[1] _Repertorium für Meteorologie der kaiserl. Akad. der Wissensch._
(St Petersburg, 1892), 16, No. 2, or _Meteorolog. Zeits._ (1895), 12,
p. 41.
INCLOSURE, or ENCLOSURE, in law, the fencing in of waste or common lands
by the lord of the manor for the purpose of cultivation. For the history
of the inclosure of such lands, and the legislation, dating from 1235,
which deals with it, see COMMONS.
IN COENA DOMINI, a papal bull, so called from its opening words,
formerly issued annually on Holy Thursday (in Holy Week), or later on
Easter Monday. Its first publication was in 1363. It was a statement of
ecclesiastical censure against heresies, schisms, sacrilege,
infringement of papal and ecclesiastical privileges, attacks on person
and property, piracy, forgery and other crimes. For two or three hundred
years it was varied from time to time, receiving its final form from
Pope Urban VIII. in 1627. Owing to the opposition of the sovereigns of
Europe both Protestant and Catholic, who regarded the bull as an
infringement of their rights, its publication was discontinued by Pope
Clement XIV. in 1770.
INCOME TAX, in the United Kingdom a general tax on income derived from
every source. Although a graduated tax on income from certain fixed
sources was levied in 1435 and again in 1450, it may be said that the
income tax in its present form dates in England from its introduction by
W. Pitt in 1798 "granting to His Majesty an aid and contribution for the
prosecution of the war." This act of 1798 merely increased the duties of
certain assessed taxes, which were regulated by the amount of income of
the person assessed, provided his income amounted to £60 or upwards.
These duties were repealed by an act of 1799 (39 Geo. III. c. 13), which
imposed a duty of 10% on all incomes from whatever sources derived,
incomes under £60 a year being exempt, and reduced rates charged on
incomes between that amount and £200 a year. The produce of this tax was
£6,046,624 for the first year, as compared with £1,855,996, the produce
of the earlier tax. This income tax was repealed after the peace of
Amiens, but the renewal of the war in 1803 caused its revival. At the
same time was introduced the principle of "collection at the source"
(i.e. collection before the income reaches the person to whom it
belongs), which is still retained in the English Revenue system, and
which, it has been said, is mainly responsible for the present
development of income tax and the ease with which it is collected. The
act of 1803 (43 Geo. III. c. 122) distributed the various descriptions
of income under different schedules, known as A, B, C, D and E. A rate
of 5% was imposed on all incomes of £150 a year and over, with
graduation on incomes between £60 and £150. This income tax of 5%
collected at the source yielded almost as much as the previous tax of
10% collected direct from each taxpayer. The tax was continued from year
to year with the principle unchanged but with variations in the rate
until the close of the war in 1815, when it was repealed. It was, during
its first imposition, regarded as essentially a war tax, and in later
days, when it was reimposed, it was always considered as an emergency
tax, to be levied only to relieve considerable financial strain, but it
has now taken its place as a permanent source of national income, and is
the most productive single tax in the British financial system. The
income tax was revived in 1842 by Sir R. Peel, not as a war tax, but to
enable him to effect important financial reforms (see TAXATION).
Variations both in the rate levied and the amount of income exempted
have taken place from time to time, the most important, probably, being
found in the Finance Acts of 1894, 1897, 1898, 1907 and 1909-1910.
It will be useful to review the income tax as it existed before the
important changes introduced in 1909. It was, speaking broadly, a tax
levied on all incomes derived from sources within the United Kingdom,
or received by residents in the United Kingdom from other sources.
