Imagens das páginas
PDF
ePub

TAXATION

of Finance, §§ 83, 84, 97, 108). In fact, as Bastable (bk. iii. ch. i. § 4) states, "The equivalence between the amount of taxes paid and the benefits obtained is rather to be found in the case of the community as a whole than of any special part of it."

[ocr errors]

For the taxation required to defray the greater part of the governmental expenditure of a modern state, some other principle of distribution than payment in proportion to services received (called the Social Dividend theory, see F. A. Walker, Political Economy, § 583) must therefore be sought. It is to be found, as Adam Smith indicated, in payment according to respective ability, a phrase which is, however, not now interpreted as implying strictly in proportion to revenue, for equality of taxation means (J. S. MILL, Political Economy, bk. v. ch. ii. § 2) equality of sacrifice. To secure this equality the necessaries of life should go free, superfluous consumption only being charged. People should be taxed, not in proportion to what they have, but to what they can afford to spend" (Ibid. § 4). The exemption of necessaries in a country with a system of poor-relief would seem to be a matter of course, for "If government risks some of the evils of communism in order to secure the poorer citizens from want of the necessaries of life, consistency requires that it should not endeavour to take by taxation from the poor who remain independent a part of what it would have to give them if they sought its aid" (SIDGWICK, Elements of Politics, p. 174). In opposition to this practical view of the exemption of the minimum of existence, see the view in CоHN that the state is part of the necessaries of life, and its demands therefore part and parcel of the demands of subsistence (Science of Finance, §§ 222, 242). In the Final Report of the Royal Commission on the Financial Relations between Great Britain and Ireland, dated 1896 [c. 8262], one of the conclusions drawn is that identity of rates of taxation does not necessarily involve equality of burden. This conclusion is based partly on arguments that what may be luxuries or superfluities in one country are necessaries in another (e.g. p. 40). Whether equality of sacrifice does not require that taxation should be progressive, i.e. that the percentage of charge should rise with the amount of the income, is a problem practically attempted to be solved in recent times by progressive income taxes and death duties. This attempt is due perhaps rather to financial necessity and the growth of democracy than to the force of economic reasoning (see GRADUATED TAXATION). (See Edgeworth, "The Pure Theory of Taxation," Economic Journal, vii. 550, for the view on utilitarian grounds, that minimum, rather than equal, sacrifice is the sovereign principle of taxation.)

[ocr errors]

519

A

TAX SYSTEMS.-Taxation based on the foregoing general principles may be raised under various systems. The most simple and logical plan would seem to be to claim from each taxpayer his contribution in one amount having reference in some way to his income. But such a method, though often advocated by theorists, as also have been single taxes on expenditure, land, rent, realised property, and capital (see IMPÔT UNIQUE; SINGLE TAX), has not in practice been adopted by any country. At the present time there is a strong agitation in America in favour of a single tax on landvalues. The many special objections, fiscal, political, moral, and economic, to a tax of this description (see Seligman, Essays in Taxation, pp. 64.94), would not apply to a single tax on income, but the difficulty of making a correct assessment, and the irritation that would be caused by the collection of such a large and undisguised impost, are sufficient obstacles to a successful attempt in this direction. multiple or plural system is thus practically necessary. The taxes forming it may be either direct," on income-rent, interest, earnings --and property; or "indirect," on commodities (see, however, DIRECT TAXATION, INDIRECT TAXATION, for various interpretations of these terms). The bulk of the taxation revenue of a modern state is raised by a judicious mixture of both forms, the intermediate class of charges on transfers, communications, etc., being used as supplementary only. Such a combination, whilst it minimises the effects resulting from the unpopularity of direct taxes, and the disturbance of industry caused by indirect, has an additional advantage in its elasticity, which makes it possible to adjust receipts to expenditure without undue inconvenience to the taxpayers. "The steady growth of the receipts from commodities in times of prosperity, the definite yield of direct taxes, and the power of altering the rate of the income-tax, taken together, provide the conditions for securing such growth or contraction of receipts as may be thought most desirable (Bastable, Public Fin., bk. iii. ch. iv. § 12. See, however, Blunden. "The Position and Function of the Income-Tax in the British Fiscal System," Economic Journal, ii. 637, for an objection to the use of the income-tax in normal times to adjust taxation). Plehn, Introduction to Public Finance, pp. 148-168, states that the great reforms of 1893, made under the leadership of Dr. Miguel, place Prussia far in advance of all other countries in the theoretical perfection of her tax system. In England, he says, special difficulties and objections have been met with little reference to any general plan, the result being a steady approach to a better state of affairs, with only an occasional intensification of existing evils, due to the attempt to cure symptoms rather than to

