CO885-(11-12) — Page 425

PUBLIC

PECORD OFFICE

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Reference

C.O.882/12

PUBLIC RECORD OFFICE. LONDON

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no doubt that the allegations of corruption are often wholly un- deserved, but it cannot be denied that a system under which a small taxpaper can evade or delay payment so long as a local inspector certifies his incapacity to pay, or that he has no goods on which to levy execution, or so long as a process server is unable to find him at home, provides frequent opportunities for petty corruption, and that the reputation of the minor Civil Service will continue to suffer so long as the government fails to get in its revenue. The system of recovery could doubtless be amended so as to remove these temptations, but we do not consider that the charges are suitable in themselves, having regard to the economic status of the persons upon whom they are levied, or that they are sufficiently productive to be worth retaining. We have already expressed the view that the poorer classes of the population pay much more than their fair share of taxation, and the relief which might be afforded by exempting them from payment of water fountain rate and night-soil fees would still leave them in that position. The abolition of night-soil fees would also benefit other classes besides the very poor, but in the case of the townships those classes would contribute to whatever increase in local rates was rendered necessary to make good the loss of revenue. So far as the general revenues of the Colony are concerned the loss resulting from the abolition of water fountain rate and night-soil fees, and the exemption from house tax of properties not exceeding Rs.1,000 in value would be as follows:

Water-rate

Night-soil fees House tax

Rs.

15,000

70,000

116,469

The loss of revenue to the District Boards by the abolition of fountain rate could be made good by giving the Boards power to levy a tenant rate within the limits of that rate as in force in the townships. There would appear to be no reason why residents other than house owners in the rural districts should not be subject to this rate as in the case of tenants in the townships and in the Municipality.

Question of New Taxation.

27. It will have been apparent that our proposals for providing additional revenue from existing sources do not go far enough to dispense with the necessity of considering the possibility of some new form of taxation.

With this necessity before us the first suggestion that arises is inevitably that of an income-tax.

The introduction of this tax was recommended by the Royal Commission of 1909, with a reservation by the Chairman in favour of an inhabited house tax as being more suitable for the special conditions of the Colony. There is no question that an income-tax, successfully worked, would be more effective than any other form

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of taxation in redressing the balance between rich and poor. It would also have the not unimportant advantage of furnishing more reliable information than it is otherwise possible to obtain as to the extent and distribution of the taxable capacity of the population. Unfortunately, with these strong points in its favour, there have to be considered a number of serious difficulties in the way of its practical application, more particularly as a means of meeting the There are, in the first place, the existing financial situation. difficulties arising from the diversity of language and business methods among the various races, English, French, Creole, Mohammedan, Hindoo, and Chinese, which comprise the business community. The wholesale distribution trade is very largely in the hands of the Mohammedans who keep their books in Arabic. The Chinese, who are predominantly the retail shopkeepers and who control a large part of the distillery and tobacco industries, keep their accounts in their own language, and in many cases are unable to speak any language of the island except Creole. Each of the different races has its own methods of book-keeping and of business management, which could not be easily adjusted to the require- ments of an income-tax system. Even as between French and English methods the differences are sufficiently great to give rise Most of these obstacles could, no to serious practical difficulties. doubt, be overcome by an efficient organization, with a reasonable measure of co-operation from the various sections of the community. To set up an efficient organization, however, would take time, and On this ground, alone, we the money is wanted immediately. would feel compelled to look elsewhere so far as the current financial year is concerned. Whether as regards future years it is worth while undertaking the task of overcoming the difficulties we have mentioned is a question on which we are not disposed to offer any decided opinion. In our discussions with Members of Council and other leading representatives of public opinion we were greatly impressed by the fact that there was a substantial measure of support for the principle of an income-tax, although very few were prepared to go the length of regarding it as capable of being worked satisfactorily in the special conditions of the Colony. On the other hand, the view was strongly expressed by others that the real objec- tion to the system arose less from difficulties of setting up the machinery and imposing standardized methods of accountancy upon the taxpayer, than from the moral factors with which the system would then have to contend. It was felt that the division of the business community into so many racial sections could be productive of widespread suspicion of evasion, and that actual evasion would be greater by reason of that suspicion. There was also expressed on all sides a want of confidence in the capacity of certain grades of the Civil Service to observe the conditions of secrecy and disin- terestedness which are an essential factor in an income-tax system,