

 
 <r- 
 
 LOCAL AND IMPERIAL TAXATION 
 
 A SPEECH 
 
 OP THE RIGHT HON. 
 
 JOHN GELLIBEAND HUBBABD, M.P. 
 
 The delivery of which on Tuesday the 20th July was precluded by 
 the counting-out of the Souse at 9 p.m.. 
 
 LONDON 
 
 LONGMANS, GEEEN, AND CO. 
 
 1875
 
 LONDON : PRINTED BY 
 
 SPOTTISWOODE AND CO., NEW-STREKT 6QUAUB 
 
 AND PARLIAMENT STREET
 
 LOCAL AND IMPERIAL TAXATION. 
 
 Mr. Speaker, 
 
 Sir, — I beg leave to move " That Local and Imperial 
 Taxation, where their incidence is concurrent, should have a 
 common basis of valuation, and should be alike assessed 
 upon the net rental or annual value of Eeal Property ; and 
 that Imperial Taxation, when levied upon Industrial earnings, 
 should be subject 'to such an abatement as may equitably 
 adjust the burthen thrown upon intelligence and skill as 
 compared with property." 
 
 Absence of any Principle in our present system of 
 
 Taxation, 
 
 The National Expenditure commands general attention 
 both within and without this House. Within these walls 
 the Budget and the Estimates are closely scrutinised and 
 jealously controlled ; and neither as to the amounts voted, 
 nor the purposes to which the votes apply, can it be said that 
 there is much ground left for adverse criticism. 
 
 It is far otherwise with the National Revenue, and yet the 
 levy of that revenue is pregnant with circumstances mate- 
 rially affecting the morality and prosperity of the country. 
 Taxation is an unpalatable word, nor can it be otherwise 
 while our system of taxation (if system it can be called) is 
 nothing but the fortuitous co-existence of imposts created 
 
 A 2
 
 4 Local and Imperial Taxation. 
 
 to meet existing emergencies, and surviving to the present 
 day, through no merits of their own, but only because others, 
 originating in the same manner, were removed at periods ot 
 fiscal prosperity, in obedience to the voice of those largely 
 interested in their repeal. No intelligible principle can be 
 discerned in the laws by which the Imperial and Local Tax- 
 ation of the country is now levied, and when the House 
 reflect that the Imperial Taxation amounts to £65,000,000, 
 and the Local Taxation to £18,000,000, they will, I think, 
 agree that the subject is one deserving their serious con- 
 sideration. 
 
 When touching Eeal Property, Imperial Taxation is raised 
 by the authority of Commissioners upon the basis of the Gross 
 rental or yearly value. In Local Taxation "Poor Rates " are 
 raised by Assessment Committees, upon the basis of a net 
 rateable value, and " County Rates " are raised by Commit- 
 tees of Justices upon a basis of their own determination. 
 Lands and Houses are thus taxed by these three separate 
 authorities upon three independent bases. The tendency of 
 recent legislation has been to approximate the working of 
 these several valuations ; but the question which I desire to 
 submit to the House is this, "Ought not Real Property, when 
 subject to either Imperial or Local Taxation, to be assessed 
 upon one and the same valuation?" 
 
 The "Metropolis Valuation Act" 1869 must be regarded 
 as the first substantial move towards the attainment of an 
 uniform system of taxation, its principle being " to charge 
 such portion only of the rents of property as remain after 
 the expenditure necessary to maintain the property unim- 
 paired in value." It is obvious that but for this rule assess- 
 ment might fall upon the property itself. Taxation would 
 become extortion and confiscation, and the property subject 
 to this gradual abrasion would in time pass from the hands 
 of the owners into those of the tax-gatherers. I may venture 
 
 UIUC 
 
 »
 
 Local and Imperial Taxation. 5 
 
 to hope that my right hon. friend the President of the 
 Local Government Board will in the ensuing session intro- 
 duce a Valuation Bill, extending to the whole country the 
 provisions of the Act of 1869, with such additions as are 
 required by the Rating Act of last session, and with certain 
 amendments which I will presently explain. 
 
 Difficulties in Local Taxation. 
 
 I am not unaware, Sir, of the difficulties which beset this 
 consummation. Counties differ from counties, and Unions 
 from Unions within the same county, in their appraisement 
 of the deductions required to convert " Gross Rental " into a 
 " Net Value " for assessment. In the same Union, difficulties 
 have been encountered from the hostility of those who, 
 disregarding the authority of facts, would substitute for the 
 guidance of actual rent the opinion of professional valuers. 
 Neither can I pass unnoticed the opposition of critics who, 
 admitting the annual net value of property to be a proper 
 object of taxation, demand the separate consideration of 
 every tenement and tenure, and in view of the obvious 
 impracticability of such a process, would rather perpetuate 
 the chaos which has hitherto prevailed, than induce uniformity 
 and order through the adoption of scales of deduction founded 
 on averages. It would be easy to prove that an equitable 
 adjustment of the assessable value of real property would be 
 far more closely attained by the general enforcement of a 
 statutory scale of deductions from the " Gross rental," than by 
 admitting the authority of separate union or county valua- 
 tions. Thirteen years have passed since the " Union Assess- 
 ment Committee Act" became law, and the valuation of 
 lands and houses for the purpose of local rates is, in the 
 provinces generally, in a most unsatisfactory state. The 
 county of Norfolk shall supply an illustration. There are in 
 that county 23 Unions, and there are as many as 12 different
 