[ocr errors]
[blocks in formation]

seck the underlying causes of the trouble. He animadverts strongly on the entire absence of system in American taxation.

This

CLASSIFICATION AND INCIDENCE. Before proceeding to consider the particular charges which the threefold system of taxation indicated above might embrace, it is desirable to allude to the difficulty experienced in making a satisfactory classification of taxes. Besides the varying division into "direct" and "indirect," a distribution of taxes into "real' and "personal" is sometimes found, -taxes on land, houses, and goods being regarded as "real,' and capitation and income-taxes as "personal." This distinction is inconvenient for purposes of classification, all taxation, including that nominally charged on things, being in the last resort paid by persons. Owing, however, to the frequent possibility of shifting the burden as originally imposed, the determination of the actual person by whom a particular tax is ultimately paid is a very difficult problem. Adam Smith, holding that every tax must be finally paid from one or other of the different sources of revenue mentioned by him-rent, profit, and wages-or from all of them indifferently, proceeded to group taxes under those three heads, with sub-divisions. classification, which English economists have endeavoured to follow as far as possible, is also open to the objection that taxation falls on persons, not things; persons, moreover, often receiving their income from more than one of the different economic shares in distribution mentioned. Further, the ultimate source of taxation is not now deemed to be revenue only, but the collective wealth of the country, including, at any given time, both capital and revenue. "To provide that taxation shall fall entirely on income, and not at all on capital, is beyond the power of any system of fiscal arrangements" (J. S. Mill, Principles, bk. v. ch. ii. § 7). "Any tax is certain to take some wealth that would otherwise have been devoted to the aid of production, and also some that, if left to the taxpayers, would have been consumed unproductively. . . . The real aim should be to so direct it [taxation] as to interfere to the smallest extent with the action of the forces that promote accumulation" (Bastable, Public Fin., bk. iii. ch. ii. § 5). The defects in the economical mode of classification have led to what Bastable (§ 10) terms the "empirical" or "fiscal" one, which takes the actual kinds of taxation and arranges them in the most convenient way.

The categories thus formed, mostly by German economists, vary considerably. Cohn adopts WAGNER'S (Finanzwissen schaft, § 451) classification into taxes on earnings, on possession, and on consumption, "with the thought that it may serve the purpose of bringing uniformity and agreement into the systematic treatment of taxation"

(Science of Finance, § 332). But whatever broad divisions may be adopted, the charges imposed in a modern state usually range themselves under some of the following heads: -Taxes on (1) land, (2) houses, (3) property and capital, and (4) income; (5) customs, (6) excise, (7) taxes on communications, (8) stamps, (9) death duties.

In any consideration of the best mode of combining these different kinds of charges in order to produce equality of taxation, it should be borne in mind that, as before indicated, the real and the apparent incidence of a tax often differ. Reference has been made below to the conclusions arrived at with regard to the incidence of different kinds of taxes by Prof. Seligman, in whose essay "On the Shifting and Incidence of Taxation" (American Economic Association, VII., Nos. 2 and 3, 1892) all the theories previously advanced are examined. In certain cases the views of Bastable (Public Finance) are given. But whatever theory be adopted, it is important to observe that in practice the apparent pressure of the burden may be a factor of greater moment than the actual (see e.g. Report from Select Committee on Town Holdings, pp. 214, 292, p. xviii.).

