CLAUSE 16. (Claims for exemption in respect of income of charities and for repayment of tax in respect of interest paid to banks, and right of appeal in connection therewith.

Orders of the Day — Finance Bill. – in the House of Commons on 15th June 1925.

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Photo of Sir Henry Buckingham Sir Henry Buckingham , Guildford

I beg to move, in page 12, line 12, after the word "by" to insert the words "the General Commissioners or ".

This is a small Amendment which will not cost the Exchequer anything, and I hope the Chancellor of the Exchequer will accept it. I am afraid that the Clause, although it seems very harmless, contains something rather sinister. On the face of it, it is proposed for the purpose of codifying and regularising claims made on behalf of charitable institutions for exemption from Income Tax. It is desirable that codification should take place, as the position of charities in respect of Income Tax has been up to now rather anomalous. Some claims are to be made to the General Commissioners and other claims are at present made to the Special Commissioners. I should be glad to see an attempt to codify the claims, but I am a little doubtful of the method proposed. Under this Clause the claim of a charity is to be made to the Commissioners of Inland Revenue, and these Commissioners shall, on proof of the facts to their satisfaction, allow the claim accordingly.

If the Committee accepts the Clause as it stands, they are giving to the Inland Revenue Commissioners judicial powers which at present they only enjoy in one or two cases—cases of a particular nature. It is an extremely dangerous practice to grant judicial powers to executive officers who are carrying out the Income Tax law. If the Committee like to take the risk it is, of course, their business but I consider it to be my duty to point out the danger. If the Committee is prepared to trust the Commissioners of Inland Revenue with these judicial powers, I would call attention to the procedure which follows. If the Commissioners on first considering the case laid before them give an adverse decision on the claim, the particular charity which may be aggrieved by the decision have the right to appeal to the Special Commissioners. I hope that nothing I may say will be taken as in any way reflecting on the impartiality or skill of the Special Commissioners, because I know no body of men who have earned a better reputation for fair mindedness than the Special Commissioners. The judicial authorities appointed under the Income Tax Acts from the very beginning have been the Special Commissioners and the General Commissioners. My object in this Amendment is to provide that any appeal from a decision of the Inland Revenue Authorities should not only be heard by the Special Commissioners but at the choice of the party concerned by the General Commissioners. There is nothing difficult in deciding these cases. I have had to decide several cases. Charities are in a peculiar position when they are asking for remission of Income Tax, because they have to satisfy certain conditions clearly laid down in the Income Tax Acts. But the General Commissioner or the Special Commissioners are perfectly capable of deciding upon the justice of the claims. As to the appeal to the Inland Revenue Commissioners, if the Committee care to accept that part of the Clause I suggest to them that they will be protecting the interests of the appellants by giv- ing them a right of appeal to the General Commissioners as well as to the Special Commissioners, who are, it must be remembered, under control of Somerset House. Therefore, the appeal from the Commissioners of Inland Revenue to the Special Commissioners is rather like an appeal from Cæsar to Cæear, and I suggest that it would be some alleviation if the right of appeal to the General Commissioners were also included. I suggest that my proposed Amendment is a very harmless one, and would avoid the continual overlooking and ignoring of the General Commissioners which is so gradually creeping into these annual Finance Acts. I do not know whether the right hon. Gentleman will accept my Amendment, but if he does not intend to do so I shall be glad to hear any reasons which he may have against it

Mr. GUINNESS:

I think that the hon. Baronet is really under-estimating the importance of this Clause. It is rather more than codifying the existing provisions. It gives the right of appeal where no such appeal has existed before. There are certain cases in which a charity is not now entitled to a personal hearing, which go to the Special Commissioners, in which the only possibility is, as I gather, a decision on affidavits. I believe that it is a great advantage that a power of appeal with a personal hearing should now be granted. The hon. Baronet may not be aware that this appeal will lot go to the Executive, not to the Com-missioners of Inland Revenue, but to a quasi judicial body, the Special Commissioners, who will be in a very good position to bring about uniform principles of administration throughout the country. I should be the last to say one word against the efficiency of the General Commissioners, but there am many different bodies, and obviously it would be disastrous to Income Tax administration if, in these complicated matters of what is and what is not to be considered a charity, you got conflicting decisions. These decisions as to charities are extremely complicated. They go back in a long string of decisions arising out of the famous Statute of Elizabeth, and it has been thought well that we should get a coherent code of decisions on them, because this does not only affect the Income Tax, but it also affects other duties, such as the Entertainments Duty. It is entirely impracticable administratively to have the appeal heard, as the hon. Baronet suggests, not by one body in a position to bring about uniform principles, and avoid conflicting decisions, but by several hundred different bodies who, however efficient they are, and however much they try, could not avoid producing incoherent and conflicting results.

