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REVENUE DEPARTMENTS, AND POST OFFICE PACKET AND TELEGRAPH SERVICES.

VOTE 2.-INLAND REVENUE-continued.

The following Sums in excess of 251. have been paid by way of Extra Remuneration-continued.

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REVENUE DEPARTMENTS, AND POST OFFICE PACKET AND TELEGRAPH SERVICES.

VOTE 2.

INLAND REVENUE.

REPORT OF THE COMPTROLLER AND AUDITOR GENERAL

1. EXPENDITURE in excess of the Estimate has been incurred under Sub-Heads D., Excess, E., G., I., L., P., Q., and R.

2. Sub-Head R. Included in the Expenditure under this Sub-Head are two sums of Losses by 7411. 78. 74d. and 591l. 19s. -d. to make good losses of Revenue. Fraud,

The first was due to the default of a Collector of Taxes who was found guilty at the Default, &c. Hereford Assizes in February, 1905, of embezzlement and falsification of accounts, and sentenced to 15 months' imprisonment. There is a saving, under Sub-Head E. of 361. 158. 8d. in respect of unpaid Statutory Allowances due to the Collector. The defalcation appears to have been rendered possible by the laxity of the Surveyor of Taxes for the District, who was subsequently dismissed. The Inland Revenue have, after communication with the Treasury Officers of Accounts, introduced certain administrative changes which will, it is hoped, diminish the risk of such defalcations in future.

The second case was one of fraud on the Revenue based upon the fact that owners of mortgaged property have the right to deduct Income Tax from payments of interest to the mortgagees. The fraud was effected by means of claims for repayment in respect of such stoppages, put forward in the names of supposititious mortgagees and supported by fictitious certificates of deduction purporting to be signed by the owners. These fraudulent claims, which were made upon the Revenue during the period from 1st August 1904 to 28th June 1905, did not pass through the hands of the Surveyors, whose signatures were forged in cach case. The two offenders, one of whom had been a Surveyor's Clerk and later a Collector of Taxes, were sentenced at the Central Criminal Court to five years' penal servitude, and six months' imprisonment respectively.

3. The Amount to be Surrendered is, as shown by the Account, 16,554l. 58. 51⁄2d.

Surplus.

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4. In addition to the Appropriations in Aid shown on the Account the following sums Fee have been received during the year for fee stamps in connection with services performed Stamps. by the Inland Revenue Department:

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5. A sum of 5s. 10d. has also been paid into the Exchequer in repayment of the Local Loans expenses of this Department in connection with the administration of the Local Loans Fund. Fund partly out the income of that Fund and partly out of receipts by the Public Works Loan Commissioners in excess of the amount appropriated in aid of their Vote. This sum of 5s. 10d. forms part of the total amount of 31,3577. 38. 11d. to which reference is made in paragraph 2 of my Report on Class II., Vote 21.

REVENUE.

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6. With reference to paragraph 5 of my Report on the Account for 1904-5, I have Allowances to state that by the provision of Section 8 of the Revenue Act 1906 (6 Ed. VII., c. 20) formerly in legislative sanction has now been obtained for the payment of allowances in respect of tion of Finspirits distilled or rectified in the United Kingdom, although such spirits have not been ance Act. "altered in character by re-distillation."

REVENUE DEPARTMENTS, AND POST OFFICE PACKET AND TELEGRAPH SERVICES.

VOTE 2.-continued.

Test of
Revenue.

Remission of Duties.

Charges raised against Collectors

of Taxes.

Verification of Claims

for repayment of

7. The receipt side of the Revenue Account has been subjected to a test examination in London and Edinburgh. The items of Revenue selected were found to have been duly brought to account, and the Inland Revenue Department and the Treasury have been informed of the results of the examination. A test examination has also been applied to the payment side of the Account.

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8. I have been furnished by the Inland Revenue Department with a Schedule of the cases, involving a loss in each of 50l. and upwards, in which claims for duties receivable under the Revenue Acts have been waived during the year 1905-6. The reasons given appear to me to be satisfactory. The total amount for the year under review is 68,6277. 48. d. as compared with 85,756l. 68. 10d. in 1904-05, 42,786l. 178. 7d. in 1903-04, and 33,469l. 108. 7d. in 1902-03.

9. In paragraph 10 of my Report of last year I stated that the Commissioners of Inland Revenue were in communication with the Treasury Officers of Accounts with a view of determining the lines of future procedure in regard to charges raised against Collectors of Taxes. I have now received from the Treasury a copy of a letter addressed by Their Lordships to the Commissioners of Inland Revenue on 27th June 1906, in which it is stated that "the result of the consideration which has been given to the subject is to indicate that the existing system of dealing with the Schedules of Default provides with approximate completeness for the satisfaction of the Revenue Claims, and that any scheme for applying a more exhaustive check would involve an increase of expenditure which would not be compensated for by gain to Revenue. My Lords

are of opinion that the determination as to the conditions which will justify the closing of Default Schedules should rest with your Board. They understand that you are prepared to arrange accordingly for their being closed under your authority, and they regard that as the most satisfactory means of improving the present procedure.'

10. In the course of examination it has been noticed that claims for repayment of Income Tax are passed for payment at Headquarters without referring the Certificates for the amount of the Tax deducted (Form 185) to the local Surveyor of Taxes. A comIncome Tax, munication having been addressed to the Inland Revenue enquiring whether steps are taken in such cases to verify the fact that Income Tax has been received to cover the amount claimed, and to guard against the renewed payment of claims originally fraudulent, I have been furnished by the Treasury with the copy of a Report that they have received upon the subject from the Commissioners of Inland Revenue, together with a copy of Their Lordships' reply, from which it appears that the matter is still under consideration.

Grant to Local Taxation.

11. In paragraph 12 of my Report of last year reference was made to the question whether any portion of the "fixed duty" receipts should be paid to the Local Taxation Account. The Lords Commissioners of H.M. Treasury have since transmitted for my information a copy of the opinion of the Law Officers of the Crown, which is to the effect that the Local Taxation Accounts are entitled under Section 19 of the Finance Act of 1894 to receive, as hitherto, the percentage upon the value of properties in respect of which "fixed duties" only have been levied.

John A. Kempe,

Comptroller and Auditor General.

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REVENUE DEPARTMENTS, AND POST OFFICE PACKET AND TELEGRAPH SERVICES.

VOTE 3.

POST OFFICE.

ACCOUNT of the Sum Expended, compared with the Sum Granted, to defray the Salaries and Government Annuities and Insurances, and the Collection of the Post Office Revenue, in the Year

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