1. TAXES ON LAND.-These, which are of very great, if not of the greatest, antiquity as a source of revenue, were originally charged by reference either to the gross produce of the land cultivated, as in ancient Egypt, or to its area, as in Rome and England at one time. The former method was partly adjusted to the productiveness of the soil, but the latter, which is still adopted in some of the British colonies, took no account whatever of the differences in fertility. A moderate approach to equality of charge was indeed sometimes (e.g. Humbert, Essai sur les Finances et la Comptabilité chez les Romains, note 899) made by arranging the lands in classes taxed at different proportions or rates. Even a classification of this kind is but a rough and ready mode of reaching the true value of the land for taxation purposes-that is, the net yield after the expenses of cultivation have been deducted. To ascertain the net yield, a minute system of valuation is necessary, the valuation being based either, as in France (where it is preceded by CADASTRAL SURVEY), on estimates of produce, prices, and cost of cultivation, or as in England, for the purposes of the INCOME TAX, on the rent at which the land is worth to be let. The tax raised on the valuation may be either "apportioned" or "rated." In the first case, a total fixed sum is collected from each district, the lands being charged at the pound rate necessary to produce it (e.g. the English LAND TAX, the French Impôt Foncier); in the second, all the lands of the country are charged at a fixed pound rate or percentage (e.g. the English income tax, Sch. A). Cohn approves the former system (Science of Finance,

377) as affording the local authorities a support and standard in making correct assessments. It may, however, become inelastic, and practically, as in England, reduce the land tax to a rent-charge. Under such a system, besides, the burden tends to become unequal in different

TAXATION

districts, and this inequality has serious consequences where, as in France, local revenue is raised by additional charges (centimes additionels) proportioned to the state tax (LeroyBeaulieu, Science des Finances, 1892, i. p. 321). The amount of revenue now raised by the taxation of land is in most countries considerable, the tax possessing special advantages as a source of income for local purposes (see Taxation of Lands and Buildings in European Countries, etc., P.P. [c. 6209] and 181/91).

If a tax on landed profits or property be a part of a general income or property tax (e.g. the English Income Tax, Schedule A), it cannot be shifted and will be borne by the landowner (Seligman, Incidence, p. 96). If imposed as an exclusive tax on cultivating owners, it will even then be apt to remain where first put (pp. 97-99). If charged on the tenant-farmer (as the English local rates are), the tax will fall on the landowner in the case of pure competitive rents, and will be divided between landowner and tenant in the case of non-competitive rents (p. 100).

2. TAXES ON HOUSES.-Houses were originally taxed only as included with the land on which they stand-their separate assessment being a development of taxation. In England the HEARTH MONEY or chimney tax of feudal times was succeeded by the window tax, finally replaced in 1851 by the INHABITED HOUSE DUTY. Houses, including in the term shops, factories, and premises generally, invite taxation by the ease with which they can be assessed, and the evidence they afford of the wealth of the occupier. Like land, they are therefore usually made to contribute largely to both imperial and local revenue. Bastable (The Taxation of Ground Rents, Economic Journal, iii. 255) argues against the proposal to charge a special tax on the ground rent of houses.

A tax on houses levied according to rental value and assessed on the occupier (as the Inhabited House Duty and local rates are in England) rests in the main ultimately on the occupier (Seligman, Incidence, pp. 117-128. See however Bastable's criticism, Public Finance, 3rd ed. bk. iv. ch. ii. § 5; also G. H. Blunden, Distribution of Rates and Taxes, Journal of Royal Statistical Society, 1896, p. 644).

3. TAXES ON PROPERTY AND CAPITAL.Except in the shape of lands and houses, property, including its interest-bearing form, capital, is now rarely made a subject of taxation apart from death duties or a general income tax. The reason is no doubt mainly the practical difficulty of correct assessment, resulting from the varied forms that, in civilised countries, property takes, and the consequent facilities for evasion. The almost invariable history of the general property tax, common in the Middle Ages, is that, originally developed out of a land-tax, it has in the course of time reverted to its primitive form, personalty having gradually slipped out of assessment (see CATASTO). It has therefore, in most countries, been supplanted by separate taxes on land, houses, wages, profits, interest, etc., or in quite modern times by an income-tax (Seligman, Essays in Taxation, pp. 23-61). In Switzerland and the United States, however, the

