March 1, 1918.

THE COLLIERY GUARDIAN.

435

look at the words of the enactments and see what is the
intention expressed by these words.

The famous doctrine of the seventeenth and
eighteenth centuries that taxes are a quid pro quo—
payments to the State for benefits received—is no
longer accepted. As Bastable 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.

Further, Adam Smith’s first maxim, that subjects
ought to pay according to their respective abilities, is
not now taken as meaning strictly in proportion to
revenue, but that equality of taxation means equality
of sacrifice. People should be taxed, not in propor-
tion to what they have, but to what they can afford to
spend.

This last doctrine is peculiarly interesting as form-
ing the basis during recent times of attempts to obtain
revenue by progressive income taxes and death duties.

Tax Systems.

The bulk of the taxation revenue of a modern State
is raised by a judicious mixture of direct taxes on
income and property, and indirect taxes on commo-
dities. Such a combination, whilst it minimises the
effects resulting from the unpopularity of direct taxes,
and the disturbances caused to industry 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
time 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 desir-
able. A point in favour of an income tax is that the rate
may be easily adjusted to the exigencies of the moment.

A classification of taxes into real and personal has
been suggested, taxes on land, houses, and goods
being regarded as real, and capitation and income
taxes as personal. All taxes are, however, in the
last resort paid by persons. This consideration intro-
duces the question of the incidence of taxation, one
of the most baffling problems in economic science, and
to which we will revert later when discussing its prac-
tical bearings on the main question at issue

The difficulty of arranging a satisfactory classifica-
tion of taxes has led many economists to be satisfied
with arranging taxes under their separate distinguish-
ing heads:—Taxes on (1) land, (2) houses, (3) property
and capital, (4) income, (5) customs, (6) excise, (7)
communications, (8) stamps, (9) death duties. It
should be noted that capital is here included as a
source of revenue. This has peculiar significance in
its relation to mining concerns, and it will be neces-
sary to revert to it later. Suffice it to say, for the
moment, that it is generally accepted that
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.

Any tax is certain to take some wealth that would other-
wise have been diverted to the aid of production.

It will now be convenient to discuss in detail the
methods by which taxation is actually levied in this
country. For this purpose it is necessary to distin-
guish between imperial taxation and local taxation.
By imperial taxation is meant taxation levied by the
State for the benefit of the nation as a whole, by way
of income tax, taxes on land, houses, customs, excise,
etc., and administered by the Government; whilst local
taxation is raised and administered through the
medium of local authorities.

The two kinds of taxes are commonly distinguished
by the terms taxes or duties and rates respectively*

Taxation of Income.—The Income Tax Act, 1779
—introduced by Mr. Pitt—instituted a general tax on
property and employments calculated with reference
to the income for the year. Income was classified as
follows: —

(1)	Income from land—including houses, comprising
incomes of owners, tenants, and mesne lessors under
demises in consideration of fines.

(2)	Income from personal property, and from trades,
professions, offices, pensions, stipends, employments, and
vocations.

(3)	Income arising out of Great Britain.

(4)	Income from any other source. Various deductions
and abatements were allowed.

The Income Tax Act of 1803 differed from the pre-
vious Act, particularly in that no general return of
income from all sources was required, but particular
returns of income from particular sources were now
substituted. Various alterations were made to this
Act in 1805 and 1806. The unpopularity of the tax,
however, led to its repeal in 1806, 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. The tax was continued
from time to time, and was extended to Ireland in
1853. Subsequently to this, many alterations in detail
have been made. The most important are to be found
in the Finance Acts of 1894, 1897, 1898, and 1907, and
the Finance Acts of 1910, 1914, and 1915.

By the Finance Act, 1907, relief is granted in respect
of “earned income” where the total income from all
sources does not exceed £2,000. The relief is extended
by the Finance (1909-10) Act, 1910, to incomes not
exceeding £3,000. The Finance Act, 1907, also con-
tains important provisions respecting returns by
employers, extension of time for making assessments,
and recovery of penalties, etc.

By the Finance (1909-10) Act, 1910, a super tax, or
additional duty of income tax, is imposed on the total
incomes from all sources of individual, exceeding
£5,000, at the rate of 6d. for every £ of the amount
by which the total income exceeds £3,000. Also new
duties were imposed on land, as follow : —:

(1)	Increment Value Duty.—This is a duty of 20 per
cent, on the increment value of land, payable when land
is sold or leased for not less than 14 years, and when it
passes by death, and is to be charged on the increase in
site value of the land as from April 30, 1909, but the duty
is payable only once in respect of the same increment.

Full allowance is to be made for all money spent on the
land, and the duty is not to be charged upon the first
10 per cent, of increment value. Provision is made for
the periodical payment of the duty on land held by bodies
corporate.

(2)	Reversion Duty. — A duty of 10 per cent, on the
value of the benefit accruing to the lessor on the deter-
mination of a lease of land. Leases of agricultural land
and leases for not more than 21 years are exempted.

