Lapas attēli
PDF
ePub

by the General Commissioners, then hold meetings, beginning about the end of August, which are attended by the surveyor, and settle upon an assessment which they consider correct. The Additional Commissioners are selected as possessing expert knowledge of separate classes of trade and commerce. Their character may be inferred from the fact that Sir Felix Schuster is one of the Additional Commissioners for the City of London. The work of the Additional Commissioners in London is most elaborate, and they form themselves into committees, sitting three times a week during the whole of the latter part of the year, with all the surveyors present, giving the benefit of their knowledge and experience. They then deliver these assessments to the General Commissioners who, after fourteen days, cause notices to be issued to the persons assessed, giving the date of the meeting fixed to hear appeals, with instructions as to the course to be followed. The notices of appeal must be given to the surveyor ten days before the date fixed for hearing, and accounts or other evidence in support of any objections made by the taxpayer must be furnished to him before the meeting. The evidence is examined by the surveyor, who in a large number of cases interviews the appellant and settles the matter, the settlement being submitted to the General Commissioners for their approval. Where, however, the appeal meeting takes place, the surveyor attends and supports the assessment made by the Additional Commissioners. The General Commissioners, after hearing the evidence, fix the liability. From this determination there is no appeal on questions of fact, although an appeal is allowed to the high court on questions of law.

There are some complicated cases which cannot be settled in time, and accordingly belated assessments, or first additional assessments, are presented by the Additional Commissioners as late as the 5th of April in the following year. In order to provide for still further omissions which may be ascertained, a second additional assessment may be made not later than the 5th of August of the second year. At that

time the power of the commissioners to make any assessment of their own initiative expires. Nevertheless, under a special provision,1 the surveyors of taxes still have power for a period up to the 5th of April of the following year, of surcharging or making a supplementary charge in respect to all cases that have not been brought into charge in the commissioners' assessments.2 It must also be remembered that anybody who is assessed in Schedule D may, if he so desires, be assessed by Special Commissioners, instead of the local commissioners of the district. Considerable advantage is taken of this provision, but the procedure is virtually in all other respects the same. We are told, however, that the surveyors make no "vexatious demands,"3 and it is not entirely settled whether the commissioners have the power of inspecting the books. The officials inform us that, since a recent decision in which the question was indirectly involved, they have no difficulty in getting at the books in case of necessity. The law, however, does not explicitly give the power to call for books, and the point has never been directly decided by the courts.1 In the case of appeals, the commissioners can insist upon the submission of schedules of particulars, which practically amount to profit and loss accounts; and if the appellant desires to make good his claim for a reduction, he must produce his books. The accounts of business firms are now usually prepared by professional

accountants.

Before taking up the question of fraud, which was the chief concern of the committee, we shall devote a few words to the other points. As regards the treatment of income derived from copyrights, patent rights, and terminable annuities, the committee substantially held that the existing methods were unexceptionable. They also decided that there was no

1 Taxes Management Act, 1880, sec. 63.

2 Report, pp. iv, v; Appendix, pp. xxx, xxxi, and pp. lxxix et seq.

8 Evidence, p. 101.

Evidence, pp. 23, 24, and 109. In the Income Tax Report of 1906, quoted below, this matter is further explained on p. 25.

reason for changing the law with reference to the exemption of coöperative societies. Finally, they declared themselves as in the main satisfied with the system in vogue as to repayments for exemptions and abatements. Counselling only some slight changes in the forms for this purpose, they made one important recommendation, namely, that the grant of exemptions and abatements should be abolished in the case of persons residing outside of the United Kingdom; for this, as we shall see, had led to considerable fraud.