Incomes under £160 were exempt; an abatement allowed of £160 on those
between £160 and £400; of £150 on those between £400 and £500; of £120
on those between £500 and £600, and of £70 on those between £600 and
£700. An abatement was also allowed on account of any premiums paid
for life insurance, provided they did not exceed one-sixth of the
total income. The limit of total exemption was fixed in 1894, when it
was raised from £150; and the scale of abatements was revised in 1898
by admitting incomes between £500 and £700; the Finance Act 1907
distinguished between "earned" and "unearned" income, granting relief
to the former over the latter by 3d. in the pound, where the income
from all sources did not exceed £2000. The tax was assessed as
mentioned above, under five different schedules, known as A, B, C, D
and E. Under schedule A was charged the income derived from landed
property, including houses, the annual value or rent being the basis
of the assessment. The owner is the person taxed, whether he is or is
not in occupation. In England the tax under this schedule is obtained
from the occupier, who, if he is not the owner, recovers from the
latter by deducting the tax from the rent. In Scotland this tax is
usually paid by the owner as a matter of convenience, but in Ireland
it is by law chargeable to him. All real property is subject to the
tax, with certain exceptions:--(a) crown property, such as public
offices, prisons, &c.; (b) certain properties belonging to charitable
and educational bodies, as hospitals, public schools, colleges,
almshouses, &c.; (c) public parks or recreation grounds; (d) certain
realities of companies such as mines, quarries, canals, &c., from
which no profit is derived beyond the general profit of the concern to
which they belong. Under schedule B were charged the profits arising
from the occupation of land, the amount of such profits being assumed
to be one-third of the annual value of the land as fixed for the
purposes of schedule A. This applies principally to farmers who might,
if they chose, be assessed on schedule D on their actual profits.
Schedule C included income derived from interest, &c., payable out of
the public funds of the United Kingdom or any other country. Schedule
D, the most important branch of the income tax and the most difficult
to assess, included profits arising from trade, from professional or
other employment, and from foreign property, the assessment in most
cases being made on an average of the receipts for three years.
Schedule E covered the salaries and pensions of persons in the
employment of the state or of public bodies, and of the officials of
public companies, &c. The method of assessment and collection of the
tax is uniformly the same. Under schedules A, B and D it is in the
hands of local authorities known as the General or District
Commissioners of Taxes. They are appointed by the Land Tax
Commissioners out of their own body, and, as regards assessment, are
not in any way controlled by the executive government. They appoint a
clerk, who is their principal officer and legal adviser, assessors for
each parish and collectors. There is an appeal from their decisions to
the High Court of Justice on points of law, but not on questions of
fact. Assessments under schedules A and B are usually made every five
years, and under schedule D every year. The interests of the revenue
are looked after by officers of the Board of Inland Revenue, styled
surveyors of taxes, who are stationed in different parts of the
country. They are in constant communication with the Board, and with
the public on all matters relating to the assessment and collection of
the tax; they attend the meetings of the local commissioners, examine
the assessments and the taxpayers' returns, and watch the progress of
the collection. There are also certain officers, known as special
commissioners, who are appointed by the crown, and receive fixed
salaries from public funds. For the purpose of schedule D, any
taxpayer may elect to be assessed by them instead of by the local
commissioners; and those who object to their affairs being disclosed
to persons in their own neighbourhood may thus have their assessments
made without any risk of publicity. The special commissioners also
assess the profits of railway companies under schedule D, and profits
arising from foreign or colonial sources under schedules C and D. The
greater part of the incomes under schedule E is assessed by the
commissioners for public offices, appointed by the several departments
of the government.
Previously to 1909 the rate of income tax has been as high as 16d. (in
1855-1857), and as low as 2d. (in 1874-1876). Each penny of the tax was
estimated to produce in 1906-1907 a revenue of £2,666,867.[1]
It had long been felt that there were certain inequalities in the income
tax which could be adjusted without any considerable difficulty, and
from time to time committees have met and reported upon the subject.
Select committees reported in 1851-1852 and in 1861, and a Departmental
Committee in 1905. In 1906 a select committee was appointed to inquire
into and report upon the practicability of graduating the income tax,
and of differentiating, for the purpose of the tax, between permanent
and precarious incomes. The summary of the conclusions contained in
their _Report_ (365 of 1906) was:--
1. Graduation of the income tax by an extension of the existing system
of abatements is practicable. But it could not be applied to all
incomes from the highest to the lowest, with satisfactory results. The
limits of prudent extension would be reached when a large increase in
the rate of tax to be collected at the source was necessitated, and
the total amount which was collected in excess of what was ultimately
retained became so large as to cause serious inconvenience to trade
and commerce and to individual taxpayers. Those limits would not be
exceeded by raising the amount of income on which an abatement would
be allowed to £1000 or even more.