(3)	Undeveloped Land Duty.—A duty of £d. in the <£
on the site value of undeveloped land, exclusive of any
value due to minerals under the surface.

(4)	Mineral Rights Duty.—A duty of 5 per cent, per
annum on the rental value of all rights to work minerals
and all mineral wayleaves. Brick clay, sand, chalk, lime-
stone, and gravel are not minerals for the purposes of this
duty, and full allowance is made for all capital expen-
diture.

By the Finance Act, 1914, super tax was levied on
incomes from all sources exceeding £3,000. A new
duty—the excess profits duty—was also imposed by
this Act.

The income tax is now imposed annually by the
Finance Act for each year. Each Finance Act incor-
porates (mutatis mutandis) and subject to any amend-
ments, the provisions of the previous Acts, which
would include those of the principal Income Tax Acts
of 1842 and 1853. The comprehensive system of direct
taxation under the Income Tax Act has for its object
the taxation of income from every source in the United
Kingdom, and the income of residents in, from
sources out of, the kingdom.

Existing Income Tax.—The tax is divided into five
branches, having reference to the different sources of
income, and termed Schedules (A), (B), (C), (D), and
(E). Schedules (A) and (B), in combination, form the
charge upon landed property. Income from this
source is taxed where it arises, including that of land
owners, tenants, owners of income issuing out of or
charged on the land, and mortgages. Subsequently
the burden is distributed so as to fall on the persons
who are in enjoyment of the income. Schedule (A)
contains the tax on the owners of land and houses in
respect of the property in them. The rent or annual
value is the basis of the charge. Schedule (B) con-
tains the tax in respect of the occupation of land.
Rent or annual value forms the basis of the assess-
ment under the schedule, the duty being charged on
one-third of the annual value.

The assessment and collection under these schedules
is in the regulation of the “general commissioners”—a
short term for the commissioners for the general pur-
poses of the Acts, who are chosen from the Land Tax
Commissioners. The commissioners appoint the
assessors. The assessors give the necessary notices to
the occupiers of lands and houses. The occupiers
make returns of rent or value. The returns are
inspected by the assessors, and eventually are settled
by the commissioners, and due notice having been
given and time for appeal allowed, the commissioners
sign the assessments in duplicate, and deliver one of
these to the local collector, together with a warrant
for collecting and recovering the duties.

Although the assessments under these schedules are
made annually, the valuations are allowed to stand
as a rule for five years. In a year when no new valu-
ation is required, provision is made in the Finance Act
for that year, that the annual value for the previous
years shall be taken as the annual value for that year.
The surveyors then act as assessors in lieu of the
ordinary local assessors.

Schedule (C) includes income from any public
revenue, imperial, colonial, or foreign.

Schedule (D) relates to income from professions,
trades, and other occupations, and income not included
in the other schedules. It is divided into six cases,
having reference to income from the following
sources: —

Case i.—Trades, manufactures, and adventures.

Case ii.—Professions, employments, or vocations not
contained in any other schedule.

Case Hi.—Profits of an uncertain annual value not
charged in Schedule (A).

Cases iv. and v.—Income from securities and posses-
sions abroad.

Case vi.—Annual profits or gains not charged under
any other schedule.

Profits under Cases i., ii., and v. are charged upon
an average of three years; profits under the other
cases, as a rule, on the amount received in one year.
The assessment, based upon a return of income from
the taxpayer, under this schedule is in the hands of
additional commissioners chosen for the purpose by
the general commissioners.

The taxpayer may, however, on due notice given,
require the assessment of his profit to be made by
“special commissioners”—a short term for commis-
sioners for special purposes—in lieu of the additional
commissioners. These special commissioners, besides
making assessments on other cases, assess the super
tax, and have power to hear appeals against assess-
ment of mines, quarries, etc. Schedule (E) relates to
persons in the employment of the State, or in other
public employment of profit.

Under Schedule (A) (No. III.) of the Income Tax
Act, 1842, income tax is chargeable on mines and
minerals as follows : —

The annual value of all the properties hereinafter
described shall be understood to be the full amount for
one year, or the average amount for one year, of the
profits received therefrom within the respective times
herein limited :—

First.—Of quarries of stone, slate, limestone, or chalk,
on the amount of profits in the preceding year.

Second.—Of mines of coal, tin, lead, copper mundic,
iron, and other mines, on an average of the five pre-
ceding years, subject to the provisions concerning mines
contained in this Act.

and the said charge shall be made on the said profits
exclusively of any lands used or occupied in or about
the concern.

Under the Income Tax Act, 1860, persons assessed
in respect of any quarry of stone as slate, or mines,

may appeal against the assessment to the commis-
sioners for special purposes instead of the commis-
sioners for general purposes.