The question of allowance for depreciation gave them a little more difficulty. It will be remembered that the acts of 1842 and 1853 allowed the actual cost of repairs, but made no provision for depreciation. The practice, however, gradually became more liberal than the letter of the law, which was interpreted to include renewals; and in certain cases, especially in regard to ships, allowances were made which to some extent admitted of the writing off from profits of certain amounts toward replacement. In 1878 this practice was specifically recognized by law. But the interpretation of the new law was never very clear, although it gradually became more liberal. Thus, in the case of ships, a fixed allowance of four per cent on the prime cost of the vessel was permitted as a deduction from annual profits. In the case of printing machinery, no precise scale of allowance was laid down, but we are told that "considerable progress has been made in establishing typical rights of allowances on different classes of machinery." The amount of income exempted on account of wear and tear thus grew from a little more than four millions sterling in 1893-1894 to almost twelve and threequarter millions in 1902-1903. The concession in the act of 1878 was still further developed by administrative action in 1897, when, by order of the Chancellor of the Exchequer, it was decided that "where a claim is made in respect of the introduction of more modern machinery into a factory, no objection is to be taken to the allowance, as a deduction from the assessable profits of the year, of so much of the cost of 1 See Report, Appendix 4.

replacement as is represented by the existing value of the machinery replaced." The committee pointed out that no very definite steps had been taken by any one to make this matter public, and that most people seemed to be ignorant of it. They concluded, however, that, with due publicity, the existing law and practice would suffice. Finally, it will be remembered that, in 1894, a deduction of one-sixth from the rack-rent value of buildings had been authorized as an allowance to cover maintenance and repairs. It was supposed that this allowance was intended to include the eventual replacement of buildings. The act of 1898, however, had directed that in estimating the amount of profits for the purposes of Schedule D only the net amount assessed under Schedule A, instead of the full annual value, should be allowed as a deduction. The allowance for wear and tear of buildings was thus limited to actual expenditure for repairs. The committee now decided that, in view of the fact that the amount of wear and tear of mills, factories, etc., greatly exceeds that of buildings, the full annual value of the premises so occupied should be allowed as a set-off in computing the liability under Schedule D, instead of being restricted to five-sixths.2

The next point discussed was the question of the threeyear average system. This, it will be remembered, applied in general to incomes under Schedule D, and also to the socalled variable and uncertain incomes in Schedules A and E. The income thus ascertained by average is termed the statutory income, as opposed to the actual income. Statutory income is, as a rule, computed on a three-year average, but the profits of mines are computed on a five-year average, while railways, iron-works, gas-works, quarries, and a few other concerns are charged on the amount of profits in the preceding year. The average system, as we know, was first applied to Schedule D in the case of trade in 1842. It was extended to provisions, employments, and vocations under 1 Cf. supra, page 184.

2

3 Cf. on this whole subject, Report, pp. xiii-xv, and Appendix, p. xxxviii.

Schedule D by the act of 1853,1 and it was thereafter allowed by practice in the case of subordinate officers under Schedule E. It might, however, happen that when profits were falling off, the actual profits in the year of assessment would be less than those which would be worked out on the average system. Accordingly, section 133 of the law of 1842 provided that when the actual profits fell short of the sum assessed, they might be substituted for any estimate, whether based on the preceding year or on an average of years. This section, however, proved to be so one-sided that it was amended in 1865. The taxpayer was now required to prove, as a condition precedent to any relief, not only that his profits for the year were less than the sum assessed, but that they were less than the average of three years, including the year of assessment. It also restricted the amount of relief to the difference between an average based on the profits of three preceding years, and an average based on the profits of the year of assessment and two preceding years.2 This system gave rise to many anomalies, and led to a serious loss of revenue to the government. The shortcomings are fully set forth in a memorandum by Sir F. Gore. He took five cases, assuming that the firms originally paid taxes for the same year upon the same average, namely, £10,000; that the total profits for the three years were in each case £30,000; and that the actual profits of each firm during the year of assessment were £5000. Yet according to the law one firm would receive back nothing, while the others would receive back respectively the tax on £333, £833, £1666, and £3333. It is no wonder that section 133 is characterized as producing "the most capriciously unequal and unfair results among individual taxpayers." He also emphasized the fact that it afforded temptations to make untruthful returns, and that it placed additional difficulties in the way of detecting false returns. Following his advice, therefore, the committee recommended

1 Cf. supra, page 154.
2 Cf. supra, page 168.

8 Appendix 7, pp. 22-30.

« iepriekšējāTurpināt »