 6 Local and Imperial Taxation. 
 
 scales of deductions used for the ascertainment of the net 
 rateable value of lands and houses. The deductions on land 
 without buildings I find to be 1 per cent, in Walsingham, 
 *1\ per cent, in Docking and Freebridge, 5 per cent, in 
 Downham, and 10 per cent, in King's Lynn, and yet (I am 
 informed) these Unions are contiguous to each other, and are 
 subject to no special causes which can account for these 
 wide discrepancies. 
 
 The enforcement of a common basis of valuation and of 
 a common scale of deductions is becoming every day more 
 necessary, when we consider the rapid growth of local 
 expenditure under the impulse of recent legislation. Millions 
 are being spent for the promotion of health and education, 
 and it is essential that the system of rating by which these 
 great works are to be provided and paid for should be 
 definitively settled before the works are carried out. 
 
 Imperial Taxation. 
 
 And now, Sir, I pass from the consideration of Local to 
 that of Imperial Taxation. 
 
 The " Valuation of Property (Metropolis) Act" — the type 
 of that which, I trust, will embrace the whole country — 
 provides that the same Valuation List shall be the authority 
 for both Local and Imperial Taxation ; but that while Poor 
 and County Rates shall be levied upon the rateable or the 
 net value, the House and Income Tax shall be levied upon 
 the gross value. Why this distinction ? It is more easily 
 explained than justified. 
 
 The Income Tax has been weighing for more than thirty 
 years upon the morality of this country, but it was pro- 
 pounded in the first instance, and renewed from time to 
 time, emphatically as a temporary tax : at every renewal its 
 course was asserted to be well nigh run, and it was plainly 
 inexpedient to alter one year the basis of a tax that was to
 
 Local and Imperial Taxation, 7 
 
 expire within the year following. When, therefore, the 
 Local Valuation List was made common authority for Local 
 Eates and Imperial Taxes in 1869, it may have been thought 
 inexpedient then to change the incidence of the Income Tax. 
 And yet the inequalities and injustice attending the 
 operation of the Income Tax are obvious. Let me briefly 
 illustrate these inequalities : — 
 
 £ 1,200 incoming as interest of money may yield £1,200 
 
 net. 
 £1,200 incoming as rent of land may yield £1,100 net. 
 £1,200 incoming as rent of houses may yield £1,000 net. 
 
 The law taxes these receipts alike at £1,200, and it is obvious 
 that a portion of the tax upon the land and house owner is 
 paid out of capital. I invite the attention of the Metro- 
 politan members to the extent in which this unequal tax- 
 ation affects the house-owners of the Metropolitan district. 
 The Gross house rental of the Metropolis is 4^25,500,000, 
 and the Net rateable value amounts to £21,000,000. The 
 Local Taxation of the Metropolis is levied upon £21,000,000 : 
 that is, upon the amount which reaches the owners after 
 defraying the necessary outgoings. Imperial Taxation is 
 levied upon the Gross rental : that is, upon £4,500,000 more 
 than ever comes into the possession of the owners for their 
 own expenditure. I have been censured for calling this 
 impost — levied not upon the rent, but upon the corpus of 
 property — 6 confiscation ' — and I am disposed to admit that 
 I was wrong ; for confiscation implies a seizure of property 
 provoked by some violation of the law, which has invited 
 this peculiar penalty, but my constituents — the constituents 
 of the Metropolitan members, who have been overtaxed 
 on four-and-a-half millions — what had they done to justify 
 such treatment ? Nothing ; the legal robbery has no pretence,
 
 8 Local and Imperial Taxation. 
 
 no excuse; and it should be described, therefore, not as con- 
 fiscation, but as spoliation or extortion. We have heard a 
 good deal lately of Turkish finances. Well, an important 
 portion of the revenue of the Ottoman Empire is raised by 
 tithes ; neither the Government of Turkey nor its subordi- 
 nates are famed for scrupulosity, but I never heard that the 
 Turkish tax-gatherer, when he tithed the flocks, took the 
 ewes as well as the lambs, or, in tithing the herds, carried off 
 not only the calves but the cows. It has been reserved for 
 Christian and civilised England to pursue for thirty years a 
 system of fiscal exaction unparalleled in the most barbarous 
 state in Europe. 
 