521

property tax is still used for cantonal and state, as opposed to federal, purposes. In France the impôt sur les valeurs mobilières is found as a special charge on income derived from capital in shares of companies, the alleged justification being that the holders are idle capitalists whose liability is limited (Leroy - Beaulieu, Science des Finances, i. p. 418). In England the small stamp duty recently charged on the share capital of companies is intended rather as a check on excessive nominal capital than a tax on a form of wealth. Prussia and Holland have recently introduced special taxes on property (Seligman, Essays in Taxation, 322-335; H. B. Greven, Fiscal Reform in Holland, Economic Journal, iii. 534; A. J. Cohen Stuart, Progressive Taxation in Holland, Economic Journal, viii. 325, and art. FINANCES, NETHERLANDS). Cohn maintains that it is the office of the property tax to fill up a gap left by the income tax through its inapplicability to property which yields no profits, such as a private picture-gallery. It is only when applied to such property that it is anything more than an income tax under a different form (Science of Finance, §§ 241, 242, 353, 354). A tax on personal property, which is not capital, cannot be shifted. A tax on mortgages or other loanable capital will as a general rule fall on the borrowers (Seligman, Incidence, p. 139).

[ocr errors]

4. TAXES ON INCOME.-Income is now so generally recognised as the normal source of taxation that it is somewhat surprising to find that it has been only after property and other taxes have failed to produce the revenue required that the plan of a direct tax on income has been adopted. Three of the com. ponent parts of income-rent, wages, and profits-had indeed early been laid under contribution by means of land taxes, poll taxes, and licences to trade, the last mentioned being now represented in England by the licences required by auctioneers, etc., but the first tax on income as such was the invention of W PITT in 1798. The unpopularity of this tax led to its abolition in 1816, but it was revived in 1842 for purposes of fiscal reform, and now may be assumed to have taken a permanent place in the English system of taxation. (For the practical difficulties in applying the progressive principle to the British Income Tax, see Blunden, "A Progressive Income Tax," Economic Journal, v. 527. Burns, "A Graduated Income Tax," Westminster Review, Nov. 1896, suggests how the difficulties may be overcome.) In France there is at present no income-tax (see Leroy-Beaulieu in L'Économiste Français, 8th February 1896 et seq., for the tax recently proposed), but its place is partially taken by the PATENTE, introduced in 1791, under which trades, occupations, and professions are ar ranged in certain classes with a view to a rough approximation to a charge on the

[blocks in formation]

amount of profits. In Germany and Austria taxes on industry are found, modelled more or less on the Patente (see J. A. Hill, "The Prussian Business Tax,' Quarterly Journal of Economics, viii. p. 77. This tax is now devoted to local purposes).

[ocr errors]

Austria has in addition a progressive general income tax, based on individual economic ability (R. Sieghart, The Reform of Direct Taxation in Austria, Economic Journal, viii. 173). Italy has a heavy income-tax of the English type, but with differentiation of the classes of income, and the Swiss Cantons supplement their property taxes by charges on income, in many cases progressive (see Palgrave, "Progressive Taxation as levied in Switzerland,' Journ. Stat. Soc., 1888). In America an income-tax was imposed for five years from 1st January 1895 (Seligman, "The American Income Tax," Econ. Journal, iv. p. 639), but was held by the Supreme Court to be unconstitutional [See INCOME TAX STATISTICS, App. to Vol. II.].

"

A general income-tax, being simply a combination of taxes on the separate ingredients of income-rent, interest, profits, and wages,-its incidence as a whole must depend upon the laws applicable to each separate part. Speaking broadly, it cannot be shifted (Selig. man, Incidence, p. 178). A tax on profits will, if confined to the profits of some particular occupation, in the long run, be shifted to the consumer. If it extends to all profits, it will be borne by the producer (pp. 164167). A trade-license tax, if fixed and high, will tend to be borne by the producer (p. 169). Given a monopoly in a trade, any fresh tax (whether imposed by way of license or otherwise) will fall on the producer (pp. 160, 162, 168). A special tax on professional men (e.g. Solicitor's Certificate Duty), will not be shifted (p. 172). A tax on wages will fall on the workmen, unless as the result of a long and fierce struggle it can be shifted to profits (p. 176).

