Proposed Increases In Taxation

Press, Volume LXXVI, Issue 23004, 26 April 1940, Page 11

Proposed Increases In Taxation

PUTIES ON BEER, SPIRITS, TOBACCO, AND MATCHES (B2ITISH OFFICIAL WIELELES3.) (Received April 24, 12.10 p.m.) RUGBY, April 23. Budgeting for £2,667,000,000, the Chancellor of the Exchequer (Sir John Simon), who presented his proposals to the House of Commons to-day, announced that income tax would be at the rate of 7s 6d in the £, as forecast in his emergency Budget last September. He had previously summed up the nation’s accounts for last year. The country had spent £1,817,000,000, finding £1,049,000,000 out of revenue and borrowing the rest —£768,000,000. He had estimated that he might have to borrow £938,000,000, so the result was better than . was expected. Regarding the national debt they had had to borrow, not only to cover the deficiency just mentioned, but also to find £4,250,000 for the statutory sinking fund and also £7,000,000 for trade agreements. The national debt of £8,163,000,000 at the beginning of ; the year had increased to £8,931,000,000 on March 31 r 1940. i ' Sir John Simon estimated that the changes in inome tax would increase the yield in a full year by £61,750,000. He proposed also to add to the existing ■ duties on beer, spirits, tobacco, and matches.

■ The increase on beer would be a penny a pint and on spirits 15s a proof gallon, representing a rise of Is 9d in the price of a bottle of whisky. The duty on tobacco would be increased by 4s per lb. He estimated a yield, in a full year, of £70,000,000 from the increase in spirit duties, and £23,000,000 as a result of the increase in tobacco duty. Sir John Simon also announced an increase in postal charges; the letter rate to be increased by Id to 2gd, and the rate lor costcards to be raised from Id to 2d. Including the changes in poundage on postal orders and inland telephone charges, he estimated an increased yield of £21.8 n 0,000. The new rate on ft! matches would bring the price of a * bo'rup'to-Ud. The Chancellor’s proposals included a new form of tax, which he estimated would brin w in substantial additional revenue. He proposed to call it a “purchase tax.” The new tax' would be a percentage on the price which would be levied at the stage when the wholesaler was selling to the retailer. It would not aoplv to food or drink or foodstuffs, whether for human or mimal consumption. A'registered seller would charge the tax to the buyer and would .be.accountable for it. Neither theidate nor the rate had yet been fixed.- The tax would out no sort oft obstacle in the way of the export trade. The Chancellor estimated that the total contribution from revenue was £1,234,000.000. ' Savings Essential Summing up the Budget in a speech which lasted more than two hours, the Chancellor said it was essential that savines and the lending °f savings should increase in response to the mounting expenditure of modem war, and he concluded; Provided the zeal and persistence °f our people in supporting Government Joans eaual their fortitude and resolution in naving Government we have nothing to fear. Our financial front will hold as firm!” as does every other front in the fight 'o’- victory.” The Chancellor had detailed how ,*l e nI9^ of:er * to raise fro" 1 revenue larger figure than ■has ever been raised bv taxation in <■ ? n J?^ e year in the history of Bri«sh finance, and £185.000,000 more tbr>n last year. .Dealing with the increases in VjSgct taxation, he said that these involved a standard rate of income axof7s 6d in the £ and reductions “Jdwances, which would have the r-increasing the effective rate ,!ght through the scale of income d-vels and rising with a surtax to a .The Chancellor commented: “Nomng bn this scale has ever been Approached before in war or in Peace. With the surtax the maxi--laca^?* 0 ! n last war was only ■fn £“■ additional proposal was n charge surtax on incomes nf more man £ISOO instead of £2OOO. The Purchase Tax * John Simon explained that the i”™ 1 of the purchase tax had only cided after careful study. In iM" 1011 to food and drink, to which _, es n- °t apply, H would also not \o articles already subject to .. , ay y duty, such as tobacco and petnor generally to such services as gas, electricity, and water. Before .TOiidjig the machinery of the tax > tK„ « p , to have consultations with t^S? 0 organisations, fii’f rS 101, ex Ptaining the new tax, oe Chancellor said it was of the S?®t e ?t possible importance to relct internal spending at this time, tax would assist in securing lb!* 1 without interfering with fa- . Government’s plans for mainan adequate supply of things oVie+ D would nut no sort of stade m the way of export trade. srin,^ res ult in limiting the conn of goods at home. „• ,t 15 the deliberate intention of fan i? ,* ax to do so. We have to fnrtv,. old ly the necessity for transour h on] o economy for the .whining the war. This 00 done without drastic and mute action.” he declared. a digression. Sir John Simon to evnes plan for deatli 6 iP ay . ments which he had exwith the utmost care, but amni l3o , found many objections, was the danger of disfr.T?® 111 ® voluntary saving, further thiir’ C ° Ura^e which, he announced, tr^° V 0 was prepared to in-of-nh^ e J ogls^a tt° n * the general effect thtw wou ld be to withdraw from of tuture calculation of the means o^ Ppi3cants tor unemployment n=Vr„ ,' e , new amounts lent to the of £,37g Urmg the War. up to a total '4 r Z^ e Chancellor explained the syshnority allocations of imebm S * that the first essentials were 5 en to the war effort. Second

