It is of little use quoting expert authority in such matters, for experts are not unlikely to differ; but a few weeks ago I happened to obtain the opinion of a gentleman, since deceased, who would be universally recognised in the City as one of the best authorities upon such a point. As it happened, he had also considered the matter very fully. His opinion was that in the event of a great war and of large issues of Consols by the English Government at 23 per cent., the price would probably be about 80, and the price for 3 per cents would be a little over 90. Other authorities seem inclined to think that the prices in the case supposed would be higher than these; but I do not know of any authority who was quite so well qualified as the friend to whom I have referred, or who had so fully entered into all the pros and cons of the subject.

Of course, these calculations do not carry us beyond the actual beginning of a war and the beginning of large issues consequent upon it. What would happen as the indirect result of all the commotion and excitement attendant upon a war, and the great efforts which might have to be made to carry it on, is a little beyond even the slight prevision which may be considered possible on the assumption with which we started. The great point is that we must not assume too hastily that there is not going to be a great fall in Consols, quite disproportionate to what there may be in other first-class securities.

I might stop at this point, having answered the question put; but there is a practical issue on which the facts stated appear to have some bearing, viz., the question of the use of a sinking fund for the redemption of debt or for the accumulation of a reserve against emergencies by a Government like our own. The bearing of the facts stated seems to be that the credit of the Government for purposes of business is not improved by the redemption of the debt or by the accumulation of a reserve fund against emergencies, because its credit is already of the highest possible quality, and its borrowing power will be regulated accordingly by the general conditions of credit, and not by the increase or decrease of the debt by a few millions annually. The Government is one of many first-class borrowers, and a little redemption of its own debt does not seem to matter as far as its credit is concerned, one way or the other. This may seem a hard saying; but when we perceive the credit of a country like Russia increasing from year to year, notwithstanding increasing debt, and the credit of a country like France increasing the same way, we have surely

cause to doubt what precise part is played by the redemption of Formerly this debt redemption was

debt on our own credit. undoubtedly an important factor. When our debt was so large as to amount to one-third of the property in the country, and when it was also almost the sole Stock Exchange security, its redemption of course affected credit generally. But now, in comparison with the great forces in the market, the redemption does not seem specially important to the security upon which it is exercised. The redemption is, in fact, for the benefit of all high-class stocks, not specially for the benefit of English Government stocks; and upon this large mass it does not seem to exercise a very great influence.

The gain to us, therefore, from the reduction of debt must apparently be limited to the direct gain; the indirect gain from the effect upon credit generally, or from the effect upon the special credit of the Government not being material. As regards this direct gain, assuming all the payment made for the redemption of debt to be an additional saving of the community which would not otherwise be made, then the country gains about £25,000 annually for every million applied to the payment of debt. The application of a hundred millions would accordingly save to the country annually £2,500,000, which is hardly a perceptible item in the aggregate income of the country. It is about equal to the annual present which sugar bounty countries are alleged to give to our sugar consumers by means of the bounty.

But if the payment is not an additional saving at all, but a transfer from one holder to another, as appears to be the case while so much of the income of the Government is derived from taxes on capital, the question may well arise whether the redemption of debt in present conditions is of any use to the State. The direct gain in the last case is absolutely nil. What the Government gains, the community as a whole loses; and so the resources of the State are actually unchanged by the process.

The general effect of this argument is accordingly to show that there is no necessity at the present time for our reducing debt or for accumulating a reserve against emergencies. We seem to gain nothing by the process, because it is one which is not required for its effect upon credit, and the direct gain is quite inappreciable; and and it is perhaps doubtful, looking to the nature of our taxation, whether there is any direct gain at all. My own opinion is that it would now be the wisest thing for us to give up any attempt at the reduction of debt, so long at least as the

means for paying the debt are really derived from taxes on capital.

I do not, however, put forward the present argument as fully covering the whole question. All that is here claimed is that the usual arguments for the reduction of debt are not what they are supposed to be, and that the whole question requires a great deal of reconsideration. I hope to return to this subject on an early

occasion.

ROBERT GIFFEN.

THE THEORY OF TAXATION, WITH REFERENCE TO NATIONALITY, RESIDENCE AND PROPERTY.

Can we define the principles and distinguish the cases for making respectively the residence of persons and the situation of the property possessed by them a ground for the incidence of public charges? That question meets us in the problems of national taxation, as between state and state, and in those of general and local taxation within a state, while in the former class of problems there also occurs the question whether the nationality of the state affords a ground for taxing those who possess it or exempting those who do not. My attention was called to the matter in its international aspect, in which I propose here to discuss it first and most fully, afterwards noticing the other.

I. Taxation considered Internationally.

At its meeting at Cambridge in 1895 the Institute of International Law determined to take up the question Des doubles impositions dans les rapports internationaux, notamment en matière de droits de mutation par décès. Questions so taken up are referred to committees which study them in conjunction with reporters, whose reports serve as the basis of the discussions in the full body of the Institute. This question has not yet come on for discussion in the full body, but the progress made by the committee in preparing it may be seen in the Annuaire de l'Institut de Droit International, vol. 16, pp. 118, 310 and vol. 17, pp. 148, 301. With my single exception the members of the committee answered in the negative the question put by the reporter: "Is it equitable that the same property should be subjected at the same time to taxes of the same order in different countries, because the domicile or the nationality of the deceased differed from the situation of the property, or for any other reason?" And there was no exception to the opinion that immovable pro

perty ought to pay taxes assessed on it in the country of its situation, without reference to any question of domicile, residence or nationality. But beyond these propositions there was great divergence.

As might be expected from a body not of economists or financiers but of lawyers, the subject was generally treated from the point of view of the right of a state to make laws for persons or property. Yet from that point of view the objection to double taxation cannot be fully sustained, as one member, M. Lehr, pointed out: vol. 16, p. 126, note. For while a state has the exclusive right to determine the ownership and employment of property situated within it, it has also the right to make laws for its subjects always and everywhere, subject to the condition that they cannot be enforced by any penalties, whether on person or on property, except within its own territory. The legal argument therefore will not protect subjects from being taxed by their own state in respect of their foreign property, at the same time that they have to pay the taxes assessed on it where it is situated. Probably M. Lehr's concurrence in pronouncing double taxation inequitable must be taken as little more than formal; if not, and in any case as to the other members, it would be interesting to know on what other foundation the opinion rested. But little else can be discovered except undeveloped allusions to the regrettable effect that very high taxation, imposed by a state without regard to taxes imposed elsewhere, may have on international relations. And one member, M. Stoerk, apprehended such regrettable effect on international relations much less from double taxation than from entering on the difficult path of distinguishing the situations of different kinds of movable property, instead of submitting them all to a single taxation on the basis either of domicile or of nationality (vol 16, p. 132). That path however is the one which most members of the committee enter on, though without unanimity as to the rules to be established, while a few support exclusive taxation of the entire mass of movables on one or other of the two bases just mentioned.

For my part, reflection has confirmed me in the view of which I submitted a short and rough sketch three years ago to the committee of the Institute of International Law.

In framing a system of taxation we consider what may be described as the normal man, the man who lives in the country of which he is politically a citizen, and who has all his property and carries on all his avocations there. The system established with a view to that man may combine direct and indirect taxation in any way,