5. CUSTOMS.-Taxes on commodities, or on consumption, may be levied either as customs at the ports or frontier, as excise with supervision over the producer, or by a state monopoly of production. The tax in all three cases is intended to fall on the consumer, the fundamental principle of a tax on consumption being (Cohn, Science of Finance, § 359) "that it accepts the demand of the taxpayer for consumable goods as the standard by which to measure his ability to contribute to the public expenditures." As regards customs (see CUSTOM; CUSTOMS DUTIES; IMPORT DUTIES), England is almost the only country that uses such duties purely for fiscal purposes, and confines them to luxuries. In France, food, raw materials, and manufactures are all subject to import duties, and there is no due relation, such as exists in England, between the customs and the internal taxes. A similar system prevails generally among the other continental nations.

A tax on either absolute necessities or expensive luxuries, whether imposed as an import or an excise duty, will, on the assumption that a corresponding rise in price will not affect demand, be shifted in its entirety to the consumer. A similar tax on comforts and minor luxuries, that is, the general mass of commodities, will be divided between the consumer and the producer in proportions varying with the elasticity of the demand and the ratio of produce to cost (Seligman,

Incidence, pp. 147-152. See also Bastable, Public Finance, pp. 347-351, 509-511).

Export duties, in early times a part of the customs, and popular as a charge (as then believed) on foreigners and a restriction on exportation, are now found only in countries with exceptional products, as, for example, India with opium and rice, Brazil with coffee, the West Indies with sugar (see EXPORTS, DUTIES ON).

In such cases the tax may be partly passed to the foreign consumers. Otherwise, an export duty will be chiefly paid by the country imposing it (Bastable, Public Finance, bk. iv. ch. vii.).

6. EXCISE.-An EXCISE on similar commodities produced within the country should, unless protection rather than revenne is aimed at, or unless (Cohn, Science of Finance, §§ 366, 368) there are insuperable practical difficulties, accompany the imposition of customs duties at the ports or frontier. Thus in England each customs duty has its countervailing excise duty if the article taxed is capable of production in this country, except indeed, as is the case with tobacco, its production here is forbidden. On the other hand, if it is intended to raise revenue by the taxation of commodities produced at home, a corresponding customs duty must be charged on the same commodity if imported (see COUNTERVAILING DUTY). In England the internal taxation of commodities is confined to luxuries, and is for imperial purposes only. In France such taxation is applied to necessaries, -e.g. salt, food, and fuel-as well as luxuries, and is used for municipal as well as state purposes (see INTERNAL CUSTOMS AND TOLLS; LOCAL FINANCE; OCTROI). A system of internal taxation somewhat similar to the French prevails on the continent generally.

The inclusion of necessaries is due rather to the inadequacy of other sources of revenue than to a determination on abstract grounds to tax the poorer classes. The selection of articles for internal taxation depends mainly on the amount of revenue required to be raised by this means. For administrative reasons the articles should be few in number, and if a large revenue is needed they must be in general use among the people. In order not to infringe the fourth of Adam Smith's maxims, they should be such as will suffer least from excise restrictions on production; and for a like reason raw materialsthe duties on which would have to be advanced for a long period-should be excluded from the list. By a state monopoly of production, as existing e.g. in France for tobacco, probably the largest revenue may be raised with the smallest amount of restriction. Under such a system an AD VALOREM DUTY becomes practicable (Cohn, Science of Finance, § 379). But where, as in the case of alcohol, it is desirable to secure the continual development of new processes, production is best left to private individuals. It must be remembered that in the taxation, whether by monopoly or a duty.

TAXATION

A

of tobacco, alcohol, and OPIUM, there is a moral ground, real or alleged, the object being not only to raise a revenue but to check the consumption of an article regarded as tending to be injurious (Bastable, "Taxation through Monopoly," Economic Journal, i. 307). moral ground may also partly be alleged as the origin of the ASSESSED TAXES in England, which were chiefly of the nature of sumptuary charges. Such as survive-licences for carriages, men-servants, etc.-are now collected as excise, and paid over for local purposes. Taxes of this kind are an unpopular and decaying form of impost, both here and abroad (see Leroy-Beaulieu, Science des Finances, i. ch. ix.). They cannot be shifted. Cohn regards the English system of consumption taxes as one-sided, in that it charges the majority of the population for the benefit of that portion which does not smoke or drink. He, writing in 1889, would wish to see an increase in the scope and number of our taxable articles, and a more adequate equalisation of the burden by further special taxation of the upper classes (Science of Finance, § 365).