 An Income Tax should be levied on Income, and not on 
 Property. It is not that a Property Tax is objectionable in 
 itself — far from it ; the Probate, Legacy, and Succession Duties 
 are Property Taxes, levied on property at its devolution, at 
 periods ordinarily far apart and within certain limits as to 
 rate. Such taxes are quite justifiable ; but an Income Tax, 
 being an annual and continuing tax, should never encroach 
 on capital, and it is in the adjustment of its incidence in 
 accordance with this rule, that the ability of a financier 
 finds its proof. 
 
 The obvious remedy for this defective fiscal action is to 
 adopt for the large and important levies of the State the rule 
 already adopted by the Legislature in the levy of Local Eates, 
 and to take from the gross products of property such allow- 
 ances as will suffice to maintain the property in an unimpaired 
 condition. 
 
 But the Income Tax is levied not only on the products 
 of property, but on the earnings of Industry. The profits of 
 the merchant, tradesman, and professional man, together 
 with all stipends and salaries, are charged under the Income 
 Tax at the same rate, and at their full amount : £1,000 in- 
 coming as interest of money and £1,000 earned by the trader,
 
 Local and Imperial Taxation. 9 
 
 barrister, physician, or salaried official, are taxed alike. The 
 remedy for this injustice is the adoption of the resolution 
 I am about to move, viz. : — " That Imperial Taxation, when 
 levied upon industrial earnings, shall be subject before assess- 
 ment to such an abatement as shall equitably adjust the 
 burthen thrown upon intelligence and skill as compared 
 with property." 
 
 Can the Income Tax be dispensed with ? 
 
 And now, Sir, I reach another question which this House 
 must answer : " Can the Income Tax — ought the Income 
 Tax be altogether dispensed with ? " I submit to the House 
 that it ought not, and I will give my reasons for that opinion. 
 
 At its present low rate of 2d. in the £, the Income Tax pro- 
 duces annually £4,000,000. It might be possible, although 
 highly inexpedient, to obtain that sum by an aggravated 
 House Duty; but I affirm without hesitation that the Income 
 Tax, even if it could, ought not now, to be abolished. When 
 Sir Eobert Peel introduced the Income Tax, for the double 
 purpose of remedying an annual deficit and mitigating the 
 Customs Duties, the Eevenue was mainly collected by duties 
 falling upon so large a range of commodities, that every one 
 in the course of his expenditure contributed his proportion 
 to the National Exchequer in the enhanced price of the 
 articles he consumed. The National Eevenue was at that 
 time practically raised by a tax on expenditure. The sources 
 of the National Eevenue have since that been greatly altered. 
 The Customs Duties upon tea, coffee, currants, and raisins, 
 yield £4,000,000; those upon spirits, wine, and tobacco, 
 yield £16,000,000 ; and these two sums comprise the entire 
 Customs Eeceipts. It is a most gratifying evidence of the 
 success of Sir Eobert Peel's policy, that the country has so 
 prospered under the stimulant of free trade, — coinciding 
 with the reduction of the long list of Customs Duties in
 
 10 Local and Imperial Taxation. 
 
 1842 to half a dozen articles in 1 875, as to contribute in other 
 forms, without an effort, a much larger revenue to the State. 
 
 One evidence of this prosperity cannot, however, be 
 entirely satisfactory. A recent Parliamentary Keturn, 187 
 of this Session, informs us that the Customs and Excise Duties, 
 the Stamps and Licences, levied in connection with the sale 
 of tobacco and intoxicating liquors, produce the marvellous 
 amount of thirty-two millions and a-half — the moiety of the 
 entire taxation of the country. This information may be 
 gratifying to a Finance Minister whose only care is for a 
 surplus ; but it must be saddening to every lover of his 
 country to reflect upon the enormous proportion of the earn- 
 ings of the labouring classes which are evidently dissipated 
 to the detriment of health, independence, and family hap- 
 piness. The question, however, to which this digression was 
 a preface, is this : " Ought not some substantial contribution 
 to the Eevenue to be made by those who indulge in neither 
 spirituous liquors nor tobacco ; and through what better 
 medium than an Income Tax can that contribution be made ? " 
 
 Again although our Fiscal system, especially in Customs 
 duties, has been purged from many grievous defects; those that 
 remain under the head of "Stamps" — charges upon the transfer 
 of property, charges upon locomotion, and charges upon pro- 
 fessions — are utterly indefensible, and such as an enlightened 
 administration should sweep away at the earliest opportunity. 
 These reforms, which I venture to anticipate, will render the 
 continuance of the Income Tax a necessity. There is again 
 the very interesting question touching the liability of Per- 
 sonal Property to contributions for Local expenditure. I 
 shall not enter upon that subject now, further than to remark 
 that those who affirm the liability of the vast and growing 
 wealth of the country, in the shape of Personal property, to Local 
 claims are deeply interested in constructing an Income Tax 
 through which Personal property can be satisfactorily reached.
 