2. Graduation by a super-tax is practicable. If it be desired to levy
a much higher rate of tax upon large incomes (say of £5000 and
upwards) than has hitherto been charged, a super-tax based on personal
declaration would be a practicable method.
3. Abandonment of the system of "collection at the source" and
adoption of the principle of direct personal assessment of the whole
of each person's income would be inexpedient.
4. Differentiation between earned and unearned incomes is practicable,
especially if it be limited to earned incomes not exceeding £3000 a
year, and effect be given to it by charging a lower rate of tax upon
them.
5. A compulsory personal declaration from each individual of total net
income in respect of which tax is payable is expedient, and would do
much to prevent the evasion and avoidance of income tax which at
present prevail.
Acting upon the report of this committee the Finance Bill of 1909 was
framed to give effect to the principles of graduation and
differentiation. The rate upon the earned portion of incomes of persons
whose total income did not exceed £3000 was left unchanged, viz. 9d. in
the pound up to £2000, and 1s. in the pound between £2000 and £3000. But
the rate of 1s. in the pound on all unearned incomes and on the earned
portion of incomes over £2000 from all sources was raised to 1s. 2d. In
addition to the ordinary tax of 1s. 2d. in the pound, a super-tax of 6d.
in the pound was levied on all incomes exceeding £5000 a year, the
super-tax being paid upon the amount by which the incomes exceed £3000 a
year. A special abatement of £10 a child for every child under the age
of sixteen was allowed upon all incomes under £500 a year. No abatements
or exemptions were allowed to persons not resident in the United
Kingdom, except in the case of crown servants and persons residing
abroad on account of their health. Certain abatements for improvements
were also allowed to the owners of land or houses.
The estimated increased yield of the income tax for 1909-1910 on these
lines was £2,500,000, which excluded the abatements allowed for
improvements. The super-tax was estimated to yield a sum of £500,000,
which would be increased ultimately to £2,500,000, when all returns
and assessments were made.
The following accounts show the operation of the same system of taxation
in other countries:--[2]
_Austria._--The income tax dates from 1849, but the existing tax,
which is arranged on a progressive system, came into force on the 1st
of January 1898. The tax is levied on net income, deductions from the
gross income being allowed for upkeep of business, houses and lands,
for premiums paid for insurance against injuries, for interest on
business and private debts, and for payment of taxes other than income
tax. Incomes under £50 a year are exempt, the rate of taxation at the
first stage (£52) being 0.6 of the income; at the twelfth stage (£100)
the rate is 1%, at the twenty-seventh stage (£300) it rises to 2%, at
the forty-third stage (£1000) it is 3%, and at the fifty-sixth (£2500)
it is 3½%; an income of £4000 pays 4%; from £4000 up to £8333 per
annum progression rises at £166 a step, and for every step £8, 6s. 8d.
taxation is assessed. Incomes between £8333 and £8750 pay £387, 10s.;
incomes over £8750 are taxed £20, 6s. 8d. at each successive stage of
£417, 10s. Certain persons are exempt from the tax, viz.:--(a) the
emperor; (b) members of the imperial family, as far as regards such
sums as they receive as allowances; (c) the diplomatic corps, the
consular corps who are not Austrian citizens, and the official staffs
and foreign servants of the embassies, legations and consulates; (d)
such people as are exempted by treaty or by the law of nations; (e)
people in possession of pensions from the Order of Maria Theresa, and
those who receive pensions on account of wounds or the pension
attached to the medal for bravery, are exempted as far as the pensions
are concerned; (f) officers, chaplains and men of the army and navy
have no tax levied on their pay; (g) all other military persons, and
such people as are included in the scheme of mobilization are exempted
from any tax on their pay. Special allowances are made for incomes
derived from labour, either physical or mental, as well as for a
family with several children. There are also special exemptions in
certain cases where the annual income does not exceed £4167, 10s.,
viz.--(a) special charges for educating children who may be blind,
deaf, dumb or crippled; (b) expense in maintaining poor relations; (c)
perpetual illness; (d) debts; (e) special misfortunes caused by fire
or floods; (f) being called out for military service. The tax is
assessed usually on a direct return from the individual taxpayer,
except in the cases of fixed salaries and wages, on which the tax is
collected from the employer, who either deducts it from the salary of
the employee or pays it out of his own pocket. The tax, which is
assessed on the income of the previous year, is paid direct to the
collector's office in two instalments--one on the 1st of June and the
other on the 1st of December.