Photo of Sir William Davison Sir William Davison , Kensington South

I am very sorry to hear what my right hon. Friend has just said. If his argument be carried to its logical conclusion it means that the General Commissioners, who are looked to by the Income taxpayers of this country as the body which will safeguard their rights and protect them, is a body to which it is not safe to entrust appeals. To say that these charitable appeals are more complicated than the appeals which come before the General Commissioners, say, of the City of London, every year, in the course of their ordinary duties, is a travesty of the facts of the case. This seemed to be a reasonable Amendment, and I should have thought the Chancellor would have accepted it at once. It only asks that in these charitable appeals the General Commissioners who constitute the appellate tribunal, to whom the country look to deal with Income Tax matters, should be substituted for the Special Commissioners, who are, after all, officials of the Inland Revenue. At this late hour I would ask the Chancellor to meet hon. Members on his own side with the same generosity as he has extended to the Opposition, especially as this proposal is very much more in accordance with the spirit of the Income Tax Acts than the previous proposal.

Photo of Sir Henry Slesser Sir Henry Slesser , Leeds South East

I hope the Government will not accept the Amendment. I intervene in this Debate for the first time, only because I have had some experience of dealing with these cases in the courts, and I agree with the right hon. Gentleman the Financial Secretary that on these technical matters it is essential that the cases should be heard by a body with great experience like the Special Commissioners. Otherwise you may get a multiplicity of cases stated, and you may multiply appeals in the High Court. From every point of view it is more advantageous that these matters should be dealt with by the Special Commissioners.

Photo of Mr Dennis Herbert Mr Dennis Herbert , Watford

I support the hon. Member for South Kensington (Sir W. Davison) in what he has said. There is a question of principal involved here. It has always been the principle that these matters should be decided in the first instance by the representative of the taxpayers, namely, the General Commissioners. The hon. and learned Member who has just spoken overlooks the fact that the General Commissioners in many cases, are the best persons to hear appeals in the first instance, because they know the local circumstances affecting the cases. The magnitude of the cases which have been heard by the General Commissioners, not merely in the City of London, but in all parts of the country, is so great and the system has worked so well except in a comparatively small number of cases that it is worth doing something to maintain the old system and the old theory that these questions should in the first place be decided by the representatives of the taxpayers. This is another and I would almost say, an insidious attempt, on the part of the tax collecting machine, to oust the General Commissioners from that position which the taxpayer has always tried most jealously to maintain.

Photo of Sir Percy Harris Sir Percy Harris , Bethnal Green South West

It is very significant and to me always suspicious, when the two Front Benches get together. There is always a desire to strengthen the bureaucracy and get these things into the hands of the officials. Everybody knows that conditions and circumstances vary in different parts of the country, and it is right and proper that we should listen to the reasonable appeal made by the hon. Member for Guildford (Sir H. Buckingham). There should be local people who understand local conditions and are in sympathy with the taxpayers point of view, to go into these matters on the merits and not merely to take the official line. The natural tendency of the Special Commissioners is to support the official view and to have everything stereotyped in one form. The Financial Secretary ought to be more sympathetic towards this reasonable and harmless proposal.

Photo of Mr John Jones Mr John Jones , West Ham Silvertown

Always having great sympathy with the poor, I wish to express my regret that the right hon. Gen- tleman has not seen fit to listen to the Bolshevists on his own benches who are so very anxious to have a court established to suit themselves. It is like having a court held in hell with the devil as the presiding magistrate. How are these Commissioners selected and what are they? I have only heard of them recently. Most of them are people liable to Super-tax or excess Income Tax of one kind or another and naturally they will shed tears of blood over the woes of their fellow victims. They would like to abolish taxes altogether except so far as the poor are concerned. We can keep on paying all the time. Nobody grumbles and there are no Commissioners to represent us. That is the position of the men who are paying more than they think they ought to pay and I am one of them.

Photo of Mr Dennis Herbert Mr Dennis Herbert , Watford

On a point of order. May I ask whether the hon. Member is a charity?

Photo of Mr John Jones Mr John Jones , West Ham Silvertown

No, but I think I have expended a great amount of charity in listening without interruption to the speeches which have been made. So far as we are concerned we have every sympathy with the poor rich; we only want the same amount of sympathy to be expressed for the people who are really poor. Hon. Members opposite want to be relieved of their taxation and then the leeway will be laid up by the people who have no means. Take it off the rich and put it on the poor—that is the old philosophy. I do not care What your Commissioners are but the workers know where they cam go to get relief.

Photo of Mr John Jones Mr John Jones , West Ham Silvertown

They can go to the guardians, of course.