priorities met the claims of the export trade. The residue was available at appropriate prices for general consumption. The Government was finding £60,000,000 sterling yearly in subsidies for cheapening food prices, said Sir John. By a system of costing and contract procedure the Government was endeavouring to secure that the rate of profit on Government work was reasonable, but the taxing of excess profits, was part of its economic policy. “I have one further announcement to make,” he said. “There is another contribution to this end which I have in mind, which will necessitate legislation. It is complementary to the whole economic policy I have outlined. The excess profits duty is at a heavy rate, but it leaves a certain proportion of increased profits in the hands of the trader That is essential, but I think these increased profits, where they occur, are valuable in proportion as they remain in the business concerned. They will be very useful if they are available to sustain and repair industry in the difficult period after the war. They are far less valuable if they are used in the hands of the shareholders. I propose, accordingly, to provide for a limitation of dividends paid by public companies, which shall not distribute a greater dividend on ordinary shares than was distributed in any one of its three pre-war periods.” Sir John Simon also announced that it was his intention to prohibit the issue of bonus shares. £2,000,000,000 for War Purposes Dealing with war expenditure, he said he was going to estimate what would be needed in this financial year for war purposes only. It would be £2,000,000,000. Expenditure for war purposes only until March 31, 1941, was estimated at £2.000,000,000. The estimated total expenditure was £ 2,667,000,000. The estimated yield from stamp duties was £ 19,000,000, from national defence contributions and excess profits tax £70,000,000, and from other revenue duties £ 1,000,000. The total inland revenue on the existing basis of taxation was therefore estimated at £658,000,000, compared with £582,000.000 in 1939-40. “In addition to v/ar expenditure I must provide for the Consolidated Fund Service and Civil Estimates,” said the Chancellor. “It is noteworthy that we are able to raise the first war loans at 3 per cent. I am assuming that future loans will not exceed the levels recently established. If the standard rate of income tax remained at last year’s figure it was estimated that it would yield £408,000,000. Owing to the large sums which were issued under the Defence Loans Act last year the amount available under this act will be nearly £15.000,000 greater than in 1939. To that extent the additional burden of interest in 1940 can be met without increasing the debt charge. The sum of £230.000,000 will be enough for interest for management on the national debt. It is proposed to remove the anomalies in children’s allowances for income tax, also to exempt the estates ofmerchant seamen - and fishermen killed in the war from death duties.” Voluntary Contributions This brought the Chancellor to a general exposition of the Government’s financial and economic policy as a whole. “What we have to do,” he said, “is to foster and improve the conditions by which the flow of voluntary contributions to the Government may be stimulated and inflation avoided. Whatever may help to restrict the misuse of spending power is of vital importance. The Government’s effort in the economic sphere has been dir&ted to secure these objects. There has been a series of steps taken or converging to this end.- We aim at maintaining the level of economy in prices and in the flow of commodities required for consumption. “First we have strict control of imports. By the imports licensing system we reduce imports which are not essential. It is estimated that by the operation of this part of thr imports system we have reduced the less essential imports which in 1938 were valued at £125.000,000 sterling to the figure in the first year of the war of £ 50.000,000. “The system of control of nonessential imports has been extended to many raw materials for the purnose primarily of enabling control b the Ministry of Suoply to secure their to the greatest advantage. This system of controlling and directing imports now applies to 75 per cent, of the value of the whole of our imports.” The Budget resolutions were approved.