INCOME TAXATION

Evening Post, Issue 66, 15 September 1936, Page 16

INCOME TAXATION

A MODERN CONQUEST

HAPPY LANDS THAT ARE FREE

REFUGE OF THE RICH

We have become so accustomed to income tax that we regard it as a burden which is never likely to be removed, says a writer in the Melbourne "Age." Yet it is not so very long ago that there was no State or Federal income tax ■ in-Australia, and there are still a few: countries in the world where it'is not imposed. ' 'Income tax was first introduced in Great Britain in 1799 by Pitt to meet war expenditure. All. incomes in excess of £60 a year were subject to the tax. The general rate was 10 per cent, on incomes of £200 and over; incomes between £60 and £200 were taxed on a 1 graduated scale up to 10 per cent. This tax, which was exceedingly unpopular, was repealed in 1802, but it was imposed again in 1803 in ' consequence of the, renewal of the war with France. It was repealed • after ■ the Napoleonic wars ended with the battle of Waterloo,^ in 1815, but it was reimposed by Sir 'Robert; Peel in 1842 to - meet a series of Budget deficits. Peel promised that the tax would be repealed when conditions improved, and the Budget was balanced without its aid, but the loss of revenue resulting from the repeal of import duties prevented the removal of the income tax, and the outbreak of the Crimean War in 1857 fixed the tax more securely on the shoulders of the British taxpayer, and it has remained there ever since. The Great War of 1914-18 resulted in the income tax being heavily increased, and though reductions have since been made, it now stands. at 4s 9d in the pound, pn small incomes the ■tax levied is below the standard rate, but incomes over £2000 pay in addition to the standard rate a super-tax beginning at Is in the pound, and rising on a graduated scale to 7s 6d in the pound. FORTUNATE ISLANDS. Less than a day's journey from England there is a British" possession where there is no income tax, and where other taxes are exceedingly low. This is the island of Jersey, the largest of the Channel Islands, with which there is daily communication by steamer from England throughout the year, and an aerial service in the summer months. Though Jersey is part of the United Kingdom, it enjoys a considerable degree of independence and self-government. It has its own Parliament, and the other islands of the group have aParliament between them at Guernsey, which is the second largest island of the group, but is only a little more than half the size of Jersey, which covers an area of fortyfive square miles. The official language of these Parliaments isl French, but the population of the islands is almost equally made up of French and English. The islands are washed by the Gulf Stream, and this is partly responsible for a mild, equable climate. Jersey'and Guernsey are favourite resorts in the summer for French and English holiday makers. The islands export butter, ' potatoes, tomatoes, grapes, and flowers to England, and as in their mild climate the crops ripen before those of England, they reach the market when pricas are high. A state of prosperity has prevailed in the Channel Islands while Great Britain has been slowly recovering from the depression which followed the war. The holiday traffic has been a considerable factor in this < prosperity. St. Helier, :the capital of Jersey, has half a .dozen'good hotels, and many/hundreds of boarding-houses. The island, which is twelve miles long and six miles broad, has a normal population of: about 50,000, ■ but this number is greatly swelled-by: visitors during the summer. > LESS THAN A MILLION. The annual revenue of Jersey is about £360,000, and this suffices to meet tlje expenditure. The public debt is only £938,000. or a little more than £18 per head, compared with Australia's public debt of £139 per head. There is no income tax in Jersey and no inheritance tax or death duties are imposed. The Customs duties on wines, spirits, and tobacco are very low compared with those in force in Great Britain. Since the war ended Jersey, because of its low taxation, has proved very attractive to Frenchmen and Englishmen who have retired from business, and some hundreds of them have made'their homes there. It has also proved attractive to retired professional men and others who are living on small pensions. • Not only is taxation lower in Jersey than in Great Britain or France; the cost of living is lower as well. Guernsey is slightly less attractive than Jersey, as an income, tax of 7d in. the pound is imposed there.

; Some wealthy men transferred their fiomiciles from Great Britain to Jersey in order to escape the heavy burden of taxation which is imposed on the British taxpayer. This fact was referred to in a report of the Committee of the Privy Council appointed in 1926 to consider - the financial position of Jersey, Guernsey, and the Isle of Man, with a view to determining what contributions they ought to ..make to Imnerial funds towards the cost of the war. The report stated that there was little or no evidence of migration to the Isle of Man as a refuge from the British tax system, but there were in Jersey "a few individuals of considerable means whose migration there we can only regard as a deliberate attempt to evade their responsibilities to the community." ■ The committee, added: "We feel strongly that his Majesty's Government should take effective steps, to compel these persons to takn their proper share in bearing the burdens of the United Kingdom."

