The arbitrary assessment of farmers at one-third the rent of their farms is an absurdity. A farmer paying a rental of £480 is usually a well-to-do man, but he escapes income tax because his income is assessed as £160. A farmer who pays a rental of £600 and who in an average year probably makes at least £400 a year, is, on the one-third basis, assessed at £200. The income tax of farmers is for the most part paid for them by the industrial classes, who are taxed pro tanto to relieve agriculture.
Schedule C deals with profits from British, Indian, Colonial and Foreign Government Securities. So far as possible these profits are taxed "at the source." Thus the Bank of England, in paying Consols dividend, deducts income tax, and leaves the fundholder to claim repayment afterwards if his income should be less than £160 per annum.
We now come to that important branch of the tax known as Schedule D.
The profits included in this Schedule consist of those from trade and industry, from professions, from all employments or vocations except public offices, from oversea investments which are not Government securities, and from interest on loans secured on the Public Rates, etc.
In the case of income from trade, assessments are made upon the average profits of the past three years. Let us suppose that a merchant in the period, 1893-1902, made the following profits: 1893, £1,100; 1894, £900; 1895, £1,200; 1896, £1,300; 1897, £1,400; 1898, £1,400; 1899, £1,500; 1900, £1,600; 1901, £1,200; 1902, £1,200; 1903, £1,500; 1904, £1,600. The table on page 301 shows how the profits are assessed under Schedule D.
Thus, while between 1893 and 1904, the income was in two years above £1,500, the assessment never rose above £1,500. The result, it will be seen, is to deprive the State of the advantage of the maximum income.
It follows that the assessments under Schedule D, from this cause alone, are always something less than the actual income of the persons assessed.