_Belgium._--No income tax proper exists in Belgium, but there is a
state tax of 2% on the dividends of joint stock companies.
_Denmark._--Income tax is levied under a law of the 15th of May 1903.
Incomes under 2000 kroner pay a tax of 1.3%; under 3000 kroner, 1.4%;
under 4000 kroner, 1.5%; under 6000 kroner, 1.6%; under 8000 kroner,
1.7%; under 10,000 kroner, 1.8%; under 15,000 kroner, 1.9%; under
20,000 kroner, 2.0% and for every additional 10,000 kroner up to
100,000 kroner 1%, incomes of 100,000 kroner and upwards paying 2.5%.
Exempt from the duty are--the king, members of the royal family and
the civil list; the legations, staffs and consular officers of foreign
powers (not being Danish subjects); foreigners temporarily resident in
the country; mortgage societies, credit institutions, savings and loan
banks. The increase in capital resulting from an increase in value of
properties is not deemed income--on the other hand no deduction in
income is made if such properties decrease in value--nor are daily
payments and travelling expenses received for the transaction of
business on public service, if the person has thereby been obliged to
reside outside his own parish. Certain deductions can be made in
calculating income--such as working expenses, office expenses,
pensions and other burthens, amounts paid for direct taxation, dues to
commune and church, tithe, tenant and farming charges, heirs'
allowances and similar burthens; interest on mortgages and other
debts, and what has been spent for necessary maintenance or insurance
of the property of the taxpayer. There are also certain exemptions
with respect to companies not having an establishment in the country.
_France._--There is no income tax in France corresponding exactly to
that levied in the United Kingdom. There are certain direct taxes,
such as the taxes on buildings, _personnelle mobilière_, and doors and
windows (_impôts de répartition_)--the tax levied on income from land
and from all trades and professions (_impôts de quotité_) which bear a
certain resemblance to portions of the British income tax (see FRANCE:
_Finance_). From time to time a graduated income tax has been under
discussion in the French Chambers, the proposal being to substitute
such a tax for the existing (_personnelle mobilière_) and doors and
windows taxes, but no agreement on the matter has been reached.
_German Empire._--In Prussia the income tax is levied under a law of
the 24th of June 1891. All persons with incomes of over £150 per annum
are required to send in an annual declaration of their full income,
divided according to four main sources--(a) capital; (b) landed
property; (c) trade and industry; (d) employment bringing gain, this
latter including the salary or wages of workmen, servants and
industrial assistants, military persons and officials; also the
receipts of authors, artists, scientists, teachers and tutors.
Liability for income tax, however, begins with an income of £45, and
rises by a regular system of progression, the rate being about 3% of
the income. Thus an income of more than £45, but under £52, 10s. pays
a tax of 6s. and so on up to £475, an income over that sum but under
£525 paying a tax of 15s. Incomes over £525 rise by steps of £50 up to
£1525, for every step £1, 10s. being paid. Incomes between £1526 and
£1600 rise by steps of £75, £3 being paid for every step. Between
£1601 and £3900, the steps are £100, and the tax £4 a step; from £3901
to £5000 the steps are the same (£100), but the tax is £5 a step.
