CHAPTER XXIV OTHER DIRECT TAXES AND THE TAXATION OF SURPLUS THE surface of the subject of direct taxation has now been scratched, but there remain for discussion other direct taxes of varying importance. It is proposed to deal with (i.) that unpopular form of taxation, poll, or capitation taxes; (ii.) direct consumption taxes, such as those on inhabited houses, huts, carriages, motor cars, and men-servants; and (iii.) the taxation of surplus. In recent years, Governments have devoted considerable attention to the taxation of surplus in the form of unimproved land duties, corporation taxes, and excess profits duties. The War period threw a new light on this aspect of tax revenue, which is mainly, if not entirely, in the nature of direct taxation. The Excess Profits tax in the United States yielded in 1918 the largest annual amount ever produced in any country by a single tax, 2505 million dollars or £511 million sterling. The British tax in four years brought into the Exchequer nearly £982 million sterling. There is in regard to the taxation of surplus a great harvest for the Finance Minister's sickle. 1. POLL OR CAPITATION TAXES Poll, head, or capitation taxes are of very ancient origin. Outside the United States, Sweden, and to a much less extent the Union of South Africa and one or two colonies, the tax is to-day merely of academic or historic importance.1 Poll taxes were levied by the Romans on the Britons, and known as the capitatis 1 Cf. "A poll tax is neither productive nor equitable, and stands as a relic of past methods rather than as a subject of present importance" (Hadley, Economics (p. 474), New York, Putnam's Sons). humana. The first poll tax of which there are details in English history is the tallage of groats, 1377. This tax is said to have been modelled on the French tax. Dutch financial experts were never in love with it on account of its inequalities. The tax of 1377 was "four pence, to be taken from the goods of each person in the kingdom, men and women, over the age of fourteen years, except only real beggars ". The tax of 1380 was granted and included " every merchant stranger". The two Dukes of Lancaster and Bretagne were assessed at 10 marks each (£6 13:4), Earls at 6 marks (£4), and the list included barons, baronets, esquires, members of the legal profession, the business community, farmers, down to "every married man (not of the estates foresaid) for himself and his wife, and every man and woman sole over the age of sixteen years, except real beggars 4d." The clergy and the unmarried were also assessed. Commissioners, appointed to assess and collect the tax in the various counties and towns, were sworn to faithful performance of their duty; but so difficult did the collection prove to be, that it was necessary to get in the arrears by farming the tax. The farmers acted with rapacity and insolence. Endless disputes occurred regarding the limit of age."1 The Wat Tyler rebellion, it is said, arose from this impost on account of a dispute over the age of a girl whose exemption was claimed as being under fifteen years. Poll taxes were also levied on aliens, and a tax of this description was granted to Henry VI. for life. In the poll tax levied in 1513 in Henry VIII.'s time wages were taken as one of the measures of taxable capacity.2 Under Charles I. a poll tax was voted in 1641 for payment of the Northern Army, and levied upon persons" according to their ranks, dignities, offices, callings, estates, and qualities ". It varied from £100 on a duke to 1s. on those with an income of £5 per annum and 6d. on persons below this amount. Poll taxes were levied in 1660, 1666, 1677, and especially in William and Mary's reign up to the year 1698, when they were finally discontinued. Samuel Pepys wrote in his Diary, when the collectors in December 1660 demanded 10s. for himself and 2s. for his servant, that he paid the amount "without dispute ", and he naïvely adds, "I put by £10 for them, but I think I am not bound to discover myself". No wonder Bacon 1 Dowell, History of Taxation and Taxes in England, vol. i. p. 113. Y speaks of the English as "the least bitten in purse of any nation in Europe ". The tax in the United States is in force in every State except Columbia and Maryland. It is usually levied on all males (and in sparsely populated Wyoming also on females) between the ages of 20 or 21 years and 45 or 60. The proceeds are used for State or for local purposes (e.g. roads and schools) or both. Evasion, however, is considerable. In other countries the tax is of little importance. In India in Mogul times poll taxes were levied,1 and in hill districts such as the Naga and Lushai districts of Assam are still known. In some countries the payment of the tax is in the nature of a registration fee or a preliminary to the vote as in certain states of the American Commonwealth. In the Union of South Africa a poll tax is levied in the Transvaal and the Orange Free State, and a hut tax in Cape Province, Natal, and the Transkeian territories. In the Transvaal the levying of a poll tax is governed by the Poll Tax Ordinance (No. 7 of 1921), the Poll Tax Amendment Ordinance (No. 9 of 1922), and the Poll Tax (Penalty) Ordinance (No. 2 of 1923). Of these the first Ordinance was challenged in the law courts and declared ultra vires so far as natives were concerned. The poll tax is now payable by nonnative adults residing in the Province for at least ninety consecutive days preceding the 30th June of the year for which tax is payable. Women who do not pay Union Income Tax, and students having no income of their own and attending recognised educational institutions for three months immediately before the date when the tax becomes due, are exempted from the poll tax. The rates of tax are, for married individuals, £1 : 10s. plus 15 per cent of the Union normal tax and super tax paid for the year preceding the year for which the poll