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is that it is mo† pesnikls to levy a surtax on the higher incomes. The reason for this is that surtax in ensentially based on individual incomes and until general individual assessment is in foros the surtax would fall only on salaried persons and thome choosing a personal assessment. This would be inequitable and at the same time defeat the object of the provisions permitting taxpayers to choose personal assessment, since they would of course only lose by doing so. To some extent this disadvantage oan be got over by stepping up the standard rate of tax as high as possible and increasing the, allowances on individuals. A proper surtax would,, however, have to mreit the intro- duction of ordinary Income Tax, and we are satisfied that the present compromise is the only practical ess at this
and is necessary if the introduction of the tax is not to be delayed with consequent loss to revenue.
There are other technical points and changes in the law which I do not propose to go into. As regarðs rates of Tax this wes, of course, outside Pudrey's own scope. The Governor has not indicated what rates he proposed. We therefore intend to urge upon him that he should hot be tied to the 1941 rates and that they should be put up as high as possible. We also proposed to emphasise the Secretary of State's desire that norma 1 Income Tax shall be introduced as soon as possible.
You will, I imagine, look upon the above primarily as a progress report, though we hope that you will share our satisfaction that real progess is being made. We feel, however, you should have an opportunity of comment before we actually send our telegram to the Governor, and I therefore enclose the draft. Ferhaps you would let me know as soon as possible whether you agres,
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