 Local and Imperial Taxation. 11 
 
 But the most forcible argument for the adoption of an 
 Income Tax is this, " that by no other means can be brought 
 under contribution to the National Exchequer vast proper- 
 ties which are justly taxable, (although their revenues are 
 possessed and expended by absentees,) inasmuch as they 
 largely benefit by the peace, liberty, and order which are 
 ensured by the wise application of the national resources. 
 Many properties in England and Ireland are so situated. 
 In the course of the generation just passed away, a single 
 wealthy absentee drew from this country millions to be ex- 
 pended in the luxurious capital of France, and which, but 
 for the Income Tax, would have contributed nothing to the 
 support of the Government of this country. 
 
 The rents of the estates of absentees are taxed under 
 Schedule A, but what of the profits assessed under Schedule 
 D? The amount assessed under Schedule D in 1872 was 
 £203,000,000. Ought not the earnings and profits which 
 that sum represents, to be charged with some portion of the 
 cost of Government? It might be said th^t while the 
 House Tax exists no one can escape taxation who lives in 
 this country ; he must lodge somewhere, and his lodging is 
 taxed. But how inadequately would a mere lodger's tax 
 represent the share of the burthen rightfully falling upon 
 the possessors of colossal fortunes created in trade and manu- 
 factures, and with their growth extending still further the 
 trade and manufactures by which they have been enriched. 
 Schedule A and Schedule D were thus assessed in Great 
 Britain : — 
 
 Schedule A. 
 
 Land Houses 
 
 1858 ... £58,000,000 ... £55,000,000 
 
 1865 ... 62,000,000 ... 69,000,000 
 
 1872 ... 65,500,000 ... 88,000,000
 
 12 Local and Imperial Taxation. 
 
 Schedule D. 
 
 Kailways, Mines, _, , , , ^ » . 
 
 and other Works! Trades and ^fessions. 
 
 1858 ... £23,000,000 ... £91,000,000 
 
 1865 ... 26,000,000 ... 124,000,000 
 
 1872 ... 35,000,000 ... 168,000,000 
 
 Thus it appears, that while in 14 years land increased 
 12^ per cent., and houses 60 per cent., Schedule D increased 
 85 per cent., and the profits represented in this stupendous 
 growth of Schedule D can be reached only through the 
 Income Tax. 
 
 A merchant invests his capital in manufactures which 
 he exports, and in goods which he imports. His property 
 may be on the seas, in warehouses, or in the acceptances of the 
 consumers whom he supplies. As he realises, he re-invests, 
 and his property may grow, year by year, from £20,000 to 25, 
 to 30, to 50, to £100,000, and yet, but for the Income Tax, 
 he might almost wholly escape contributing to the National 
 Exchequer. You may think at any rate to tax his property 
 at his death through the Legacy or Succession Duty, but be 
 not too sure : he may do what has been done before — divide 
 his property among his children and relations, and, reserving 
 an annuity for his own life, convey his accumulated wealth 
 to the next generation without sharing a single pound with 
 the Chancellor of the Exchequer. 
 
 Can the Income Tax be amended ? 
 
 But Sir, the Income Tax is by some persons considered so 
 essentially vicious in its principle that it cannot be improved ; 
 it is branded as unequal in its incidence and inquisitorial in 
 its operation. The present Tax is truly most unequal in its 
 incidence, but that fault can easily be remedied : the fault of 
 being inquisitorial, is, I admit, one inseparable from the Tax ; 
 but let us consider the extent and weight of the objection. 
 
 Under Schedules A, B, C, and E. the larger portion of
 
 Local and Imperial Taxation, 1 
 
 o 
 
 the entire Income Tax is levied, and the rents of real 
 property, the interest and dividends of all moneys, funds, and 
 companies are taxed at their source, while salaries are taxed 
 in the hands of the employer. Under Schedule D are in- 
 cluded all earnings of Joint Stock Companies (whose profits 
 should, under a revised code of taxation, be levied upon the 
 dividends declared or paid). There remain then the profits 
 of persons and partnerships alone to be taxed by the process 
 of Self- Assessment. " Self-Assessment " is the process com- 
 plained of under the term inquisitorial. If the Tax were 
 equitably adj listed, nothing could be imagined more inoffen- 
 sive than the inquisitorial operation under Schedule D. The 
 trader and professional man are asked by the State to make 
 their own return of the sum upon which they should be 
 assessed. If the return be truthful, no inconvenience need 
 arise. The ordinary complaint is that a trader's business is 
 by the returns which he makes disclosed to his neighbours 
 and rivals in trade ; but this inconvenience may be easily 
 avoided by the appointment of officials who would be sworn to 
 secrecy, and who who would have no motive or interest in 
 discussing the affairs of the tax-payers. Already there are 
 trusted Special Commissioners to whom Returns may be 
 addressed. 
 
 The inquisitorial character of the Tax has been offensive 
 — only because the tax has been unjust — and its injustice has 
 wrought the natural results of untruthfulness and fraud, so 
 persistent and so general as to demand special consideration. 
 
 Evasive and fraudulent Returns. 
 
