TAXATION RELIEF IN BRITAIN

Gisborne Herald, Volume LXXII, Issue 21853, 25 October 1945, Page 5

TAXATION RELIEF IN BRITAIN

LABOUR BUDGET LOWER LEVY RATE MORE SOCIAL SERVICES LONDON, Oct. 24. The Government hoped while it is in office to go far to satisfy the widespread desire for tax reductions and increased social services’ expenditure, said the Chancellor of the Exchequer, Dr. Hugh Dalton. “The present is a supplementary Budget on the morrow of gloat victories, yet my task in some respects is harder than those of some of my predecessors,” he said. “The Government will shape its policy and make its five-year construction plan to reduce taxation and increase social services’ payments. “We must be resolute and guard against inflation, must increase production of peacetime goods as rapidly as possible and must prepare to hold back purchasing power until there are enough goods to buy. The danger now is lest too much money should run after too few goods.” The cost of living is at present 31 per cent, more than before the war. he said. He had decided to hold it steady at that figure until further notice. even if it meant an increase in Exchequer subsidies. He was making inquiries also whether he could not hold it steady at a lower cost in the total subsidy by economy in administration. Defence Against Inflation “Large and continuous savings by all sections of our people is by far the best defence against inflation under the present conditions,” he added. “I hope later that this will gradually become less urgent as production expands and develops. “Price controls must be retained and enforced and, if necessary, strengthened and extended. I believe that, in the near future, price stabilisation will be even more firm than was contemplated by my predecessor. In this period we shall keep a firmer grip than ever before on the cost of living in which respect subsidies last vear cost the Exchequer about £200,000,000. Now, with the cessation of lend-lease, we must reckon on a figure of at least £300,000,000. The actual figure may prove considerably higher, especially if the decision to peg the cost of living has to be carried out in face of still rising costs. Must Stimulate Exports “The lend-lease talks have not yet reached even a provisional conclusion. We are keeping in close touch with the Dominions and India regarding the discussions. Meanwhile, it is more than ever urgent to stimulate exports and restrict imports, especially those costing dollars. “Whatever the outcome of the Washington talks we must make the most vigorous and imaginative efforts to stimulate the balance of our external trade and we must do the job soon.” Dr. Dalton said the Government would now turn its attention to the possibility of securing lower middleterm and long-term interest rates, but would do nothing in this respect to hinder the success of the national sayings weeks which would go on until the end of Noyember. If the Government should decide to reduce interest rates on the new issues, such a reduction would not effect the terms of the existing loans. This would apply not only to the market issues but to savings certificates and post office and savings bank deposits. There was a probable saving of* £200.000,000 on the defence and supply departments, but this was outweighed by the cost of supplies formerly provided under lend-lease and also by credits under the AngloFrench financial agreement signed last March. Services’ Expenditure The service and supply department’s expenditure would be faster the faster we demobilised because of lump gratuities and service credits. Similarly, the closing down of war contracts involved compensation payments which would also be large in relation to the cost saved this financial year, The annual charge on the floating debt was now £66,000,000, but the recently announced reduction of interest on Treasury bills would save the Exchequer £32,000,000 yearly, thus almost halving the charge to the Exchequer. The legal minimum prices on the Stock Exchange for gilt-edged securities imposed throughout the war no longer served a useful purpose. These would be abolished to-day. As far as could be foreseen the yield of various items of revenue would conform approximately to the estimates of the last Budget. Family allowances would begin to be Daid next year. Increased old age pensions and other improved benefits would also begin next year under legislation which the Minister of National Insurance is preparing. There would also be increased expenditure on housing, education, colonial development and welfare. 1 Let no one expect that we will be able next year to present a fully balanced Budget,” he said. “We shall, however, substantially narrow the gap between expenditure and revenue. The abolition of war damage contributions meant a relief of £40,000,000 yearly to many taxpayers. He proposed to repeal certain excise allowances on industrial alcohol and exported spirits which had been _ granted for many years in compensation for certain restrictions imposed on distillers. Taxation on Motor Vehicles The Finance Bill would include a provision to modernise the revenue control of distilleries without restrictions which, in wartime, had proved necessary. He also intended to continue until the present severe shortage of liquor was eased the abatement of the liquor license duty provided by the 1942 Act.