There is also a supplementary tax on property of about 1/20th% of the
assessed value. This supplementary tax is not levied on those whose
taxable property does not exceed a total value of £300, nor on those
whose annual income does not exceed £45, if the total value of their
taxable property does not exceed £1000, nor on women who have members
of their own family under age to maintain, nor on orphans under age,
nor on persons incapable of earning incomes if their taxable property
does not exceed £1000 nor their income £60. There are a number of
exemptions from the income tax, some of the more important being--(a)
the military incomes of non-commissioned officers and privates, also
of all persons on the active list of the army or navy as long as they
belong to a unit in war formation; (b) extraordinary receipts from
inheritances, presents, insurances, from the sale of real estate not
undertaken for purposes of industry or speculation, and similar
profits (all of which are reckoned as increases of capital); (c)
expenses incurred for the purpose of acquiring, assuring and
maintaining income; (d) interest on debts; (e) the regular annual
depreciation arising from wear of buildings, machines, tools, &c., in
so far as they are not included under working expenses; (f) the
contributions which taxpayers are compelled by law or agreement to pay
to invalid, accident, old age insurance, widow, orphan and pension
funds; (g) insurance premiums. Moreover, persons liable to taxation
with an income of not more than £150 may deduct from that income £2,
10s. for every member of their family under fourteen years of age, and
abatement is also allowed to persons with incomes up to £475 whose
solvency has been unfavourably affected by adverse economic
circumstances. The income tax is both levied at the source (as in the
case of companies) and assessed on a direct return by the taxpayer of
his income from all sources. Salaries are not taxed before payment.
Fixed receipts are assessed according to their amount for the taxation
year in which the assessment is made, and variable incomes on an
average of the three years immediately preceding the assessment. The
income tax and the supplementary tax are collected in the first half
of the second month of each quarter by the communities (_Gemeinden_)
who bear the whole cost.
In Saxony a graduated tax is in force on all incomes of £20 per annum
and upwards. All corporate bodies and individuals who derive their
income or any portion of it from Saxony are liable to the extent of
that income, except those serving religious, charitable or public
purposes. Incomes between £20 and £5000 are divided into 118 classes,
in which the rate rises progressively. From £500 to £5000 the classes
rise by £50, and above £5000 by £100. The rate of income tax begins at
¼%, i.e. 1s. on an income of £20. An abatement is allowed to those
whose incomes do not exceed £155 of £2, 10s. for each child between
the ages of six and fourteen years, provided such abatements do not
reduce the income by more than one class. In the case of persons with
incomes not exceeding £290 abatement (not exceeding three classes) is
allowed--(a) when the support of children or indigent relations
involves a burden of such a nature as to affect the general standard
of living; (b) on account of long-continued illness, involving heavy
expense; and, on restoration to health, temporary decrease of
wage-earning power; (c) in the case of accidents which have had the
same effect.
In Bavaria the existing system of income tax came into force on the
1st of January 1900. The rate on earned income varies according to a
scale laid down in article 5 of the law, beginning at .1% for incomes
up to £37, 10s. (1s.), being .66% (£2, 5s.) for incomes between £230
and £250; 1.03% (£4) for incomes between £350 and £375; 1.30% (£6,
16s.) for incomes between £475 and £500 and 1.38% (£10) for incomes
between £650 and £700. Incomes exceeding £700 and not exceeding £1100
pay £1 on every £50; those between £1100 and £1700, £1, 10s., on every
£50, between £1700 and £2050, £2 on every £50; between £2050 and
£2500, £2, 10s. on every £50 and beyond £2500, 3% on every £50.
Exemptions from earned income tax are similar to those already
mentioned in the case of Prussia. Special abatement in the case of
incomes not exceeding £250 from all sources is given in consideration
of education of children, protracted illness, maintenance of poor
relations, serious accidents, &c. The tax on unearned income is at the
rate of 1½% on incomes from £3, 10s. to £5; from £6 to £20, 2%; from
£21 to £35, 2½%; from £36 to £59, 3%; from £51 to £150, 3½%; from £151
to £5000, 3¾%, and over £5000, 4%. There is a differentiation in
assessment on fluctuating and fixed incomes. Fluctuating incomes (e.g.
those derived from literary, scientific or artistic work) are assessed
at the average receipts of the two past years. Fixed income is
returned at the actual amount at the time of assessment, and the
assessment for earned income, both fixed and fluctuating, takes place
every four years. Income tax is not levied at the source, but on a
direct return by the taxpayer. In the case of unearned income, where a
person's yearly unearned income does not exceed £100 and he has no
other or only an insignificant additional income, he is required to
pay only half the assessed tax. Also in the case where a total income,
earned and unearned, does not exceed £250 it may, by claiming
abatement on such grounds as the education of children, maintenance of
indigent relations, &c., be assessed at the lowest rate but one, or be
entirely exempt.