 The Reports of the Inland Revenue Department furnish 
 a distressiug series of details of fraudulent returns. I will 
 refer only to a few of them. The 4th Report, illustrating 
 the information that fraud is not confined to inconsiderable 
 offenders, cites the case of a partnership who having been
 
 A 
 
 Eeturned 
 
 B 
 
 55 
 
 C 
 
 55 
 
 D 
 
 55 
 
 E 
 
 55 
 
 14 Local and Imperial Taxation. 
 
 assessed for some years at £6,500 upon their own return, were 
 subsequently surcharged at £32,000. 
 
 The 6th Keport fills a page with cases of fraudulent 
 returns. I extract some specimens, contrasting the sum 
 returned with the sum upon which payment was actually 
 paid on assessment : — 
 
 £170 Paid on £350 
 
 400 „ „ 1,500 
 
 1,000 „ „ 3,000 
 
 2,200 „ „ 5,000 
 
 6,000 „ „ 10,000 
 
 As a rule, persons intending to defraud the Revenue on a 
 large scale decline making any return, and await the official 
 assessment, against which they can appeal if it is too high, 
 but to which they submit, if it prove lower than their 
 legal liability, a portion of which they by this device escape, 
 without the actual perpetration of a lie. A Return (8 1 Sess. 
 1874) moved for by Mr. Norwood informs us that out of 
 490,000 persons charged under Schedule D, in 1872, 128,000, 
 or nearly one quarter, declined to make returns of their profits 
 in compliance with the law. An instance of this mode of 
 evading the law is given in the 6th Report : 
 
 " A B some years ago returned £15,000 as his assessable 
 " income, but the amount was raised by the Commissioners 
 " to £20,000, on which he paid. The following year he made 
 u no return, and the Assessment of the Commissioners was 
 " again £20,000, but the Surveyor charged him on £45,000, 
 " the duty on which was paid without appeal. Again the 
 " next year he made no return, and again the charge was 
 " raised by the Surveyor, who assessed him on £60,000 with 
 " the same result as in the former instance." 
 
 Well may the Commissioners of the Inland Revenue, in 
 their special Report of 1870, exclaim — "We have frequently
 
 Local and Imperial Taxation. 15 
 
 called your Lordships' attention to the large evasions which 
 are practised under Schedule D, by means of fraudulent 
 returns." 
 
 And further on they add : — 
 
 " This fraudulent practice is not confined to any par- 
 ticular class, trade, or profession. . . . We find it in every 
 variety of trade, and we find it in great public companies, 
 and in firms whose business is almost a national concern, 
 from its magnitude and world-wide reputation." 
 
 They then proceed to estimate the amount of duty 
 fraudulently suppressed under Schedule D in the years 1864-5, 
 in the following words : 
 
 " We may assume £44,042,306 as the income returned 
 in assessment; £101,297,303 the income which should have 
 been returned ; and the difference, £57,254,997, the sum on 
 which duty was evaded." ..." We see no reason to distrust 
 this estimate. We have already stated that we have found 
 every class of contributors to Schedule D liable to the same 
 shortcomings in their returns, and it must not be supposed 
 that we except public companies and large* joint stock 
 associations, since we have before us a long list of defective 
 returns by such co-partnership concerns." 
 
 This, Sir, is a shocking picture of the widespread violation 
 of the law, and the question which it forcibly suggests is, 
 " Why is not the law vindicated, and why are not the law- 
 breakers subjected to penalties and punishment?" The 
 Inland Eevenue Commissioners themselves supply the 
 answer : 
 
 " There is, indeed, a provision in the ' Income Tax Acts ' 
 which authorises the District Commissioners to impose treble 
 duty when a surcharge is confirmed on appeal, but there is 
 an almost invincible repugnance on the part of the Com- 
 missioners to exercise this power." 
 
 Sir, the reason for this repugnance it is not difficult to
 
 16 Local and Imperial Taxation. 
 
 find ; it lies in the consciousness of the administrators of the 
 law of Income Tax that the law is unjust — that is, hateful 
 in the eyes of all men, and that you dare not enforce.it. 
 
 In the position occupied by the State relatively to 
 the taxpayer it addresses him virtually to this effect : 
 "Make a return of your profits that we may tax them. 
 " It is true that in taxing them at their full amount we are 
 " perpetrating a gross and palpable injustice, and we are quite 
 " aware that a vast number of traders habitually protect them- 
 64 selves from this injustice by understating their profits ; but 
 " the law requires you to be truthful and to submit to unjust 
 " taxation, and if you are detected in any inaccuracy, you 
 " will be severely punished." 
 
 Such, Sir, without exaggeration, has been for thirty years 
 the language of the State towards the industrial community 
 of Great Britain. That injustice has been met by fraud, is 
 notorious. Inquisition to detect fraud, has been necessary, 
 and it is the operation of organised suspicion and distrust, 
 inseparable from the legal iniquity, that has created the 
 prevalent detestation of the Income Tax. 
 