Photo of Mr Dennis Herbert Mr Dennis Herbert , Watford

I said the charity.

Photo of Mr John Jones Mr John Jones , West Ham Silvertown

We know where they are, but when you want relief you call them commissioners, not poor law guardians. They are commissioners appointed by yourselves. You select them.

Photo of Mr John Whitley Mr John Whitley , Halifax

The hon. Member is addressing himself to me, and I do not want to get relief.

Photo of Mr John Jones Mr John Jones , West Ham Silvertown

You would not, but you would be better if you did.

Photo of Mr Winston Churchill Mr Winston Churchill , Epping

There can be very little doubt that in these completely technical matters connected with charities, such as questions of how far they fall within the scope of the various provisions of the various Acts, it is much better to have a tribunal like the Special Commissioners as the source for giving decisions rather than the General Commissioners. I know that my right hon. Friend, who has much knowledge on this subject, wishes to appreciate the prestige of the General Commissioners, and I can say on behalf of the Government that they have not the slightest desire to express any want of confidence in them, but here there are 700 bodies all over the length and breadth of the country, and we should get an immense number of conflicting views upon these matters and of different interpretations as to whether charities fell within or without a particular Act. I hope, therefore, he will not press the Amendment.

Amendment negatived.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Photo of Mr Frederick Pethick-Lawrence Mr Frederick Pethick-Lawrence , Leicester West

There is just one point on this Clause that I am not quite certain about, and that is as to the significance of Sub-section (1, b) of the Clause. I put a question to the Chancellor a few days ago relating to a form of evasion of tax practised by certain people through single premium insurance. The method of procedure of these people is as follows:—They effect an insurance by means of a single premium and borrow on it. Therefore they obtain the use of the money they had before and they escape paying the Income Tax and Super-tax upon the whole of the interest upon that money. This is a very serious deprivation of the revenue, and is, I understand, a growing practice by which certain undesirable rich people endeavour to evade their liabilities, and. thereby throw a burden on the rest of the community.

Mr. GUINNESS:

The premium to which the hon. Member has drawn attention does not arise in this Clause in any way. It is not a matter of Income Tax but is under the administration of Supertax. This particular sub-section is merely to provide for the first time a convenient machinery for deciding what income tax allowances can be made on account of payment of interest to banks.

Photo of Mr Frederick Pethick-Lawrence Mr Frederick Pethick-Lawrence , Leicester West

Is it not a question of how much a man can set off against his income?

Mr. GUINNESS:

I am advised that it does not concern this point at all.

Photo of Mr George Garro-Jones Mr George Garro-Jones , Hackney South

There is a point of considerable importance. I think we ought to have an announcement from the Chancellor or the Financial Secretary. We all admire the diligence which the Income Tax collectors show in their task. There are numerous cases of harsh and unconscionable methods adopted by the collectors which make necessary the complicated system of appeals which is dealt with in this Clause. In a Court of Law counsel for the prosecution, as representative of the State, is not supposed to press his case beyond the limits of fair and almost judicial argument. I think that ought also to be the case with collectors of Income Tax. At the present time great carelessness is displayed by these officials in sending out demands. Many times I have had people come to me asking, "What do you think of this?" and I have told them to send it back with the simple observation, "This assessment is ridiculous." In several cases the assessment has come back within a week or two half what it was. That is an unfortunate state of affairs, and it could be remedied if the system of collectors could be altered.

Photo of Mr John Whitley Mr John Whitley , Halifax

This Clause deals only with charities, so far as I understand it, and it seems to me that the hon. and gallant Member is going outside this provision.

Photo of Mr George Garro-Jones Mr George Garro-Jones , Hackney South

I regret if I have broken the rules, but I would ask a question with regard to Sub-section (4). We cannot be expected to carry the Statutes of England about with us, and when a Clause of this kind has reference to the Income Tax of 1918 we might have a brief explanation from the Financial Secretary as to what it means.

Photo of Mr Dennis Herbert Mr Dennis Herbert , Watford

I would also ask the right hon. Gentleman to consider this question with regard to paragraph (b) of Sub-section (1). Is not this particular question of the right to a return one which may arise in conjunction with other claims? I want the right hon. Gentleman to tell me whether this claim that is dealt with under paragraph (b) is not likely to be one claim on a form in which there may be a number of other claims, the decision of which goes, not to the Special Commissioners but to the General Commissioners. Is he not, therefore, by paragraph (b) putting a case in which on one claim one part of the claim may have to go to the General Commissioners and the other part to the Special Commissioners?

Captain BENN:

I only rise to congratulate the Government on the docility of their followers. Three of their members have moved one Amendment which was scorned by the Chancellor, and one other has asked a question to which no reply is vouchsafed.