In Württemberg the General Income Tax Act came into force on the 1st
of April 1905. Article 18 provides a graduated scale of rates on
incomes from £25 upwards. Abatements are allowed for the education and
support of children, support of indigent relatives, active service in
the army and navy, protracted illness and severe accidents or
reverses. There is a supplementary tax of 2% on unearned income from
certain kinds of property, such as interest or other income derived
from invested capital, dividends, &c., from joint-stock companies and
annuities of all kinds. The income tax is not levied at the source,
but on a direct return by the ratepayers; assessments are made on the
current year, except in the case of fluctuating incomes, when they are
made on the income of the preceding year.
_Hungary._--There is no income tax in Hungary at all corresponding to
that of the United Kingdom, although proposals for such a tax have
from time to time been made.
_Italy._--Graduated income tax in Italy dates from 1864. Incomes are
classified according to their characters, and the rate of the tax
varies accordingly. In class A¹ are placed incomes derived from
interests on capital, and perpetual revenues owned by the state,
interests and premiums on communal and provincial loans, dividends of
shares issued by companies guaranteed or subsidized by the state
lottery prizes. These incomes are assessed at their integral value and
pay the full tax of 20%. In class A² are placed incomes derived from
capital alone and all perpetual revenues. The assessments on these are
reduced to 30/40ths of the actual income and taxed at a rate of 15%.
In class B are incomes derived from the co-operation of labour and
capital, i.e. those produced by industries and commerce. The
assessments of these are reduced to 20/40ths and taxed at 10%. In
class C are placed incomes derived from labour alone (private
employment) and those represented by temporary revenues or life
annuities. Assessments on these are reduced to 18/40ths and taxed at a
rate of 9%. In class D are placed incomes from salaries, pensions and
all personal allowances made by the state, the provinces and communes.
Assessments on these are reduced to 15/40ths and taxed at 7½%.
Certain abatements are allowed on small incomes in classes B, C and D.
Incomes are assessed (1) on the average of the two preceding years in
the case of private industries, professions or companies in which
liability is unlimited; (b) on the income of the current year in the
case of incomes from dividends, salaries, pensions and fixed
allowances, as well as in the case of incomes of communes, provinces
and corporations; (c) on the basis of the account closed before the
previous July of the current year in the case of incomes of limited
liability companies, banks and savings banks.
_Netherlands._--In the Netherlands there is a property tax imposed
upon income derived from capital, as well as a tax on income earned by
labour.
_Norway._--In Norway under the state income tax incomes under 1000
kroner are exempt, those between 1000 and 4000 kroner pay 2% on that
part liable to taxation; those between 4000 and 7000 kroner pay 3%;
those between 7000 and 10,000 kroner pay 4%, and those above 10,000
kroner 5%. Persons liable to taxation are divided into (a) those who
have no one to support, as companies and the like; (b) those who have
from one to three persons to support; (c) those who have from four to
six persons to support; (d) those who have seven or more persons to
support. Those who are counted as dependent upon the taxpayer are his
children, own or adopted, his parents, brothers and sisters, and other
relations and connexions by marriage who might have a reasonable claim
to his support. A certain part of the income liable to taxation is
abated by a graduated scale according to the class into which the
ratepayer falls.
_Spain._--In Spain the income tax is divided into (a) that derived
from personal exertion and (b) that derived from property. Directors,
managers and representatives of banks, companies and societies pay
10%; those employed in banks, &c., commercial houses, and those in
private employment, as well as actors, bullfighters, professional
pelota-players, acrobats, conjurers, &c., pay 5%. Those employed by
the day or those whose salary is under £45 are exempt, as are also
masters in primary schools. Income derived from property is taxed
according to the source from which the income is derived, e.g. income
from shares in public works is rated at 20%, income from shares in
ordinary companies, railways, tramways or canals at 3%, from dividends
on bank shares at 5%, from mining shares at only 2%. There is also an
industry tax, i.e. on the exercise of industrial, commercial and
professional enterprises, which tax is divided into five different
tariffs, of which I. applies to commerce (vendors), II. also to
commerce (middlemen), III. to industry (machinery), IV. to professions
and V. to licences (retail and itinerant vendors). Tariff I. is
differentiated according to the importance of the business and of the
locality in which it is carried on, the rate being fixed by a
consideration of the two combined. Tariff II. is differentiated
according to the character of the enterprise, its importance and the
importance of the locality. Tariff III. is differentiated according to
either motive power, output, method, product or locality; Tariff IV.
according to the character of the profession and the importance of the
locality; Tariff V. is also differentiated according to the locality
and the importance of the business.