 But, Sir, if the Government of this country turn itself 
 from its evil ways, and say to the trader or professional man, 
 " Your revenue is not like that of the landowner or capitalist ; 
 you ought not, — you cannot, — you do not — spend the same 
 proportion of your precarious earnings that can be reason- 
 ably spent by the owners of durable, certain, and spon- 
 taneous incomes ; we will endeavour at least to do you 
 justice by deducting a third of the amount of your profits 
 previous to their assessment." I say, Sir, that such a declara- 
 tion would satisfy the industries of this country, and that in 
 response to the equitable intention of the State, equitable 
 and accurate returns would be furnished to the officials of the 
 Inland Revenue. Fraud to some extent might still prevail, but 
 the public sympathy would then be not with the cheat but with
 
 Local and Imperial Taxation. 17 
 
 the State, and the inquisitorial character of the Income Tax 
 would be complained of only by those who were conscious of 
 fraud, which inquiry would detect and punish. 
 
 Oppressive Action of Income Tax on burthened property. 
 
 Sir, the crying evil of the Income Tax is its treatment of 
 industrial earnings ; but it is not in Schedule D that the 
 most conspicuous examples of its blundering injustice are to 
 be met with. I must look for them to the hapless sufferers 
 under Schedule A. 
 
 A very large proportion of the Landed Kevenues of the 
 country are absorbed by the burthen of mortgages and 
 settlements, and few members of this House can find diffi- 
 culty in bringing to mind cases in which old county families 
 have been burthened by the process of settling at marriage, 
 and borrowing to provide for younger children, until the 
 owner of the estate was reduced to the condition of a mere 
 administrator of a property of which the portion he enjoyed 
 was a mere fraction. 
 
 Imagine an estate of £2,000 gross rental, and assessed 
 at that amount to the Income Tax. It is chargeable 
 with £1,000 a year interest on a mortgage, and £600 as a 
 jointure : there remains £400, of which £200 are spent in 
 outgoings for maintenance, leaving £200 for the fruition of 
 the landowner. But he is charged with Income Tax on 
 £400, so that he pays double the Income Tax which is paid 
 by the capitalist on the interest of his mortgage received 
 without trouble or risk. 
 
 The instance I have assumed is by no means an extreme 
 one. It is quite possible for an impoverished landowner to 
 be so burthened as to become chargeable with Income Tax 
 on a residue of gross rental, insufficient even for the main- 
 tenance of the estate. I think, Sir, it will be plain to
 
 18 Local and Imperial Taxation. 
 
 the House that it is not alone traders and professional men 
 who are aggrieved by the operation of the present law. Ac- 
 cepting the estimate recorded by the Inland Ke venue (1870 
 Eep., p. 162), that one-fourth of the gross rent of land and 
 houses goes into the pockets of encumbrancers, the result is 
 this — Keal property in the aggregate is overtaxed to the 
 extent of 27 per cent. 
 
 Parliamentary Committee of 1861. 
 
 Sir, I should perform my task imperfectly were I to pass 
 unnoticed the inquiry into the revision of the Income Tax, 
 conducted by a Committee of this House upon my own 
 motion, in 1861. To that Committee I presented at the close 
 of the session a report which they declined to entertain, and 
 they adopted a report unfavourable to the scheme I had pro- 
 posed. That report I am ready to defend in its essential 
 features against all comers, but that report is not in question 
 now. The resolution before the House involves no details, 
 and affirms only the expediency of carrying out a principle 
 admissible even by those who withheld their acquiescence from 
 the scheme I proposed in 1861. Within these fourteen years 
 circumstances have greatly changed as affecting the con- 
 sideration of the Income Tax. In 1861, the objections to a 
 re-adjustment were two-fold : the first was that the Tax was 
 a temporary tax : it was soon to expire, and it was un- 
 desirable to disturb its basis for the brief period it had yet 
 to live. But, Sir, since 1851, there have been important 
 remissions of indirect taxation, and the House, I trust, will 
 think with me that the Income Tax cannot now be spared, 
 and as it cannot be discontinued, must be amended. 
 
 The other main objection to the proposed adjustment was 
 that professing to do justice generally, it gave too much to one 
 and too little to another, and did justice to none. This 
 objection, which impugns the action of relief by averages,
 
 Local and Imperial Taxation. 19 
 
 has however been conclusively overborne by the legislation of 
 the last few years. The Schedules of Abatement for Main- 
 tenance (proposed in Valuation Bills for the whole country) 
 and adopted in the " Valuation of Property (Metropolis) 
 Act," has decisively settled the controversy upon that head. 
 Abatement by averages is the law as regards incomes derived 
 from real property, and it constitutes an irresistible precedent 
 for a similar treatment of incomes derived from trades and 
 professions. The wide range of character within the limits 
 of industrial incomes is undeniable. Traders and manufac- 
 turers have an appreciable value in their floating capital, 
 their factories and their machinery, apart from their industry 
 and skilled labour ; while professional men have no other 
 capital than the knowledge stored in their own. brain by 
 education and study. From the physician, with intellect 
 as his sole capital, to the dry dealer whose stock can be 
 valued to a shilling, there is a wide difference ; but between 
 the two stands the general practitioner, who is at once 
 physician and druggist, and whose earnings combine fees for 
 skilled advice and profits on the sale of drugs. On all sides 
 are discovered gradations, but so insensible that you can 
 stop at none; and the necessity arises for dealing with 
 trades and professions upon the same scale of abatement. 
 Again, as to the fixedness of the profits on trade : it will be 
 found that sleeping partners in old and wealthy firms may 
 be the inheritors of a lucrative position, almost the equiva- 
 lent of a landed estate. But these rare and extreme cases 
 are unknown to the administration of a law which must deal 
 with classes of income, and I repel by anticipation adverse 
 criticism, founded upon the close approximation of indi- 
 vidual border cases of different classes. 
 