tax is payable; for unmarried individuals below twenty-five years of age who do not pay income tax, £1 10s., and for others £2: 5s. plus 22 per cent of any Union Income Tax paid. If the tax is not paid within a specified date a penalty of 10 per cent is levied for each month or part of a 1 The tax was on adult males only. In 1564, for example, Akbar of his own accord, and ten years before he made the acquaintance of the famous Abul Fazl, remitted a large source of revenue, viz. the poll tax on non-Muslims. Abul Fazl states that it was a very great source of revenue. It was re-imposed by Aurangzeb in 1679. According to Vincent Smith the tax had been fixed originally by the Kalif Omar in three grades. Vide p. 66, Akbar the Great Mogul, Vincent A. Smith (Oxford Clarendon Press, 1919). month in default. Employers are entitled to deduct the tax from the wages of their employees if the tax is recovered from the former. The taxes cannot be considered productive.1 The main objections to capitation taxes are that they are inconvenient and do not take into account the real ability of the taxpayer to pay, and also that they are unproductive and expensive to collect. In Adam Smith's view "capitation taxes are levied at little expense, and, where they are rigorously exacted, afford a very sure revenue to the State. It is upon this account that in countries where the ease, comfort, and security of the inferior ranks of people are little attended to, capitation taxes are very common. It is, in general, however, but a small part of the public revenue, which, in a great empire, has ever been drawn from such taxes; and the greatest sum which they have ever afforded, might always have been found in some other way much more convenient to the people." 2 2. DIRECT CONSUMPTION TAXES Direct consumption taxes are strikingly insignificant in modern tax systems. Indirect consumption taxes have taken their place. In these days of industrial progress it is, for example, more easy, and certainly more productive, to collect revenue from taxes imposed at a particular stage of manufacture than from a scattered body of consumers. Moreover, direct consumption taxes are usually on luxuries or non-necessaries. Taxes, then, on these are inelastic and unproductive, especially when compared with excise duties. In Great Britain the direct consumption taxes are licences 3 on carriages and motor cars, armorial bearings, male servants, together with the game, gun, and dog licences. The inhabited house duty, abolished from 1924 to 1925, was found to be a convenient mode of assessment on account of the universal use of 1 Native taxes in 1922-23 were £840,000 only out of a total revenue of £28,695,000. Montesquieu (L'Esprit looked on as badges of Adam Smith (Bk. V. Wealth of Nations, Bk. V. chap. ii. pt. ii. art. iv. des lois, bk. xiii. chap. xiv.) thinks that these taxes are slavery, because they are fixed at so much per head. chap. ii. pt. ii. art. ii.) remarks that "every tax, however, is to the person who pays it a badge, not of slavery, but of liberty ". 3 Consumption licences are to be distinguished from trade licences, e.g. those granted in Great Britain to distillers, brewers, auctioneers, house agents, pawnbrokers, and dealers in plate. houses. The house rent paid is usually a good criterion of one's income, and accordingly of one's taxable capacity. Probably on account of the difficulty of obtaining actual rents, recourse was had to the taxing of hearths and windows. The former tax was abolished after the Revolution on account of its inquisitorial nature, and a tax of two shillings on every inhabited house, with additional taxes if there were ten windows or more, was imposed. A tax on the basis of windows is to be condemned as a tax on ventilation. This was afterwards modified to a window tax from 2d. to 2s. per window.1 The objection to this type of tax is that it falls more heavily on the poor than on the rich. Until April 1924 the inhabited house duty was a permanent direct tax upon occupiers of dwelling-houses based on the annual letting value. In the administrative county of London the annual value depended on the quinquennial valuation under the Valuation Metropolis Act, 1869. The last new assessment was made in 1921, and for the rest of Great Britain a new assessment came into force for 1923-24, the previous assessment having taken place in 1910. The rate of duty 2 for private dwelling-houses, i.e. except for farm-houses, hotels, public-houses, coffee-shops, residential shops, or lodging-houses, was 3d. in the £ if the annual value is £20 or more and does not exceed £40, exceeding £40 and not exceeding £60, 6d., and exceeding £60, 9d. For farm-houses, hotels, publichouses, coffee-shops, residential shops, or lodging-houses the rates within these limits were respectively 2d., 4d., and 6d. A house let in tenements or flats 3 and inhabited by two or more persons or families was usually subject to one assessment only, except in certain cases, i.e. a house providing separate dwellings may be the subject of a separate assessment for each dwelling of an annual value not exceeding £60. The taxation of houses is hardly a suitable source of revenue for a State or Federal Government, which should tax only incomes from houses, leaving the taxation of houses to local bodies. The house duty yielded in 1923-24 only £1,950,000 out of a total tax revenue of nearly £856,000,000. 1 "The window tax, as it stands at present (January 1775), over and above the duty of three shillings upon every house in England, and of one shilling upon every house in Scotland, lays a duty upon every window, which, in England, augments gradually from twopence, the lowest rate, upon houses with not more than seven windows, to two shillings, the highest rate, upon houses with twenty-five windows and upwards" (Wealth of Nations, Bk. V. chap. ii. pt. ii. art. i.). 2 1921-22. 33 Edw. VII. c. 46, § 11. |