“I cannot agree at present to a reduction in the totals of taxation on motor vehicles,” he said. “I have come to the conclusion that I must leave the distribution of taxation as between license duty and fuel substantially where it is. In the case of private cars, there is general agreement in the motor industry and others with whom I have had discussions that the present method of calculating the horse-power according to the cylinder bore should co and the tax. in future, should be based on the cubic capacities.” Dr. Dalton expressed regret that he could not take off the purchase tax on cars sold in Britain. There were manv other claims for remission of the purchase tax which must be put first. . He hoped the motor industry was going to export many more cars than it sold at home. Post-War Credits to End

Post-war credits for income tax payers would be abolished from April 1, 1946. The total amount of post-war credit accumulated to the end of March was £575,000.000. It was estimated that 1945 would add another £225,000.000, making the total £BOO,000.000.

“The repayment of credits already created cannot thus far be safely undertaken until the supply of goods and the increased risk of inflation have correspondingly diminished.” said Dr. Dalton.

He said he proposed that from the beginning of next financial year, to raise the personal allowance for a single person from £BO to £llO. He proposed for a married couple to raise the personal allowance from £l4O to £IBO, and to raise the.exemption limit from £llO to £l2O. This would bring the allowances back to the pre-war level and relieve 2,000,000 persons from income tax. Single persons in 1946 would not pay income tax unless their income exceeded £2 7s weekly. No married couple would pay unless the amount exceeded £3 17s and no married couple, with one child, would pay unless it exceeded £4 18s. No "panted couple with three children

would pay on incomes under £7 Is weekly and, with five children, under £9 3s. These remissions would cost about £160,000,000 in a full year, subject to certain abatements. Standard Rate Reduced “I have come to the conclusion that the 10s in the £ standard rgte of income tax, falling as it does from the richest to the poorest, is too high a rate to be carried into peacetime. I propose from the beginning of the next financial year to reduce the rate from 10s to 95,” said Dr. Dalton. If he were to do this and no more he would be treating the larger income tax payers too favourably in relation to the smaller payers. He, therefore, proposed a new gradation of the standard rate. At present the first £165 of taxable income was charged at 6s 6d in the £ and the rest at 10s. He proposed in future that the first £SO should pay only one-third of lire standard rate or 3s, the next £75 would pay two-thirds of the standard rate and the remainder of taxable income 9s in the £. Finally, he proposed to raise the surtax scale in order to recover from the richer taxpayers part of the standard rate relief which otherwise would give them too much compared with the rest of Hie community. The surtax was levied in a rising scale on successive slices of income above £2OOO yearly. It started at 2s in the £ on £SOO and reached the maximum of 9s 6d on incomes exceeding £20,000. Dr. Dalton pointed out that there are about 125,000 surtax payers, of whom 100,000 had an income of £SOOO a year or less. He said the new surtax scale materially affected only bigger incomes. The loss to the Exchequer on income tax', taking account of the £225,000,000 figure relating to post-war credit liability, was about £97,000,000. The new surtax scale would bring in about £7,000,000 a year extra. Therefore, the net loss was reduced to £90,000,000. “I hope that the encouragement given by the general relief of the tax will lead to intensified production and, therefore, to a more abundant revenue.” Excess Tax Reductions Dr. Dalton expressed the hope that the increase in the net profits of companies would be spent on up-to-date plant and would not go straight into the shareholders’ pockets. “We cannot afford that now,” he said. “Capital development must stand in front of higher dividends.” Dr. Dalton said from January 1 the excess profits tax would be reduced to 60 per cent. He would continue to study .the possibility of alternatives to that tax. The national defence contribution would not be changed. The net cost to the Exchequer of the reduction in .the excess profits tax would be about £30,000,000. The Finance Ac.t provided that repayment of the excess profit tax should be used for the development and re-equipment of industry and hot distributed for the benefit of shareholders The finance bill would contain conditions which would govern repayment to ensure that this refund would not be misused. Relief under the excess profits tax would provide about £25,000,000 which should be spent over the next few; years in restoring British industry. Nothing more would be i-'ayable under deficiency payments in respect of any accountancy period after December 31, 1946. Purchase Tax Abolished Dr. Dalton continued: “I propose to abolish the purchase tax completely from a range of articles of special importance in connection with the housing programme. The articles to be released from the purchase tax will be coal and coke stoves, grates, refrigerators, geysers, boilers and other domestic appliances which now pay a rate of 33 1-3 per cent.” Dr. Dalton estimated that this abatement would cost the Exchequer about £1,000,000 in the current financial year and about £10,000.000 in 1946-47. Dr. Dalton said he had deliberately gene slow on tax reliefs because there was inflationary risk in any reduction of taxation, either now or in the near future. Dr. Dalton added that by April next we would see the picture much more clearlv. He would then put forward further proposals regarding taxation changes of one sort or another. He, meanwhile, had selected for announcement such tax reliefs for next year as would give the greatest incentive tQ the greatest number.