[746] E.g. "Many definitions of the word 'tax' have been proposed, but I know of none which would include just so much of the Post Office revenue as happens to be in excess of the amount expended in the year and no more.
"I believe that the desire to reckon this amount and no more as a tax, arises from a somewhat dim impression that it is the sum which the State exacts in excess of what a private company, without any legal or natural monopoly, would have to be satisfied with for performing the same services. But it is not. In the first place, such a private company would expect and receive about 3 per cent. on its capital in addition to the mere working expenses. We do not know what the capital of the Post Office is, but it must be very great, seeing that all the more important offices are owned in fee simple. Secondly, a company would raise new capital for new buildings and the purchase of more land, instead of defraying the expense as if it were current working expenditure. Thirdly, a company would not 'encourage thrift' by giving away upwards of £700,000 a year to the depositors in the savings bank, by paying 2½ per cent. Fourthly, in all sorts of ways the Post Office is not conducted as a commercial enterprise would be. For example, it spends more than a company would do in the less profitable districts.
"The only argument I know of in favour of treating the so-called 'net revenue' alone as a tax, thus breaks down. If any part of the gross revenue is a tax, the whole must be."—E. Cannan (Memoranda on Classification and Incidence, p. 163).
[747] "The payment for the same service may be a price in one State, a fee in a second, or a tax in a third.... The controlling consideration in the classification of public revenues is not so much the conditions attending the action of government or the kinds of businesses conducted by the government, as the economic relations existing between the individual and the government."—E. R. A. Seligman, Essays in Taxation, p. 423.
[748] This has been held a justification for regarding the letter rate as a whole as a pure tax:—
"A special service is no doubt rendered to each contributor of the tax, as well as a general service to the whole community, by means of the facilities of communication always available; but the charge is what is technically known as a tax, and the fact that a particular, as well as a general, service is rendered, does not alter the tax nature of the charge. Apart from the theory it has also to be considered that the productive portion of the Post Office revenue is derived from charges where the cost is very little—from letters, for instance, in the metropolitan district, or in and between great centres of population, where the cost of conveyance and delivery does not exceed, probably, one-tenth of a penny per letter, and the surplus of nine-tenths is spent on other services of the Post Office on which there is a deficit."—Sir Robert Giffen, K.C.B. (Memoranda on Classification and Incidence, p. 94).
The argument is that in large towns the cost of the service is infinitesimal, and the charge is therefore tax. Obviously this has no application to country services.
Plehn does not take this view:—
"Postal surplus not the result of taxation."
"There are some writers who regard any surplus acquired in this way as practically the result of taxation, and class any charge for the public service, above the cost thereof, as a special tax. This classification presupposes that the service is, by nature, of a public character, an assumption contrary to the fact, for no function except that of governing itself, in the narrowest possible sense, is by nature of a public character, nor, on the other hand, by nature of a private character. On this consideration, therefore, it is better to class these gains, not as taxes, but as the earnings of a public industry."—C. C. Plehn, Introduction to Public Finance, p. 358.