_Switzerland._--The system of income tax varies in the different
cantons. Broadly speaking, these may be divided into four different
kinds: (1) a graduated property tax, in which the rate applicable to
each class of fortune is definitely fixed; (2) a proportional tax,
under which property and income are chargeable, each at a fixed rate,
while the total amount of the tax is liable to a proportionate
increase according to scale if it exceeds certain specified amounts;
(3) a system by which property and income are divided into three
classes, the rate of the tax being increased by a graduated rise,
according to the class to which the property or income belongs, and
(4) a uniform rate of tax, with progression in the amount of income
liable to taxation.
_United States._--One of the means adopted by the Federal Government
for meeting its expenses during the Civil War was the levying of an
income tax. By the Act of Congress of the 5th of August 1861 a tax of
3% was imposed on all incomes, with an exemption of $800, and was made
payable on or before the 30th of June 1862. No tax, however, was
assessed under the law. In March 1862 a new income tax bill was
introduced into the House of Representatives. This act, which was
signed on the 1st of July 1862, imposed a tax of 3% on all incomes not
over $10,000, and 5% on all incomes above that sum, with an exemption
of $600. It was also provided that dividends of banks, insurance
companies and railways should be assessed directly; but the
bond-holder was allowed to deduct the dividend so assessed from his
taxable income. In the case of government salaries, the tax was
deducted before the salaries were paid. The income tax was first
levied in 1863. The rate was changed by act of Congress in 1865, 1867
and 1870, and a joint resolution in 1864 imposed a special additional
tax of 5% for that year. The tax was finally abolished in 1872. The
total amount produced by the tax from the beginning was $376,150,209.
The constitutionality of the act was subsequently brought into
question, but was upheld by a unanimous decision of the Supreme Court
in 1880, which held that the tax was not a direct tax but an excise
tax, and that Congress had a right to impose it so long as it was made
uniform throughout the United States. On the 27th of August 1894 an
income tax act was passed as part of the Wilson Bill. By this act it
was provided that a tax of 2% on all incomes should be levied from
the 1st of January 1895 to the 1st of January 1900, with an exemption
of $4000. The legality of the tax was assailed, chiefly on the ground
that it was a direct tax, and not apportioned among the several states
in proportion to their population. On the 20th of May 1895 the Supreme
Court, by a vote of five to four, declared the tax to be
unconstitutional. Accordingly, before any federal income tax could be
imposed, there was needed an amendment of the constitution, and a
movement in this direction gradually began. In the first year of the
presidency of Mr W. H. Taft both Houses of Congress passed by the
necessary two-thirds majority a resolution to submit the proposal to
the 46 states, the wording of the amendment being "That Congress shall
have power to lay and collect taxes on incomes from whatever source
derived, without apportionment among the several States, and without
regard to any census enumeration."
_Cape Colony._--Cape Colony was the only South African colony which,
prior to the Union in 1910, had a system of income tax, which was
first imposed by an act of the 31st of May 1904. Incomes not exceeding
£1000 per annum were exempt from taxation; incomes exceeding £1000 but
not exceeding £2000 were taxed 6d. in the pound on the excess beyond
£1000; those between £2000 and £5000 were exempt for the first £1000,
paid 6d. in the pound on the next £1000 and 9d. in the pound on the
remainder; those exceeding £5000 paid 6d. in the pound on the second
£1000, 9d. in the pound on the next £3000 and 1s. in the pound on the
remainder.
_New South Wales._--Income tax in New South Wales first came into
operation on the 1st of January 1896. It is complementary with a land
tax, assessed on the unimproved value of freehold lands (with certain
exemptions and deductions). Incomes of £200 per annum and under are
exempt, and all other incomes (except those of companies) are entitled
to a reduction of £200 in their assessments. The rate of tax is 6d. in
the pound. There are certain incomes, revenues and funds which are
exempt from taxation, such as those of municipal corporations or other
local authorities, of mutual life insurance societies and of other
companies or societies not carrying on business for purposes of profit
or gain, and of educational, ecclesiastical and charitable
institutions of a public character, &c.
