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The English Income Tax; with special reference to Administration

and Methods of Assessment. By JOSEPH A. HILL, Ph.D. (New York: for the American Economic Association, The Macmillan Company; London: Swan, Sonnenschein & Co.

1899. Pp. 155. 1$.)

This work is the outcome of a visit to England in 1897, when Dr. Hill, at the suggestion of the Massachusetts Commission on Taxation, undertook an investigation of the practical workings of the English Income Tax on the spot. The report then written and presented, but not published, has been expanded by the inclusion of the results of a subsequent study of the literature of the subject; but the monograph is still mainly devoted to the branches of the subject referred to in the sub-title. There has been no attempt to write an exhaustive treatise, several important spheres of inquiry and discussion in relation to the ethical and legal bases of the tax being purposely left untouched. Such matters as the taxation of foreigners, the equal assessment of the income from property and the earnings of industry and skill, and the suggestions for the full adoption of the principle of progression, are passed by as outside the scope and limits prescribed for himself by the author. As already indicated, it is the practice rather than the theory of the income tax with which he has chiefly concerned himself, and within these limits his success is undeniable.

Dr. Hill has divided up his matter into seven chapters headed respectively (1) Introduction; (2) the general character of the assessment; (3) the machinery of assessment; (4) the process of assessment; (5) exemptions and abatements; (6) the general character of the tax service; and (7) the growth and completeness of the assessment. The key-notes of the work are sounded in the introductory chapter, which concludes with the observation that “the success of the tax in surviving the test of experience is in no small degree due to the method by which it is assessed, and the manner in which the assessment is carred out through the agency of competent officials.” The method here referred to and described in chapters 2 and 5, is that of the taxation of the income at its sources, the advantages of which, in respect of productivity and avoidance of a general disclosure of income, secure the admiration of Dr. Hill as they have previously secured that of other American economists. But the avoidance of a full disclosure, formerly one of the best features of the system, has ceased to be a strong point in it. Owing to the extension of the abatement limit to £700, probably five-sixths of the persons assessed are under the necessity of making a full statement of income in order to obtain the relief to which they are entitled; whilst large numbers of persons who are not liable to the tax at all are placed under the like disability by the stoppage of the tax from their income from investments. Dr. Hill's observations on this topic (see chapter 5) appear to us to be both just and weighty.

Chapter 4 contains a description of the processes of assessment, which, considering the intricacy and complexity of the subject, is surprisingly clear and complete. The writer of it was fortunate enough to secure the guidance of competent officials in threading the mazes of the system; but he has obviously brought a highly-trained intelligence to bear, and has turned his opportunities to excellent account.

Perhaps the most interesting portion of the work is the exposition of the inner workings of the administration of the tax contained in chapters 3 and 6. We learn that the historic and universal fear of the rapacity of the tax officers of the central government induced the British Parliament to place almost all the legal authority and power in the hands of local commissioners and their officers. But the increasing magnitude of the business, and still more its extreme complexity and delicacy, have caused it to completely outgrow the means of administration provided, and the direction and management have, from sheer force of necessity, gradually passed into the hands of the surveyors of taxes and their clerical staffs. With a truly British disregrad of the necessity of adjusting the legal framework to the facts of daily practice, Parliament still neglects or declines to remedy this anomalous state of things, finding their justification in the fact that the resulting example of government by compromise is much more satisfactory than could be expected. All this is clearly brought out by Dr. Hill, who has been the first to lift the veil of official reserve which has hitherto been kept somewhat closely drawn over this subject.

As this work is likely to become a book of reference, and as its merits are such as to lead us to anticipate the need for a second edition at no very distant date, it may be worth while to draw atten. tion to a few passages in which some slight emendation appears to be required. On p. 262, the statements contained in the fifth paragraph need modification, the land and buildings used for industrial and business purposes being usually assessed under Schedule A, and not under Schedule D. The exceptions are, however, of sufficient importance to render their enumeration desirable in the next edition. The paragraph which follows describes Schedule C too briefly, and needs amplification. On pp. 276 and 277, it is stated that the general commissioners are appointed by the Land Tax Commissioners from their own number. This is very largely the case, but their range of choice is not limited to their own body, and as a matter of fact other appointments are often made. The remuneration of assessors is not usually graded according to the amount of work to be done, as stated on p. 279; it is based on the poundage payable at the time the change to salaries took effect some ten years ago. In relation to the assessment of property (p. 287, &c.), it should be stated that the process of assessment is only repeated at intervals of five years, and that the returns of rent then called for are used for charging the Inhabited House Duty as well as the Income Tax. In the Metropolis they also form the basis of charge for all the local rates and the domestic water rental; and as all these charges fall upon the occupier he is not quite so disinterested a party as is suggested on p. 288. With regard to appeals, the statement on page 328 that the general commissioners never issue precepts for detailed accounts and information is somewhat too absolute. The notices of assessment issued by the clerks to the commissioners usually contain an instruction to intending appellants which is in the nature of a general precept; and in some important districts special precepts are issued to particular appellants at the request of the surveyors when considered necessary, or by the Surveyors on behalf of the commissioners. It is moreover quite unusual, for the commissioners to make any sort of reference to their power of requiring the verification of appellants' statements and accounts on oath. The bar to the employment of solicitors in Income Tax appeals, referred to on page 330, has recently been removed. The commissioners “may” permit lawyers to appear for clients, and usually do so when requested. But such requests are not yet very numerous. Finally, it may be worth while to point out that the pensions of the surveyors of taxes are not fixed at one half of the salary annually received in the two years immediately preceding their retirement (p. 356). In common with those of other civil servants, their pensions bear a variable proportion to the salary according to the length of service of the pensioner ; rising, according to a statutory scale, to a maximum of two-thirds.

