The Press FRIDAY, SEPTEMBER 18, 1953. The Business of Taxing

Press, Volume LXXXIX, Issue 27148, 18 September 1953, Page 8

The Press FRIDAY, SEPTEMBER 18, 1953. The Business of Taxing

Before the passing of the Inland Revenue Act, 1952 (which amalgamated the Land and Income Tax Department and the Stamp Duties Office), there was no statutory obligation to furnish a report on'' the adm inistratinn of the Inland Revenue Acts, except the Social Security Act. The 1952 act changed the position, with considerable advantage, as the first annual report to Parliament of the Commissioner of Inland Revenue shows. Opportunity has been taken in the report to present some historical notes about the various forms of inland revenue and statistical tables of revenue for many years. The assembly of all these facts in one document will make the 1953 report of the Inland Revenue Department a most useful reference work for politicians, professional men and the public. Statistics show the remarkable growth in recent years not only of the amount of income tax collected, but of the numbers of assessments made by the department. The last year for which figures are given is the 1952 assessment year. Provisional figures for that year are 520,000 individual

assessments, and 16,000 for companies; the 1951-52 assessment year refers to income derived in the previous year; and at that time the population had not quite reached 2,000,000. Thus, two years ago, more than one in four persons were assessed for income tax; 650,700 individuals had enough income to be required to submit returns. Of the remainder, a great part would be accounted for by children, housewives, retired persons, and pensioners. The department’s report speaks of a “ phenomenal ” increase in Taxes Division revenue collections since the establishment of its

counterpart (the Land Tax Department) in 1878. The department’s point can be seen without going too far back into the past (and looking at statistics that might evoke wistful memories). Speaking of the volume of taxation from incomes, the report notes that, “ with sharply “ rising income* % the period of seven years since the war had seen “ almost a doubling of the peak war- “ time revenue despite the abolition “of the national security tax and “downwards adjustments in income “tax rates". (Unlike some politicians, the Commissioner of Inland Revenue does not speak of “concessions”). The increased spread of income tax over the community is no less “ phenomenal". In the last post-war year, 1939-40 (when the population was about 1,633,000), taxable income tax assessments totalled 182,128; in 1946-47 (when the population was about 1,800,000) taxable assessments totalled 319,718; the provisional figure for 1951-52 (population about 2,000,000) is 536,000. Obviously, few adult wage-earners are exempt from paying income tax. This should cause politicians and the department to think seriously about the wisdom of introducing a pay-as-you-earn

system of income tax collection. One advantage would be protection of the revenue in the event of recession. With income tax so widely spread, there might be very considerable difficulties in making up expected revenue in the event of a cut in incomes. "The report suggests • that there should be no insuperable administrative difficulties about collecting from wages and salaries by a PAYL method; a ccnsider- • able proportion of income tax could easily be collected because, of a 1 total Social Security charge of [ £45,507,938 in 1938, wages tax contributed £26,650,922. Wages tax is , nothing more nor less than PAYi. operating on a wage or salary earner’s income. To evolve a workable system covering the whole of his income should not be beyond the ingenuity of a department which • prides itself, not without justification. on improvements in “ work i “procedure ” which have resulted in . “some spectacular ■ time-saving . "methods being introduced.”. These ; include the introduction last year of : the combined assessment and ■ demand forms and the combination

in one form of the return of income for income tax purposes and the declaration of income for social security purposes. The report gives some interesting details about staffing and staff training in a department whose work calls for highly trained and experienced staff. It is noted that the department has overcome warcreated difficulties over arrears, aflb that “they are now well under “control”. Similarly, improvements in staffing have enabled the department to give more attention to tax evasion. An interesting point made in the report is that over the last few years the whole of the cost of administering the department has been more than covered by the revenue from investigations. In the

financial year 1952-53, 65 inspectors conducted 1388 investigations; and, as a result, additional income tax and social security charge totalled £1,152,228. The department’s total expenditure during the 1952-53 financial year in assessing and collecting all its types of revenue was £1,106,137, or 0.79 per cent, of the total revenue collected. The Commissioner of Taxes could not properly make political points; but statistics in his report pertinently

suggest an inquiry whether the work involved in collecting land tax is worth the expense and trouble. Whereas other revenue has increased “ phenomenally", the annual revenue from land tax has been about £1,000,000 since 1935-36. The number of land tax returns required to be handled by the department was reduced by the 1950 Land and Income Tax Amendment Act, which increased the maximum ordinary land tax exemption from £5OO to £lOOO. Nevertheless, in the financial year 1952-53, 38,000 taxable land tax ■■■annmnnts were made for a

revenue* of £1,231,271. A final thought on the report of a, nominally, new department is that the change of name from Land and Income Tax Department might well have been taken as a reason to abolish a tax that has no real purpose in the present fiscal structure.