WAR FINANCE

Ashburton Guardian, Volume 60, Issue 246, 25 July 1940, Page 5

WAR FINANCE

THE NEW TAXES IN BRITAIN.

DETAILS GIVEN BY MINISTER. AVOIDANCE OF INFLATION. (United Press Association—Copyright:) LONDON, July 23. , New taxes estimated to bring in £240,000,000 in a full year were announced by the Chancellor of the Exchequer (Sir Kingsley Wood), in the House of Commons. Income tax,' estate tax, duties on wine, beer, and tobacco and amusement tax are increased and a modified purchase tax introduced.

The increased 'entertainment---tax' is expected to bring in a further £4,000,• 000 a year. The modified purchase tax will not apply to food, drink, public services such as water and lighting,* children’s clothing, and boots-, farm implements and ' patent -■ medicines.. - Another goods, including adults’ clothing,, newspapers and periodicals, drugs and medicines, will pay a purchase tax of 12 per cent on the retail price. Luxury lines, such as furs, cosmetics, jewellery, china, porcelain, : haberdashery, silks," lac-os and furniture will pay a purchase tax of 24 per cent. Increase, in Expenditure. This measure was intended, said the Chancellor, to reduce public consumption as well as to increase revenue. The war had been expected by Sir John Simon in April to cost £2,000,000,000 a year, but in recent weeks Britain had been spending at the rate of £2,800,000,000 a year. Expenditure above the £240',000,000 to ho raised by the new taxes would have to be borrowed from the pocple’s savings. In the last month £28,000,000 was raised by various voluntary saving schemes, through which money was coming in atl an average rate of £1,400,000,000 a year.

With the extra charge of £128,000,000 imposed in April,.a total additional > levy of £367,000,000 had been made on the people in the present financial year, said the Chancellor, who expressed confidence that the imposts would he willingly borne by all classes in support of the war effort. He had budgeted for a total expenditure of £3,467,000,000, but the present Budget must, like,its predecessor, be regarded as of an interim character.

After announcing the increase in income tax from 7s 6d to 8s 6d in the £, and the balancing of the increase of the rate at) which tax will operate in the lower income levels liy rises in sup-er-tax rates, the Chancellor said that the result of the increases in income tax and surtax would be to raise the combined yield in a full year to £639,000,000 compared with- £290,0Q0,000 which they produced only five-yonks ago. The: fi^Ev9arlsjq^in. ; |i:pip' increases in direct, ta-xaiion imposed this year would” amount' l lk '--all to £203,000,000. Compulsory Deduction. The severe increase in income tax necessit.ated-a modification'] in (the collection arrangements, and ho proposed to order a compulsory deduction, weekly or monthly, from wages and salaries to help in orderly.payjnept.i< / -f q.• Coming to indirect taxation he intimated that the increases on beer, tobacco, and wine would give £23,000,000 as an additional yield in a full year. The Chancellor then came to his eagerly awaited statement on the purchase tax. He revealed his -intention to recast fundamentally the original scheme ; foreshadowed.. :by’. sit J6lui Simon. This involved the withdrawal of the Purchase Tax Bill, Tho Chancellor then explained his proposals for exemptions, and the introduction* of the tax at two sharply differentiated, rates—-one-tliird on luxury goods, and onesixtli on another limited category of goods levied* on the wholesale value.In the luxury classes-he put first, articles of real silk, lace, china, porcelain, fancy goods, jewellery, toilet preparations, and cosmetics. The second category included clothing, boots, shoes other than children’s, domestic goods, medicines, drugs, newspapers, periodicals, and books. This merchant sales tax, the Chancellor claimed, would be applied at the point where the goods pass from the wholesaler to the retailer without undue difficulty. In explanation of these proposals, lie declared, basing his views on unofficial but authoritative estimates, that the peace-time national income had been about £5,000,000,000, out of which £1,500,000,000 was spent on rent, rates interest, income tax, and savings, £1,350,000 on food, £880,000,000 yon services such as water, gas, electricity transport education, domestic wanes, etc., £570,000,000 on coal, petrol, tobacco and drink, leaving a balance of 14 per cent, which lie attributed in a rough and general way to personal expenditure. All Classes Taxed. Referring to compulsory deduction of income tax at its source lie said: “I realise that the proposal will impose extra responsibility and work on employers, but it is certain that the proposal will bo recognised and appreciated as a desirable method of relieving the employees from the burden of providing a heavy payment at. a given rate.” Adjusting the figures to wholesalevalues he estimated his taxable field at £600,000,000 and the yield of merchant sales tax at £100,000,000 in a full year and £40,000,000 in the current year. _

In the most significant passages in his Budget statement, the Chancellor placed his proposals against the background of the vast economic readjustments involved in the application of the nation’s resources on a prodigious scale to the war.

The “Daily Telegraph’’ says that the Budget is disappointing because it lags considerably behind the necessities of thn hour and' the expectations of the nation. In the light of the Chancellor's figures, it is difficult to share his confidence that Britain will escape initiation without much - more- drastic taxation.