little over £25 millions (Great Britain only) which was about 3 per cent. of the total tax revenue.

550. The Stamp Duties in Northern and Southern Ireland were, respectively, transferred to the Government of Northern Ireland from the 22nd November, 1921, and to the Provisional Government of Southern Ireland (now the Government of the Irish Free State) from the 1st April, 1922. For comparative purposes the total net receipts for Great Britain only may be set out for the post-war years and the last pre-war year :

551. It will be seen that the Stamp Duties now form a rather subsidiary part of the tax system, although in the aggregate they provide a useful yield. While on the whole their effects were not greatly emphasised by witnesses, several of the duties were subjected to criticism, and there were no suggestions that this branch of revenue should be further developed. Professor Cannan, alluding to the duties on transference of property, characterised such taxes as "a survival from a bygone age in which the art of collecting taxes was so little developed that the stamp method seemed very excellent" (E. in C., 19). It may be said of the duties generally, that they are not an advanced type of taxation. Their incidence is not clear, they have not only a casual relation to ability to pay, and they tend somewhat to hamper business transactions. On the other hand, they are quite well accepted by the taxpayer, partly, no doubt, because they have been established so long. Criticisms are mainly directed to the recent increases of duty, in 1918 and

1920.

552. We propose to confine our attention to the most productive of the numerous duties, in the following order ::

(i) duty on conveyance of land and property other than stocks and shares;

(ii) duty on transfer of stocks and shares;

(iii) duty on bearer bonds;

(iv) duty on companies' share capital;

(v) duty on cheques;

(vi) duty on receipts.

Several intricate questions arise as to incidence, but for practical purposes, and in view of the minor importance of the several duties in the total tax-system, these need not be discussed in detail.

(i) The duty on conveyance of land, etc.

553. Rate of duty and yield.-This duty was increased from 10s. per cent. to £1 per cent. in 1910. The net receipt (Great Britain) amounted to £1,423,932 in 1913-14; it fell considerably during the War, reaching a low-water mark of £814,560 in 1916-17. The net receipt (Great Britain) for post-War years has been as follows:

554. Incidence.-The incidence of the duty is rather indeterminate as between vendor and purchaser. When a tax is imposed on the conveyance of land, the prospect of recurrent liability on any occasion of sale tends to depress values, if only to a slight extent, and, in so far as it has this result, it falls upon all existing owners of land. When the first sale of a property takes place, the purchaser, although paying the duty on that particular transfer, will give a lower price for the property; if the lower price has taken full account of the recurrent liability, the incidence of the duty may be said to have been thrown back on the original owner, and to be avoided altogether by his successor. In practice, however, this theory works very uncertainly, owing especially to the uncertain frequency of sale. All that can be said is that the original owner may tend to suffer most; in land and house property, however, the exact price is so largely fixed by individual powers of bargaining that it is impossible to determine how far it has been affected by the duty or, in other words, what proportion of the duty has really been borne by either party.

555. Criticisms by witnesses. Professor Cannan took the point that "everything which makes it more expensive to transfer property must tend to keep it in the hands of people who ought really to get rid of it, because they cannot manage it as well as somebody else." He thought the existing duties quite high enough to be appreciably hurtful in this way (Q. 814). We do not ourselves attach importance to this aspect. The duty is not, of course, the main item in the cost of transfer, especially when difficulties as to title, etc., are involved.

556. The Law Society called attention to the joint effect of the conveyance duty and the companies' capital duty on new or reconstituted businesses; the National Gas Council put in a statement in the same sense, with special reference to amalgamations (Ev. Appendix V). The conveyance duty, undoubtedly, adds very appreciably to the expenses of company formation, where large existing assets are taken over. We consider the combined burden under the head of the companies' capital duty (cf. para. 568).

557. The Law Society referred to an administrative concession, under which the duty is not claimed where a reconstructed company is being formed to take over the business of the existing company, and where the shareholders in the new company are the same, and hold shares in the same proportion, as those in the existing company. They advocated legislation extending not only to such reconstructions but also to the case where a private business is converted into a private limited company, and where substantially all the shares are taken up by the vendor or his nominees (E. in C., 10-11). The latter type of case, however, does not appear to be on quite the same footing as the former. The conversion of a partnership into a company involves a more radical change of constitution, and, moreover, it offers considerable advantages in the matter of taxation, especially on account of the freedom of reserves from Super-tax. It is doubtful whether firms should be given a further inducement to con

version.

(ii) The duty on transfer of stocks and shares.

558. Rate of duty and yield.-This duty remained at 10s. per cent. until it was doubled by the Finance Act, 1920, the higher rate taking effect from the 1st September, 1920.

