Direct Tax in United Kingdom
History
Almost at the opening of the age of parliamentary taxation one of the older sources of revenue ceased. The pressure of popular opinion forced Edward I. to decree the expulsion of the Jews (1290), though he naturally desired to retain such profitable subjects. It is, indeed, probable that, owing to the exactions practised on them, the Jewish usurers had become less serviceable to the exchequer; while it is certain that the general resources of the kingdom had so increased as to make their contribution relatively much smaller. The first effects of the representative influence in the fiscal domain are the abandonment of the tallages on towns and the decline of scutage as a mode of levy.
The tax on movables was framed in a more systematic way. Instead of distinct charges on different classes, or variations in proportion of levy from one-fourth to one-fortieth, the policy of imposing a tax of one-tenth on the towns and one-fifteenth on the counties was adopted. Greater strictness in assessment was sought by the appointment of commissioners for each county, supplied with special instructions as to taxable goods and exemptions. This method continued in force for the tax on movables from 1290 till 1334, though in some cases the proportions imposed on the towns and counties were varied (e.g. an eighth and a fifth were granted in 1297, and a tenth and a sixth in 1322). A more general influence was the growing national economy which led to greater activity on the part of the king as administrator, and which also increased the need of the state for revenue. Though the doctrine that “The king should live of his own” was generally accepted as a constitutional maxim, the force of events was making it obsolete. From being an infrequent and uncertain kind of taxation the direct tax on movables, which was practically absorbing the older forms, became usual and regular. Under medieval conditions the collection of a general property tax (for such, in fact, was the nature of “the tenth and fifteenth”) presented serious difficulties. Each locality gained by keeping its assessment down to the lowest point, while the borough authorities were naturally not eager to enforce the charge on their fellow-citizens. England in the 14th century was not ripe for a system that has been found hard to make effective in more advanced societies.
Hence, from 1334 onward, the method of “apportionment” was employed, i.e. the tenth and fifteenth was taken as affording a definite sum measured by the yield on the ancient valuation. As this gave, in the aggregate, between £38,000 and £39,000, “the tenth and fifteenth” became for the future “practically a fiscal expression for a sum of about £39,000”; the total to be divided or “apportioned” between the several counties, cities and boroughs according to their former payments. This settlement, which remained in force for centuries and affected all the later direct taxes, had the great advantages of certainty and adaptability. The inhabitants of any particular town knew their total liability and could distribute it amongst themselves in the manner most convenient to them. From the royal standpoint also the arrangement was satisfactory, for the “tenth and fifteenth” could be multiplied (e.g. in 1352 three “tenths and fifteenths” were voted for three years), and supplied a stable revenue for the service of the kingdom. To the parliament the power of regulating the policy of the crown by the bestowal or refusal of grants was naturally agreeable. Thus, all sections of the nation united in support of the system established in 1334, just before the opening of the Hundred Years’ War, in connexion with which it was particularly serviceable.
Akin to the tax that has just been described, at least in its nature as a direct impost, is the poll or capitation tax. Financial pressure at the close of Edward III.’s reign (1377) led to the adoption of a tax of fourpence per head on all persons in the kingdom (mendicants and persons under fourteen years being excepted). This “tallage of groats,” which seems to be derived by analogy from the hearth money for Peter’s pence, was followed by the graduated poll taxes of 1379 and 1380. In the former the scale ranged from ten marks (£6:13:4) imposed on the royal dukes and the viscounts, through six marks on earls, bishops and abbots, and three on barons, down to the groat or fourpence payable by all persons over sixteen years of age. Such a form of taxation approximated—as Adam Smith saw—to an income tax, but it proved to be unproductive, only half of the estimated yield of £50,000 being obtained.
The tax of 1380 varied within narrower limits; from twenty shillings to fourpence (or sixty groats to three), with the proviso that “the strong should aid the weak.” But this particular tax is chiefly memorable as the occasion—whatever may have been the real causes—of the great “Peasants’ Revolt” of 1381. This unlucky association sealed the fate of the poll tax as a fiscal expedient. It was abandoned, with one exception, for nearly three hundred years; and its occasional employment in the 17th century did not result in its permanent revival. Apart from special circumstances it is plain that the “tenth and fifteenth” was better suited than the poll tax for the purpose of English finance. The machinery for collection was ready to hand for the former, while special agents had to gather the latter, even from the poorest classes. In fact, the episode of the poll taxes may be regarded as an attempt—fortunately unsuccessful—to relieve the propertied classes at the expense of the peasants and poorer burghers. Failure in this respect helped in the maintenance of the settlement of direct taxation devised in 1334. (…)
Direct taxation still retained in one of its branches the pattern set in the reign of Edward III. “Tenths and fifteenths” continued to be voted, and for some time all attempts to introduce new methods failed. In 1488 a military grant framed on the model of the abortive tax of 1472 yielded only a little over one-third of the estimate (£27,000 out of £75,000), and the unsatisfactory result prevented further experiments on the part of Henry VII. The foreign policy of Henry VIII.—particularly his French expedition—with its attendant outlay, accounts for the graduated capitation tax of 1513, which was even less in accordance with anticipation than the tax of 1488 (it yielded only £50,000 instead of £160,000). But these failures cleared the way for a more effective form of direct impost, which appeared in the “subsidy” or general tax on land and goods. The first case of this tax (1514) was a modest one-2½%; it, however, soon took on a typical form, so that the subsidy came to mean a charge of 4s. in the pound on land and 2s. 8d. in the pound on goods, a scale evidently devised with reference to the older tenth and fifteenth, which was henceforth put in a subordinate position.
The subsidy became the established mode of grant under both Tudors and Stuarts, though by degrees it underwent a change similar to that experienced by its predecessor. The taxing statutes made elaborate provisions for the assessment and collection of the tax in order to secure a full return. Old habits proved too strong and the subsidy “slipped into the same kind of groove as that of the fifteenth and tenth, and became, in practice, a grant of a sum of money of about the same amount as the yield of the last preceding subsidy” (Dowell). The consequence was that each subsidy came, in the middle of the 16th century, to be a sum of £100,000, and at its close only £80,000. The parallel vote of the clergy in convocation (which after 1533 had to be confirmed in parliament) amounted to £20,000. The usual parliamentary proceeding was to vote so many “tenths and fifteenths” and so many subsidies, e.g. Elizabeth’s first parliament voted her “two fifteenths and tenths and a subsidy,” or, taking the usual values, £160,000. At times of crisis such as the arrival of the Armada the votes were enlarged by granting more tenths and fifteenths and subsidies. The history of the subsidy is instructive as to the tendencies of direct taxation in all countries. The assessment becomes inelastic and approximates to a fixed sum. As the subsidy follows the course of the later medieval taxation, so it is the undesigned model of the later land and property tax. (1)
Resources
Notes and References
- Encyclopedia Britannica (11th Edition)
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