas or new taxes?

(2) Is there any branch, for example, of the criminal law which must contend with a bombardment of propaganda indicating that there is every justification for its breach? And (3) When so much eloquence is deployed against tax; who will speak for it?

With commendable brevity the Commissioners of the Inland Revenue in the Report already cited34 record the reintroduction of the income tax by Sir Robert Peel in 1842: "In the year 1816 the income tax ceased. It was not revived until the year 1842, when it was reimposed by Sir Robert Peel's government, not as a war tax, but for the purposes of repairing the deficiency which then occurred in the revenue to meet the expenditure of the country, and to enable the Government to make some reforms, with the view of improving the commerce and manufactures of the Kingdom." One has the impression that Peel was a practical realist. A number of the assessed taxes had been dropped. Need one ask why after reading the Edinburgh Review? Income tax had all the symptoms of inevitability. Peel introduced it for four years and subsequently sought to extend it for a further three years on the basis rather agreeably put as recorded by Dowell35 that it would be justified by prosperity.

"He now advanced a step in his plans for fiscal reform, and asked the House to reimpose the income tax for three years after its expiration in 1847 'in order to enable me,' he said, 'to make arrangements with regard to the general taxation of the country which will lay the foundation of great commercial prosperity, and materially add to the comforts even of those called on to contribute.' " This last comment was modest enough coming from one who left See above n. 27.

35 Dowell he. cit. p. 327.

20 The Backdrop of History his name t o t h e police force which would protect, or at least do its best t o protect, the prosperity of those w h o would be paying Peel's income tax. But why, one is disposed t o ask, did n o t Peel propound more fully the positive reasons why tax—and indeed income tax in some form—is an inevitable price for membership of a civilised community?

Income tax had gone out in 1816 with such comments as those attributed t o one Mr. William S m i t h 3 6 : "As far as the commercial world was concerned, the great evil of the tax consisted in that inquisitorial visiting which laid open t o the world, with the most ruinous effect, the exact situation of every man's affairs, however he might wish for c o n c e a l m e n t. " Mr. Smith appears t o have been among the first of a long line of Members of Parliament w h o are prone t o c o m m e n t on tax matters without first checking h o w the system actually works in law or in practice.



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