_New Zealand._--In New Zealand the income tax is also complementary
with a land tax. Incomes up to £300 per annum are exempt; incomes up
to £1000 per annum are taxed 6d. in the pound, with an exemption of
£300 and life insurance premiums up to £50; incomes over £1300 pay 1s.
in the pound, which is also the tax on the income of trading
companies, to whom no exemption is allowed. The income of friendly
societies, savings banks, co-operative dairy companies, public
societies not carrying on business for profit, &c., are exempt from
income tax.
_Queensland._--In Queensland income tax is levied on (a) income
derived from property such as rents, interest, income from companies,
royalties, &c., and (b) on income derived from personal exertion. On
income derived from property all incomes not exceeding £100 are
exempt; incomes between £100 and £120 pay £1 tax; those over £120 but
under £300 have £100 exempt and pay 1s. in each and every pound over
£100, while incomes over £300 pay 1s. in each and every pound. Incomes
from personal exertion pay 10s. between £100 and £125; £1 between £126
and £150; between £151 and £300 have £100 exempt and pay 6d. in each
and every pound over £100: between £301 and £500 6d. in every pound;
between £501 and £1000 6d. in every pound of the first £500 and 7d. in
every pound over £500, between £1001 and £1500 7d. in every pound of
the first £1000, and 8d. in every pound over £1000; incomes over £1500
pay 8d. in every pound; 1s. in every pound is charged on the incomes
of all companies and of all absentees.
_South Australia._--The income tax dates from 1884 and is levied on
all incomes arising, accruing in or derived from South Australia,
except municipal corporations, district councils, societies, &c., not
carrying on business for the purpose ot gain, and all friendly
societies. Where the income is derived from personal exertion the rate
of tax is 4½d. in the pound up to £800, and 7d. in the pound over
£800. For income derived from property the rate is 9d. in the pound up
to £800, and 1s. 1½d. in the pound over £800. There is an exemption of
£150 on incomes up to £400, but no exemption over that limit.
_Tasmania._--In Tasmania there is (a) an income tax proper, and (b) a
non-inquisitorial ability tax, one complementary to the other. The
income tax proper is levied on all income of any company, at the rate
of 1s. for every pound of the taxable amount; on all income of any
person, at the rate of 1s. for every pound of the taxable amount
derived from property, and on every dividend at the same rate.
Personal incomes of £400 and over are assessed at the full amount, but
an abatement of £10 for every £50 of income is allowed on incomes
below £400 down to incomes of £150, which thus have £50 deducted;
incomes between £120 and £150 have £60 deducted; incomes between £110
and £120, £70, and incomes between £100 and £110, £80. The ability tax
is paid by (a) occupiers and sub-occupiers of property and (b) by
lodgers. The amount of tax paid by occupiers or sub-occupiers is
calculated upon the assessed annual value of the property occupied,
and that of lodgers from the assessed annual value of their board and
lodging. A detailed account of both taxes will be found in House of
Commons Papers, No. 282 of 1905.
_Victoria._--In Victoria the rate of income tax is fixed annually by
act. The rate charged on income derived from property is exactly
double that charged on income derived from personal exertion, the
rate for which for 1905 was: on the first £500 or fractional part
thereof, 3d. in the pound; on the second £500 or fractional part
thereof, 4d. in the pound; on the third £500 or fractional part
thereof, 5d. in the pound; on all incomes in excess of £1500, 6d. in
the pound. All companies, except life insurance companies, were
charged 7d. in the pound on their incomes; life insurance companies
were charged 8d. in the pound.
BIBLIOGRAPHY.--The Annual Reports of the Commissioners of Inland
Revenue, the Reports of Committees and other references mentioned in
the article, as well as Dowell's _History of Taxation in England_
(1884); Dowell's _Acts relating to the Income Tax_ (6th ed., 1908),
and Robinson's _Law relating to Income Tax_ (2nd ed., 1908).