 Trading companies and trading partnerships in the same 
 line of business, at first sight, may appear scarcely distin- 
 guishable from each other, but there are essential differences 
 in their action and in their liability to taxation.
 
 20 Local and Imperial Taxation. 
 
 In a trading company the labour of the directors, mana- 
 gers, and clerks is all paid by salaries, and these salaries, the 
 remuneration of skill and industry, are entitled to an abate- 
 ment before they are taxed ; the remaining profits — after 
 allowance made for the reserve, which may equalise their 
 distribution — are, as interest of capital, and in the character 
 of dividends equitably liable to taxation. 
 
 The discrimination between the earnings of industry and 
 the usufruct of capital, which is practicable in the case of a 
 public company, is not practicable in the case of traders or 
 trading firms possessing capital. From some few the needful 
 information might be obtained, but the great bulk of shop- 
 keepers and traders would be unable, and certainly unwilling, 
 to make a separate statement of their capital in trade. 
 
 In a private trade or partnership, the management is 
 carried on by the trader or partner, and the profits returned 
 to the Inland Revenue Office are a combination of the 
 earnings of industry and of the usufruct of capital, so that 
 they ought not to be confounded with the dividends of com- 
 panies, which, so far as the shareholder is concerned, are 
 purely the usufruct of capital. 
 
 The present low rate of Income Tax a plea for inaction. 
 
 In some quarters, Sir, it has been argued that the in- 
 justice and inequalities of the Income Tax are less serious 
 and less felt when the rate is low, and that the best answer 
 to objectors is to be found in maintaining it unchanged 
 at its present ratio of 2d. in the £. Sir, I cannot think 
 that suggestion satisfactory or statesmanlike. It is irre- 
 concilable with the theory that an Income Tax is a War 
 tax, and must be available in the event of such a lament- 
 able contingency. For at what rate would the Income 
 Tax as a War tax be levied? not necessarily at 2d. in 
 the £. In the great war at the commencement of this
 
 Local and Imperial Taxation. 2i 
 
 century the Income Tax was levied at the rate of 10 per 
 cent, during the years 1806 to 1815. And who will venture 
 to foretell the limits within which the Income Tax may 
 hereafter operate ? No, Sir, the conclusion to be drawn from 
 the suitability of the Income Tax as a War tax is this — that 
 the favourable moment for its adjustment should be eagerly 
 seized, and that the pressure of war expenditure shall not be 
 aggravated by the defective action of the tax through which 
 it is supplied. But, Sir, there remains in full force the 
 objection to the present law that it is unjust, and that its 
 injustice generates fraud. Whether the tax is 2d., as now, 
 or 25. in the £, as in 1806-1815, no Christian statesman can 
 look with complacency upon a law which has such a character 
 and entails such consequences. And in the eye of Him who 
 is a Grod of Truth, and to whom a false balance is an 
 abomination, it will be no excuse to plead that the State 
 profits comparatively little by its deliberate oppression of 
 the people, and that the people save but little when they 
 escape that oppression by a lie. 
 
 That the rate is only 2d. in the £ is most opportune in 
 this — that the tax falling so gently upon all can be recast 
 free from the prejudice raised by the argument that the 
 adjustment which relieves the heavy burthens of the one 
 oppressively aggravates the burthen of the other. So far as 
 it is felt, the deprecated result is the inevitable and legitimate 
 consequence of the correction of inequalities. Assume that 
 A, E, I, 0, and U are charged to convey 50 stone to a given 
 destination, and that, their course half done, they find that 
 they have been carrying — A, 12 ; E, 11 ; I, 10 ; 0, 9; and 
 U, 8 stone. The equitable adjustment of the burthen will re- 
 lieve A and E, and throw a heavier burthen upon and U, but 
 assuredly these two will have no cause for complaint, because 
 at last they are made equitably to bear the weight from 
 which they have too long escaped. 
 
