The classes of taxable income in the English income tax are as follows: (a) Income aris ing from the ownership of lands and houses; (b) income arising from the use or occupation of land; (c) income from interest, annuities or dividends; (d) income from any profession, trade, employment or vocation; (e) income from public office or employment.
The tax is levied at the rate of 5 per cent on incomes exceeding f160 ($800). Certain abate ments are granted, however, so that the tax is graduated in amount up to that on an income exceeding £700. On incomes less than f800 an abatement of flO for each child is also given.
In the budget of 1909, David Lloyd George introduced the new principle into the income tax, that of a super-tax. This was fixed at 2% per cent on those portions of incomes over £5,000 which exceed f3,000. There was also in troduced the principle of differentiation, which covers that rate of tax on earned incomes as compared with unearned incomes.
The English income tax has been a success and is now an integral part of the tax system of the country. In the fiscal year 1913-14, it raised £47,249,000 or 23.8 per cent of the total revenue of the United Kingdom. Since the out break of the war the income tax has become an even more important source of revenue. On 5 Dec. 1914, the rates were doubled. The reve nue derived from the income tax for 1915-16 amounted to over £128,000,000, or more than 38 per cent of the total revenue. The Budget for 1916-17 estimates the amount to be derived from the income tax at f195,000,000.
In the budget for 1916-17 the rates of the in come tax were still further raised and the scale now stands as follows: Rates for earned income: Per cent Not exceeding £500 11 Exceeding £500. but not exceeding £1.000 12 Exceeding £1,000, but not exceeding £1,500 15 Exceeding £1.500, but not exceeding £2,000 183 Exceeding £2.000 Rates for unearned income: Not exceeding £500 IS Exceeding £500. but not exceeding £1,000 173 Exceeding £1,000, but not exceeding £1.500 20 Exceeding £1,500, but not exceeding £2,000 223 Exceeding £2,000 25 &cmPtimu and abatements: Not exceeding £130 Exemption Exceeding £130, but not exceeding £430. Abatement of
£120.
Exceeding £430. but not exceeding £600. Abatement of £100.
Exceeding £600, but not exceeding £700. Abatement of £70.
Several special war concessions have been made to compensate for reduction of income due to the war. For example, instead of aver aging income for the three years preceding the year of assessment, the latter may be inchided as one of the three. Again, anyone whose in come is less by 10 per cent than that for which i he is assessed is entitled to a refund. Special reductions have also been made to persons serving in the army or. navy, die Red Cross Society or other similar organizations. Per sons whose income does not exceed 1700 ob tain an abatement of #.25 for every child under 16 years of age.
Life insurance premiums, up to an amount not exceeding one-sixth of the total income, may, with certain limitations, be deducted from income before assessment.
Other changes in the income tax have tended to smooth out the rough places and make it more easily workable .
The reasons for the success of the English income tax may be summed up as follows: (a) Blending of regard for local interests and fis cal productiveness; (b) ingenious system of ad ministration; (c) absence of inquisitorial pro cedure; (d) system of stoppage at the source; (e) moderations of rate; (f) principle of dif ferentiation; (g) principle of progression.
(2) New Zealand was the first of the British colonies to adopt a com prehensive income tax. It was first adopted in 1891. The tax applies to incomes above £300. The rate on the amount ,of income be tween L300 and :€1,300 is 2% per cent, and over i1,300 is 5 per cent, In 1913-14 the income tax yielded L554,271, or 4.5 per cent of the total rev enues of the colony (but 9.4 per. cent of the rev enue raised by taxation). The total cost of as sessment and administration was only 1.31 per cent. The total yield of the tax in New Zea land small because incomes derived directly from land are exempt from the income tax, and being the subject of a special tax assessed on capital value. Since the war began the rate of the tax has been increased by. one-third.