This leads to the consideration of the distinction in
English law between a “ quarry ” and a “ mine.” A
‘ ‘ quarry ’ ’ is held to be “a thing ’ ’ which is worked
by taking away the surface and not by sinking a shaft,
in other words, an “open working.” A “mine” is
“ an underground working.”

In contradiction to this rule of English law, a slate
quarry is held to be assessable under Rule 1 as a
quarry, and not under Rule 2 as a mine, although the
< slate be obtained by underground working. The
statute imposes the tax upon what is worked, and not
on the mode of working.

It is important to note here the legal decisions given
with reference to various appeals against assessments
under the foregoing rules, including the following: —
Knowles v. McAdam (1877); Miller v. Fairie (1878);
Coltness Iron Company v. Black (1881); Wakefield
Rural District Council v. Hall; Addie v. Solicitor of
Inland Revenue (1875); Benner v. Bassett Mines
Limited (1912); Morant v. Wheal Grenville Mining
Company (1894). The net result of all these decisions
is that no deduction may be allowed on account of
capital expenditure.

Rating of Mines.

The rating system of England and Wales is a very
simple form of taxation in so far as rates are levied
in respect of immovable property. There are, how-
ever, considerable complications in the system which
arise chiefly from two causes: (1) The various areas
for which rates are levied; (2) the different charges
upon various classes of property according to their
nature.

Under the Poor Relief Act, 1601, poor rates were
levied by overseers on every parochial inhabitant and
occupier of land, houses, tithes, coal mines, and sale-
able underwoods, according to the ability of the parish.

The express mention of coal mines as liable to
assessment was held by the courts to exclude other
kinds of mines, and these were not made ratable until
the Rating Act of 1874.

In 1836 the Parochial Assessments Act defined the
standard by which the value of property for rating
purposes should be determined as
an estimate of the net annual value of the several heredita-
ments rated thereunto—that is to say, of the rent at which
the same might reasonably be expected to let from year
to year, free of all usual tenant’s rates and taxes, and tithe
commutation rent charges, if any, and deducting there-
from the probable average annual cost of the repairs,
insurance, and other expenses, if any, necessary to main-
tain them in a state to command such rent.

To constitute liability to be rated there must be
occupation in the sense of actual possession. The
occupiers of a mine are ratable when the mine is being
worked, even if the royalties payable to the owner
absorb all the profit, and no surplus profit for the
occupier. The occupation need not necessarily be
commercially profitable; it is enough if it be bene-
ficial. It is ratable whenever it is of value. On the
other hand, there is no liability to be rated whilst
sinking pits; liability is incurred when the mine is
being worked and is productive. If a mine is
exhausted and is no longer being worked, even though
minimum rent is being paid to the lessor, the mine
owner is not liable to be rated.

If a mine is at a standstill, and it is not known when
working will recommence, the mine becomes ratable
as a warehouse for the machinery and plant which is
being kept in order.

Apart from the mine itself, and the rights inci-
dental to occupation, the occupier is liable to be rated
for surface land and works, including machinery and
.plant, even though the occupier himself may have
erected the buildings, machinery, or plant, he is liable
to be assessed on the improved value, the theory being
that he will be remunerated by the greater quantity of
coal which can thereby be raised. The following are
the circumstances in which machinery and similar
property are ratable: —

(1)	Things are liable to be rated which, though capable
of being removed, are yet so far attached that it is
intended that they should remain permanently connected
with the undertaking, or with the premises used with it,
as essential to its working. Regard is to be had to the
degree of annexation and the object of annexation, i.e.,
whether permanent or temporary, and only for the enjoy-
ment of the chattel itself. If things are annexed, though
but slightly, with a view to the enhancement of the inheri-
tance and the permanent improvement of it, they may be
considered as part of it, for which a hypothetical tenant
would be ratable. This is the case if it is reasonable to
suppose that the hypothetical landlord would provide the
things in question.

(2)	Machinery or chattels reasonably likely to be found
by the hypothetical tenant, being not essential to make
the premises fit for occupation, are not liable to be rated
or to be taken into consideration.

(3)	Machinery and plant, although not liable to be rated
as personal chattels, or because not part of the ratable
hereditament, may be taken into account as enhancing the
ratable value of the hereditament (i.e., by increasing the
rent which the hypothetical tenant would give) when such
things are there for the purpose of making, and do make,
the premises for the particular purpose for which they are
used, even though such machinery and plant are not
physically attached to the premises.

Machinery and plant are not ratable if they are
only of value when used in connection with a mine
which is of no present value, as where they are used
only for the purpose of endeavouring to pump out the
water from drowned-out seams of coal. In such cases
there is no beneficial occupation. The present value is
the basis, not some possible future and contingent
benefit.

Ratable Value.

In every rate book there is a column for the gross
estimated rental which has been defined as the
rent at which the hereditament might reasonably be
expected to let from year to year, free of all usual
tenant’s rates and taxes, and tithe commutation rent
charges, if any. The rate is, however, computed upon