7. TAXES ON COMMUNICATIONS AND TRANSPORT.-In England the POST OFFICE, a state monopoly, is carried on at profit, and the surplus, being applied as revenue, is a tax on commercial and private correspondence. A higher charge than is necessary to meet expenses is a check on trade, and an undesirable form of taxation. In other countries the postal service is generally carried on at a loss; and this is the case also with another form of government enterprise-state railways, the receipts from which rarely cover expenses, including interest on debt. The Prussian railways are a conspicuous exception, and the profit arising from them is a tax on transport. The making of such a profit was no part of the original policy of state acquisition, but Cohn ("Railways and Waterways in Germany," Economic Journal, iv. p. 543) speaks of the surpluses with approval as a kind of taxation which affects those strata of the population which are most able to pay taxes. As regards railways in private hands, a small amount of revenue is raised in England by the Railway Passenger Duty, a special tax on part of the gross receipts from passengers. The present law is founded on the report of the select committee of the House of Commons appointed in 1876, which however recommended the repeal of the duty whenever the state of the public revenue would permit (pp. 312, 376). In France a considerable sum is raised by a tax on goods and passengers carried on the railways, and in America there are state taxes on either the gross or net earnings of the lines. In so far as these taxes fall on goods and travellers on business (see Bastable, Public Finance, bk. iv. ch. viii. § 2), they act in restraint of trade, and are undesirable.

8. STAMPS. This term denotes merely the

523

mode in which certain taxes are collected. When charged in respect of law proceedings and juridical acts, STAMP DUTIES, so far as they exceed the level of fees for services rendered, are open to objection, the administration of justice being a general interest affecting rich and poor, litigants and non-litigants, alike. In England and France a small amount only of revenue is raised in this manner, but in Germany the fees contain a larger tax element. As charges on commercial transactions and transfers of property, stamp duties are, however, largely used in England, France, and Italy. They are easy to collect, and although tending to check trade and production, are, when charged at low rates as in England, open to little practical objection as a subsidiary source of revenue.

According to Bastable (Pub. Fin., bk. iv. ch. iii. § 6), stamp duties on commercial instruments, such as bills and receipts, may be regarded as falling on business gains, whilst those on transfers of land and other property are probably divided between buyer and seller. 9. DEATH DUTIES. SUCCESSION DUTIES. -Duties on the transfer of property from the dead to the living, though theoretically objectionable as tending to fall on capital, and thus to retard the growth of wealth, are almost universally regarded as an essential constituent of a well-arranged system of finance. In practice, so long as small estates passing to widows and children are lightly charged, and adequate measures are taken to prevent evasion, perhaps the only limit to the rate of duty is the danger of diminished productiveness through either genuine gifts inter vivos, or, eventually, the stoppage of accumulation. Seligman, discussing the various arguments for an inheritance tax, as death duties are called in America, advocates a charge of this kind as a supplement to an income or general property tax, in order to reach the real faculty or ability of the individual, which has been increased by an accidental or fortuitous receipt. He also regards the tax as a convenient method of applying the principle of differentiation in the taxation of income derived from property and labour (Essays in Taxation, 121-135. also Max West, The Inheritance Tax). principle of graduation according to the amount of property left by the deceased has now been adopted in England, more especially since the introduction of the estate duty (Finance Act, 1894), (38th Report of Commissioners of Inland Revenue, 19-28; Seligman, Essays in Taxation, 307-311; Bastable, Pub. Fin., bk. iv. ch. ix. §§ 4, 6). A tax on inheritances or bequests cannot be shifted.

See The

[See books mentioned in the following: M'Culloch, Literature of Political Economy (1845), pp. 318-349.-Ely, Taxation in American States and Cities (1888), pp. 94-101.-Cohn, Science of Finance (1889), American translation, 1895, §§ 819.-Bastable, Public Finance (1903).- Cossa, Introduction to study of Political Economy (1893). Seligman, Essays in Taxation (1895),

« AnteriorContinuar »