Sir Robert Houston, a wealthy British ship owner, who ■ died at Jersey on April 14, 1926, left an estate of over £6,000,000. At that time the British death duties on estates of over £2;000,000 in value were 40 per cent. (they have since been increased to 50 per cent.). Therefore. Sir Rober* Houston's estate would have been subject to a deduction of £2,400,000 if h* had not transferred his domicile from England to Jersey. The British Chancellor of the Exchequer contended that Sir Robert was domiciled in England, and threatened to take steps to enforce the payment of thfe death duties. The executors of the estate decided to pay the full amount demanded, and, therefore, the matter did not come before the Courts or before the British Parliament. WAR CONTRIBUTIONS. In 1917 the Jersey Parliament, responding to pressure by the British Government, voted £25,000 as a contribution to the cost of the war. In the following year this contribution was doubled, and in 1919 a further sum of £25,000 was voted. Guernsey's contributions amounted to a similar sum. But the British Chancellor of the Exchequer regarded these contributions as inadequate, and pointed out that on a population basis they represented much less than the cost of the war per capita, which had to be borne by the people of Great Britain. In 1925 he asked Jersey to pay £325,000 a year to Ihe Imperial funds as its war con-|

tribution; and he asked Guernsey to pay £275,000 a year. These amounts would have meant an addition of about £6 per head to the existing taxation, which was below £4 per head. But even with this substantial addition the taxation per head in the islands would have been less than two-thirds the rate that residents of Great Britain were paying. Both the Jersey and Guernsey Parliaments refused to pay these contributions, and declared that neither legally nor constitutionally could the islands be compelled to contribute to the British Exchequer. The Jersey Parliament offered to pay a lump sum of £300,000 in final settlement of the British Government's request for a yearly contribution, and the Guernsey Parliament offered £220,000; but as these sums represented only a fraction of the capital value of the war pensions being paid to ex-service men in the islands by the British Ministry of Pensions, the offers were rejected. The Ministry, of Pensions1 was sending yearly £46,000 of the British taxpayers' money to Jersey and £60,000 to Guernsey. These sums represented the total pensions to disabled men in Jersey and Guernsey who joined the British Army during the war, and pensions to dependants of men who had been killed. POWER OF BRITAIN. Subsequently the British Government appointed a committee of the Privy Council to report on the question of annual contributions from Jersey, Guernsey, and the Isle of Man, to the cost of the war, and to investigate the constitutional position of the islands. The report of this committee stated:—-"There can be no question ftf the sovereign power of the British Parliament at any time to terminate the privileges which the Channel Islands now enjoy, and to merge them in the United Kingdom, or to impose any lesser change in their constitutional position. In particular Parliament has unquestionably the legal power to impose financial legislation on the islands, with or without their consent." The committee recommended that Jersey should pay to the British Treasury an annual contribution of £120,000 for 100 years, and that Guernsey should pay £75,000 for the same period. The period of one hundred years was taken as the time which will elapse before Great Britain wines out her war debt Both Jersey end Guernsey declined to accept the recommendations of the committee. Jersey renewed its offer of a lump sum of £300,000 and Guernsey renewed its offer of £220,000. These amounts were accepted, but not as a settlement of the British claim. The Isle of Man in the Irish Sea is another British possession which enjoys considerable independence and self-government. Taxation there is much lower than in Great Britain, and the income tax ranges from Is in the pound to Is 9d. The island depends for most of its prosperity on tourist traffic, and the number of visitors and holiday-makers in the course of a summer reaches over 500.000. The Committee of the Privy Council recommended that the Isle of Man should make an annual contribution of £100,000 to the British Treasury as its share of the war burden. The House of Keys, as the Parliament is called, declined to fall in with this contribution and offered a single contribution *of £500,000 in addition to £250,000 previously paid. TAX-FREE COUNTRIES. The little principality of Monaco, on the Mediterranean coast, between the frontiers of France and Italy, long enjoyed freedom from income tax and municipal rates. This was because the company which owns the Casino at Monte Carlo paid '■ from £80,000 to £100,000 a year for its gambling concession. Monaco is only three, miles long and less than two miles wi,de. It consists of three towns, Monaco, La Condamine, and Monte Carlo. Owing to the depression uv European countries, and to the' competition of French casinos, where roulette and chemin-de-fer have been legalised, the profits of the Casino at Monte Carlo have dwindled, with the result that some minor degree of taxation has been introduced at Monaco.

The little republic of Andorra, in the Pyrenees, between France and Spain, is another European country where there are no taxes. Andorra is not an absolutely independent republic, for its two, powerful neighbours, France and Spain, have exercised joint suzerainty over it for 650 years. It covers an area of about 160 square miles, its greatest length from north to south being about twenty miles. Jt is a mountainous country, through which run half a dozen narrow valleys. There are only six small towns in the republic, and the largest of them, Anderra de Vielle, which contains 164 houses and a population of about 800, is the capital The houses are of stone, and most of them were built hundreds of years ago. The total population of the republic is under 6000.

There are no newspapers, railways, theatres, or even moving pictures in Andorra. Tourists seldom go there, for the hotel accommodation is limited and primitive, and there is nothing to see except mountain scenery of a kind which can be seen in scores of other places. There are only two roads in the republic, and some of the chief villages are connected by narrow mountain paths, which afford passage for mules.

There is no postal service. Most of the people are unable to read or write, and as few of them have ever gone outside the boundaries of the little republic, they have no friends abroad with whom to keep up a correspondence. If an Andorran has occasion to communicate with a friend or relative living in another part of the little country, he sends his message verbally when the opportunity occurs. There is no police force, for crime is almost unknown; there are no written laws of any kind. The General Council or Parliament of Andorra consists of twenty-four members elected for four years by the heads of families. The President receives an annual salary of approximately £3, and each member of the Council 15s a year. The Secre-tary-General, who does all the spade work, draws the equivalent of 10s a week.