The first striking fact in the foregoing statement is the large difference between "contributions" and "collections," i.e. between the "true" revenue derived from Ireland and the sums merely collected there. During the last two financial years this difference amounted to an average of £1,752,000. The excise collections alone represent an excess of £1,920,000 over the actual contribution. This, of course, arises from the movements of duty-paid spirits and beer between different parts of the United Kingdom. The last Report of the Commissioners of Customs and Excise (Cd. 5827) gives the amount of home-made spirits on which duty has been paid in Ireland at 5,209,000 proof gallons, whereas the quantity retained for consumption was only 2,776,000 proof gallons. A similar but smaller difference exists in the case of beer. To credit Ireland with the full amounts of the duties collected in Ireland, as was done by Mr. Gladstone in 1886, and as is now proposed in some quarters, would, in effect, amount to a gift from the British Exchequer of £1,750,000 a year. And there is obviously no security that the Irish Exchequer could rely on this boon being continued for more than a short time. There would be nothing to prevent the British spirit merchant from removing his spirits to this country in bond and paying the duty here after arrival. It is obvious that the Treasury would be compelled to grant facilities for this course. The present system is merely one of book-keeping and administrative convenience, but as the withdrawal of this sum from the British Exchequer to which it properly belongs would have to be made good from other British sources, there would be every inducement for the British merchant to effect such slight changes of method as would transfer the whole of this sum from the Irish to the British Exchequer. Having regard to the fact that on the other sources of revenue the collections in Ireland are estimated to fall short of the actual contributions by nearly £200,000, and that these are in the main direct taxes paid by the individuals concerned, it is not unlikely that a scheme which gave to Ireland the full benefit of her revenues as collected would in a short time be converted from a gain of some £1,700,000 to a loss of £100,000 to £200,000 to the Irish taxpayer. Stability in the tax system and reliability upon the realisation of the estimated revenue could not be assumed if "collections" instead of "contributions" were to be made the basis of any financial arrangements.
Turning next to the contributed revenue upon which alone an Irish Parliament could rely, we note first the large proportion of the revenue represented by Customs and Excise. Contrasted with the figures for Great Britain, it is seen by the following table that whereas in Ireland the revenue from Customs and Excise amounts to 60 per cent. of the total, in Great Britain the proportion was not more than 36 per cent.
PERCENTAGE OF REVENUE FROM DIFFERENT SOURCES CONTRIBUTED BY IRELAND AND GREAT BRITAIN RESPECTIVELY IN TWO YEARS ENDING MARCH 31, 1911.[51]
| Ireland. | Great Britain. | |
| Per cent. | Per cent. | |
| Customs | 29 | 18-1/2 |
| Excise (ex. licences) | 30 | 17-1/2 |
| Estate, etc., duties | 9 | 14-1/2 |
| Income tax | 13 | 23-1/2 |
| Postal, etc. | 11 | 15 |
| Other sources | 8 | 11 |
| --- | --- | |
| 100 | 100 |
Exclusive of the licence duties the average yield (contribution) of Customs and Excise in Great Britain amounted in the last two years to £55,900,000, or at the rate of £1 7s. 5d. per head; in Ireland the average yield was £5,800,000, or at the rate of £1 7s. 10d. per head. The incidence of our consumption taxes is thus seen to be at the present time practically the same in Ireland as in Great Britain; and the much larger proportion of the Irish revenue obtained from them is due to the smaller relative yield of direct taxes. Ireland being mainly an agricultural country, income tax, death duties, and stamps yield much less per head of the population there than in Great Britain. Such conditions are highly suggestive of inelasticity. An Irish Chancellor of the Exchequer will find no such fiscal reserves in direct taxes as does his more fortunate British colleague. This conclusion should give pause to those who think that if the Customs and Excise continued to be controlled from Westminster, it would be still possible to extract the larger revenue needed for the growing expenditure of Ireland by higher rates of income tax and death duties. Such a course would increase the burdens of the direct taxpayers of Ireland, but it would not fill the Irish Treasury. On the other hand, it is clear that there is no chance of relief being afforded to the Irish indirect taxpayer under Home Rule, supposing Customs and Excise were handed over to the Irish Parliament. Yet whenever a British Chancellor of the Exchequer has found it necessary to increase any of the taxes on consumption, the protests from the Irish benches have been invariably both loud and vehement. Irish members have pointed to the low wages earned in Ireland, the greater addiction of the people to tea and spirits, and the higher toll of their earnings consequently extracted by the Exchequer. The yield of existing taxes, therefore, whether direct or indirect, is not elastic in Ireland. Neither of them afford sufficient resources to meet the necessities of an Irish Parliament.