The net receipt (Great Britain), covering composition for transfer duty from corporations, &c., was £1,514,308 in 1913-14. In the early part of the War it fell heavily, reflecting the interference with normal Stock Exchange business, and in 1915-16 only amounted to £815,146. It then recovered and regained the pre-war nominal level in 1917-18. The net receipt (Great Britain) for post-war years has been :

£

559. Incidence.-£1 per cent. is rather more severe in the case of stocks and shares than in the case of land, since they constitute a much more mobile form of capital against this may perhaps be set the fact that the other costs of transfer are much less. The question of incidence is difficult and obscure. A duty of this kind, in so far as it hampers dealings, may tend to have some depressing influence on the initial prices of stocks. The real losers, as Professor Seligman* points out, may be those responsible for floating the securities, or those underwriting the issue.

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560. Criticisms by witnesses.-Sir Felix Schuster represented that the duty does not only reduce Stock Exchange transactions but also obstructs the investment in the class of securities subject to the tax " (Ev., p. 11: E. in C., 13). We think the duty is open to some objection on both counts. It may tend

*The Shifting and Incidence of Taxation, 4th Edition, pp. 384-5.

to give a slight advantage to Government securities which are exempt from the duty, and to municipal stocks which only pay composition for the duty, the burden of this falling on the ratepayer; it may thus add a slight incentive to the tendency to favour gilt-edged stocks rather than ordinary industrial shares.

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561. The Association of British Chambers of Commerce stated that Stamp Duties on the sale of securities through the Stock Exchange are not only detrimental to business, but are considered unfair as compared with Stamp Duties levied on the transfer of other property" (Ev., p. 291; E. in C., 68). We assume this criticism to have in view the point which we mentioned above, viz., that securities change hands more frequently than land and material assets, and therefore suffer rather more from a duty charged at the same rate.

(iii) The duty on bearer bonds.

562. Rate of duty and yield.-Except for Colonial Government and Colonial Municipality issues, the duty stands at £2 per cent., having been increased from £1 per cent. as from the 1st September, 1920. The rates for Colonial Government and

Municipality issues are 5s. per cent. and £1 per cent.

respectively.

The net receipt (Great Britain) was £1,034,099 in 1913-14. During the War the issue of foreign bonds almost came to a standstill. In 1914-15 the net receipt was under £million; in 1917-18 it had fallen to £167,326 and in 1918-19 to £103,542, but in the next few years it recovered, as the following figures show:

563. Incidence.-Apart from War Loan issues, bearer bonds are exceptional in British finance, while they are a common feature in many countries. The incidence of the duty which, in broad idea, is a composition for the transfer duty applicable to registered stocks, appears normally to be on the borrower; for the foreign borrower has to offer terms as acceptable to the lender, all things considered, as the home market will provide, and the lender will not be ready to take the burden of the duty on himself.

564. Criticisms by witnesses.-Several witnesses referred to the competition between this country and the United States for foreign loan business. "The United States," said Sir Fredric Wise," has a distinct advantage over Britain in regard to Stamp Duties, and therefore the foreign loan competition, although keen, enables the United States in some instances

to pick and choose her foreign flotations" (E. in C., Ans. 13). Mr. Beaumont Pease, Sir Felix Schuster and Mr. A. M. Samuel dealt with the same point, emphasis being laid upon the value of foreign loans floated in this country as stimulating our export industry. "I do not think," said Sir Felix Schuster, "it is sufficiently appreciated that the issue of foreign loans both for Government and industrial enterprises is directly productive of trade and employment in this country, and not only sporadically, but that their effect is permanent (Ev., p. 11; E. in C., 13, cf. also Q. 114).

At the same time, while Sir Felix was convinced that in the long run the £2 duty must have the effect of turning business away, he had not been able to find any direct evidence that so far this had actually taken place. "I tried to find out from some of the houses concerned in that class of business whether in their experience it has had that effect. They said: No, not so far, because so far this business comes to the United States or here, and there is no other lending country' (Q. 114). Mr. Samuel, again, remarked that "whether harm arises in present circumstances from the loss of such business is doubtful. Some of the foreign loans alleged to have been driven away from London by high Stamp Duties were floated in New York. But it is said that New York failed to digest the loans, and that London bought the loans in New York, and brought them to London, at a cheaper rate than that at which they would have been issued in London" (E. in C. Ans. 13).

565. The figures of yield for post-war years, although they do not prove anything, give no ground for inferring that the growth of foreign loan issues in this country has been checked by the £2 per cent. duty. Apart from questions of comparative taxation, the United States have in the past looked with less favour than ourselves on foreign issues, and it appears that they tend to demand a higher rate of interest. It may well be that the advantage enjoyed by the British market in this respect is more than enough to cancel any deterrent effect of the duty, at least in the case of loans to foreign industry. The matter, however, requires to be carefully watched it would be unjustifiable to continue the duty at its present level, if it appeared to have a material influence in diverting foreign loan business. It should be noted that, while the duty is borne by the foreigner, it can hardly be said to differentiate against him, for £2 per cent. is only equivalent to the transfer duty on two transfers of British registered stocks. If the duty on bearer bonds were reduced it would probably be necessary to reduce also the more productive transfer duty; the two can hardly be considered separately, and indeed a reduction of the transfer duty might occasion some demand for a similar reduction of the £1 per cent. conveyance duty relating to property other than stocks and shares.