 Sir, the receipts of the Inland Revenue Department from
 
 22 Local and Imperial Taxation. 
 
 voluntary payments of Income Tax are a most remarkable 
 feature in the history of- this impost. The recurrence of 
 these remittances of Conscience-money has been commented 
 upon as another evidence of national immorality. I look, 
 Sir, upon Conscience-money in a very different light — as the 
 bright gleam in a very dark and revolting picture — for 
 Conscience-money is not, in my judgment, the inadequate 
 reparation for previous fraud, but the exhibition of that 
 scrupulous and honourable instinct which will, in the same 
 degree, be found in no other country under Heaven, and 
 which in this country is found among men of every rank. 
 It was, Sir, a touching incident which I observed in the 
 list of contributors of Conscience-money "A Curate, £1." 
 Who can measure the importance to that Curate of that one 
 pound, spontaneously rendered to the State in obedience 
 to the dictates of his conscience ? In England only 
 can an Income Tax be successfully worked, for in England 
 only you find the indispensable conditions of an advanced 
 civilisation and a high standard of morality. 
 
 Economic advantages of Adjustment. 
 
 Although not to be named in the same breath with 
 the removal of serious evils, an important advantage 
 attending the consolidation of Local and Imperial Taxation 
 in the same rate-book, and on the same valuation, will be 
 found in the economy of cost in their collection. A single 
 charge-note may do the work of many, and may for instance 
 collect at once the 
 
 Poor Eate, 
 
 County Eate, 
 
 Local Board Eate, 
 
 Highway Eate, 
 
 House Duty, and 
 
 Income Tax, 
 at periods alike convenient to the State and the taxpayer.
 
 Local and Imperial Taxation. 23 
 
 The system of consolidated charge-notes has already 
 been partially adopted, and may be made both more general 
 and more comprehensive. 
 
 And, now, Sir, before I conclude I would make an appeal 
 to this House, and first to the distinguished man who 
 occupies the eminent position of First Minister of the Crown. 
 
 In common with other Statesmen the Prime Minister 
 has denounced the inequalities of the Income Tax ; in 
 common with other Statesmen he has deprecated their con- 
 tinuance ; but alone amongst Finance ministers he stands 
 conspicuous for having endeavoured to remove them. I 
 appeal to the Eight Honourable Grentleman to lend his 
 powerful aid to the resolution I propose, and by its success 
 insure the triumph of the just and generous principle which 
 he had the sagacity and courage to enunciate twenty-two 
 years since. 
 
 And, then, Sir, may I say to the Members of this House, 
 I have dealt with this great question with entire impartiality, 
 but I must confess that I have the deepest sense of personal 
 interest in the success of my endeavours. 
 
 During an unbroken period of half a century I have been 
 intimately connected with the Commerce of the City of 
 London, and I am jealous for the honour of my profession — 
 a profession which, in the case of my family, is one of in- 
 heritance — a profession which has been the foundation of 
 England's greatness — and which — as it is one of the most 
 independent and most beneficent, ought to be one of the 
 most honourable. 
 
 Does it command the honour which should be its due ? 
 
 In the course of fifty years I have seen the marvellous 
 extension of our commerce, the wide development of our 
 manufactures, the multiplication of our shipping, the acqui- 
 sition of new colonies, the foundation of flourishing institu- 
 tions, and the accumulation of princely fortunes. Would
 
 24 Local and Imperial Taxation. 
 
 that I could say that the reputation of my country for 
 honourable and fair dealing in its commercial transactions 
 had kept pace with the growth of its material progress and 
 prosperity. Can I say so when the records of the Inland 
 Eevenue exhibit so frightful a picture of habitual untruth- 
 
 1 
 
 fulness and fraud? But, Sir, I lay the responsibility of 
 these sins at the door of this House. The people are 
 what their rulers make them, and the untruthfulness and 
 fraud which we now lament, is the fruit of unjust legislation ; 
 it is therefore, Sir, that I beseech the members of this 
 House to separate themselves from all complicity with the 
 prolonged misrule which, for a whole generation, has been 
 gnawing at the heart of English honesty. I beseech them 
 to purge our Statute-book from this shameful stain. I be- 
 seech them to provide for Englishmen some alternative 
 between a degrading submission to fiscal injustice, or an 
 immunity purchased at the price of their own integrity. 
 
 NOTE. 
 
 With the subject fresh in my mind, I commit to the press the Speech I might 
 have delivered, had not the House been abruptly counted out, on the 20th July, 
 at the evening sitting. 
 
 The points I am anxious to establish are the following: — 
 
 (1) That an uniform system of assessment for all Local and Imperial 
 purposes should be applied to the whole country. 
 
 (2) That Local and Imperial Taxation should have a common basis, and 
 be alike assessed upon the net or rateable value of real property. 
 
 (3) That the Income Tax ought not to be discarded as a permanent source 
 of revenue. 
 
 (4) That the Income Tax as now administered is unjust, and demoralises 
 the country by the fraudulent evasions it provokes in the returns under 
 Schedule D. 
 
 (5) That the Income Tax can be equitably adjusted. 
 
 I shall gladly welcome any of those criticisms which my speech might 
 have received had the expected discussion taken place. 
 
 J. Gr. Hubbard. 
 24 Prince's Gate, Aug. 20, 1875. 
 
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