There are, of course, other reasons why there should be no delegation of the power to impose Customs and Excise. The constitutional objections to such a course are overwhelming. It would involve the abandonment of the plea that Home Rule for Ireland was the prelude to Home Rule all round; in other words, that separation was the condition precedent to federalism. In every federal system in the world the control of Customs and Excise has been retained by the central authority. This is true not only of the quasi-federations within the British Empire; it is equally true of the United States, Germany, and Switzerland. One can scarcely be surprised at the emphatic repudiation which such a proposal received at the hands of the Parliamentary Secretary to the Board of Trade (Mr. J.M. Robertson) when, on February 7, 1912, in a speech at Lincoln, he said—
"There was, however, just one thing that must remain one for three kingdoms, and that was the fiscal system, Customs and Excise. It was a federal union we want, a federal state. If they were to do as some of his unreflecting Home Rule friends, Irish and English, have done, and demand that Ireland should not only have power to lay taxes but to fix Customs and Excise then they had no State left at all."
Another obvious objection to such a course is that it necessitates the erection of a Customs barrier between Ireland and Great Britain. Tariff Reformers are ready to admit that the present fiscal system is at least as injurious to Ireland as to other portions of the United Kingdom. The power to impose Customs duties on British goods—and the proportion of British total imports is so large that if this power were limited to foreign goods it would be financially valueless—would no doubt provide the Irish Exchequer with considerable funds and might be used to develop her prosperity. But the separation of the Customs systems for the purpose of enabling Ireland to impose tariffs in her own interests would necessarily be followed by a demand for treaty-making powers such as have been successfully claimed and are now enjoyed by British Dominions overseas. Under a general tariff for the United Kingdom the same advantages would accrue to Ireland without any corresponding damage to British or Imperial interests.
Thus, whether Customs and Excise are handed over to the Irish Parliament or retained by the Imperial Parliament, the consequences are equally embarrassing. In the one case Ireland would be deprived of the control of some 60 per cent. of her present revenue, and of all power of expansion; in the other, British trade with Ireland might be gravely injured by hostile legislation, and the union of the three kingdoms in financial and commercial policy would be destroyed. But this is not federation, nor is it a step towards it. It is separation pure and simple. Unless we are prepared to accept separation as the end of our policy the control of Customs and therefore of Excise, must remain an Imperial affair.
There can, therefore, be no justification for taking the control of the Customs and Excise from the Imperial Parliament. The Irish Parliament would thus be left with some 40 per cent. of present revenue under her own control. But the power to raise further revenue within the limits legally reserved to the Irish Parliament would be even less than this figure would imply. For of the £4,100,000 of revenue other than Customs and Excise, nearly £1,200,000 comes from the Postal Services; and even if these services were controlled by Ireland, it may be taken that the rates charged will be the same as in Great Britain. Of the remaining £2,900,000 nearly one-half comes from income tax. It has already been pointed out that its yield cannot be materially increased. There are only two ways by which an Irish Chancellor might attempt such a task. He might raise the rate of income tax or he might lower the exemption limit. The former course would almost certainly be followed by two equally undesirable results. So far as the tax continued to be paid in Ireland it would fall with crushing force on the already heavily-burdened agricultural industry. Still, from the point of view of the Exchequer, there might be some additional revenue on this account. On the other hand, there would be a check to the investment of capital in Ireland—and no country needs capital more—and a powerful temptation to transfer it where the tax would be lower. It may be seriously questioned, therefore, whether any increase in the income tax above the British rate is practicable. The other alternative, namely, the lowering of the exemption limit, would be so unpopular that no Irish Chancellor is ever likely to consider it seriously.