National Security Tax

Press, Volume LXXVI, Issue 23100, 16 August 1940, Page 8

National Security Tax

A ‘correspondent whose letter appears , this mbriiing has misunderstood in several respects, as an officially prepared footnote the effect'of broadcast notice of national security obligations. For example, these are hot

,the; result of unexpected interpretations of the ’ taxfifgvact (Finance Act, 1940) but- are expressly defined in the act, the provisions of V which 1 were explained when the measure was - before -the' House of Representatives. This applies particularly to the provisions for taxation of income other than wages and salaries derived during the year ended March 31, 1940, and for the assessment of the tax. Where one corespondent has overlooked (i) the wording of the acj, (ii). the reported explanation, and • (ili):■■■an official notice printed towards the end of July, it may be supposed that others, - alsp, either' are quite unaware of, or misunderstahd, the demands of this new tax measure; arid it seems desirable, therefore, to direct

attention again to the fact that 1 all. who received income other than wages and salaries during the year 1939-40 are to pay theinew national security tax on it as well .as the*' old social security charge. But although the' tax and the charge afe at the same rate (5 >er cent.) and levied in the same way, the amount of the tax payable on 1939-40 income will not be the same as the amount of the social security charge payable. This difference.

which will not outlast the current year, is due to the fact that the social security charge was in force, when the financial year opened; the national security" tax became effective only whkn three months and three weeks of the ■ year had already elapsed. The tax will there- %, ferl‘.be assessed at an amount equal to the i i'- r iaiheurit- of " social security charge instalments £ i a due and payable,” on 1939-40 income, after r ’ ’: th4Jpassihß of the act; that is, at the usual , r dates, August 1, November 1, and *l£of next year. Or, if the social charge 1 has-been paid (at May 1) in whole year, then the national .‘payable will be equal to the

amounts of the instalments so paid in advance. (Our correspondent’s second err,or in fact relates to this point.) The simplest statement of the position with regard to taxable income for 1939-40 is that, while full social security charge is payable, of course, national security tax will be assessed at the rate of 9d in the £ instead of Is, The complaint that the tax is unfairly levied on last year’s income is, however, far from insubstantial. It is not the major objection to it that no notice was given, that the taxpayer had no opportunity to redress his budget and prepare to meet thfe demand, and that he may therefore be seriously embarrassed by it. No notice was given of the immediate impact of the tax upon wages and salaries; and the effect is as likely to be embarrassing in this part of the fiscal field as in the other. The worst hardship will perhaps be suffered by persons whose sole and small income is derived from investments, and'who are already troubled to make it stretch as prices rise. The Minister for Finance dealt with hardship of one sort by extending the family benefits scheme. He should be ready to listen to evidence of hardship in other directions and to respond to it. But the retroactive application, of the tax, due entirely to a more or less arbitrary tie-up with the social security charge system,, may discriminate unjustly against one group of taxpayers. They pay the tax this year on income derived in 1939-40; in 194142 they will pay the tax on income derived this year; and so on. But the tax is a war measure; the revenue is paid to the War Expenses Account; and it is to be supposed that, when the emergency passes, the tax will be discontinued. .Unless special care is taken to protect them, those taxed in the manner described may be taxed over a longer incomeperiod and therefore on a larger proportion of received income than others. Apart from the Government’s hunger for present revenue, it is difficult to see why the incidence of the tax was not fixed for all income as it was for wages and salaries only, from the date of the enactment; and taxpayers are entitled to be assured that the retroactive effect of clause 16 will not penalise them.