The discovery of a few mistakes in matters of detail scarcely at all diminishes our admiration of the book as a whole. Such slips are inevitable when so intricate and technical a subject is approached from the outside. They do not affect the value of any of the author's generalisations, which appear to display his possession of a penetrating mind and a well-balanced judgment. We find ourselves in almost complete agreement with his conclusions, and, not less for English than for American readers, consider the work a highly illuminating one within the regions traversed.

G. H. BLUNDEN

The Theory of International Trade, with some of its Applications

to Economic Policy. By C. F. BASTABLE. Third edition,

revised. (London: Macmillan and Co. 1900.) La Théorie du Commerce International. Par C. F. BASTABLE,

Traduit sur la 2de edition Anglaise, revue par l'auteur et précedé d'une introduction par SAUVAIRE-JOURDAN. (Paris : Giard et Brière. 1900.)

In the successive editions of this work Professor Bastable not only maintains his reputation as author of the best text book on the subject, but also obtains new distinctioniby displaying in his replies to criticisms a candour and courtesy which are rare in economic literature. In the vicissitudes of a prolonged controversy he has shown how to retract with dignity and to triumph with moderation. The questions debated in this Journal ? have now been reduced by mutual concessions to such narrow dimensions as hardly to merit public attention. There remains only some difference of view as to the possible action of Free Trade in causing a displacement of population under circumstances admittedly hypothetical. For our part we are ready to admit that our statements must have been inapt, since they have been misinterpreted by Prof. Bastable. In the country A, which was supposed to pass from Protection to Free Trade, we “imagined a landed interest employing the portion of the agricultural produce not consumed by the owners and cultivators in the purchase of manufactures from a landless class. On the opening of the trade the landed interest transfer their custom to the manufacturers in B, and the manufacturers in A are left to starve or emigrate.”

On this Professor Bastable remarks :

“The obvious comment on this definite statement is, that it describes a conception of economicorganisation very different from that adopted in the present work. In place of a landed and a landless class it appears more in accordance with the conditions of the case to imagine a society composed of landlords, capitalists and labourers, some of the two latter sections engaged in agriculture, others in manufactures."

But that was the very organisation which our statement was de. signed to indicate, excluding the possible supposition of a socialistic division of the land among all the inhabitants of A; as in that case no doubt the greater demand in B for the agricultural produce in A would be an advantage to all parties in A. “If we lived in Mr. Owen's parallelograms,” as Ricardo would say, an improvement in production could not be a detriment to any party. But in the existing conditions of exchange it might happen that the possessors of the land might benefit by the opening of the trade, while the workers who could not find employment in agriculture would be in an evil case.

It was not denied-it was expressly asserted in the immediate context of the sentence which Professor Bastable quotes—that some of the displaced manufacturers in A might "transfer their labour and capital to agriculture.” But the conditions of “comparative cost ” might be such as not to permit a large influx of new workers into agriculture in A.

At this point we hope that Professor Bastable will reconsider with his usual candour the following statement made by him :

“ Under the assumed conditions rent in A will rise, and so will the cost of agricultural production, until the point at which there is no difference in the comparative costs in the two countries is attained. At this point, again, the view of the situation taken in the present work differs from that of Professor Edgeworth ; for if, as has been stated above (p. 15), a difference in comparative

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cost is the essential condition for the maintenance of foreign trade, the absence of that condition involves the cessation of the trade which is dependent on it (this is certainly the doctrine of Ricardo, J. S. Mill, and Cairnes) · otherwise it would be impossible to understand how the export of agricultural products change, as under a further development it would do into the export of manufactures." 2

The anti-thesis that the identity of comparative cost is the essential condition of a steady foreign trade is supported in the critique 3 which the reader is requested to consult before pronouncing judgment on the present issue. Of course if, with the classical writers, we suppose

costs of production irrespective of the quantity produced, it is proper to suppose these fixed comparative costs unequal. But in general it is legitimate to conceive the margin of production varyinga circumstance to which Professor Bastable himself was among the first to call attention.4 Consider two countries, P and Q, interchanging commodities of this sort. P might both produce and import corn, as the United Kingdom does. For the export of P let us take a commodity of which the exportation from the United Kingdom has been instanced by a high authority as exemplifying the principle of comparative cost-namely flax. Let Q then both produce flax and import it from P-And, to avoid thecomplications of cost of transport, let these imaginary countries be separated not by the “ dissociable ocean,” but by a mere mathematical frontier line. In order that the trade should begin there certainly must be a difference in the comparative costs of corn and flax in the two countries. But, as P goes on increasing her production of flax and Q her production of corn, there will be reached theoretically a point at which the cost of producing flax is so great that it would cease to pay to produce flax rather than corn in P, and likewise corn rather than flax in Q. The ideal entrepreneur in either country seeking to invest an increment of capital would hesitate between the two industries. At this point the expansion of the trade would cease, but there would not be “ cessation of trade" in the ordinary sense of the term; the trade would not stop, but become steady.

The distinction is familiar to those who are conversant with the modern theory of economic equilibrium. It is thus that the consumer will not be a regular purchaser of tea unless he is a gainer in respect of utility by the first pound of tea per week or month which he purchases. But because this condition holds for initial or intramarginal purchases, it does not follow that it holds at the margin. On the contrary, the “final utility” of the last pound of tea minus the price paid for it is zero. At that stage the householder ceases to vary his family budget, but he does not therefore cease to be a consumer of

1 This parenthesis forms a note in the original.
2 Theory of International Trade, third edition, p. 192.
3 ECONOMIC JOURNAL, Vol. VII., P. 401.
4 International Trade, p. 29.

ó Professor Taussig in Quarterly Journal of Economics, Vol. III., p. 260. No. 39.-VOL, X.

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