EFFECTS OF THE WAR ON CREDIT, CURRENCY, AND FINANCE, 277 
Question 7.—/t is generally taken for granted that certain transactions— 
e.g. the purchase and sale of stocks and shares or real property, the raising of 
mortgages, the hiring of a house, and so on—provide suitable occasions for 
‘taxation. Is there any justification in economic theory for a tax on transactions ? 
Does not the more enlightened view point to the freeing of transactions as well 
as trade from the inquisition of the tax-collector? 
This question was thrown into a form which suggests the answer, and we 
are nearly agreed in saying ‘Yes’ to it. Thus Mr. Hirst, agreeing with the 
view implied in the question, says: ‘It seems to me that taxes on transactions 
‘are bound to reduce and hinder trade. Hence I would certainly reduce rather 
than increase such taxes.’ But we admit that there may be a case for continuing 
taxes to which people have become accustomed, especially when, as with some 
of the stamp duties, their payment lends a kind of additional sanction to the 
transaction taxed. 
Sir Edward Brabrook replies: ‘Freedom of transactions and of trade is 
essential to the welfare of the country.’ 
Robertson replies (Mr. Lavington and Mr. Ellinger agreeing with 
) : ‘Convenience, ease of collection, and productivity must be given some 
weight in framing a system of taxation as well as justice. Even from the 
standpoint of justice, there is perhaps something to be said for making a special 
harge on those who avail themselves to a special extent of the readiness of the 
State to enforce contracts. I am not inclined to favour a general repeal of 
axes on transactions ; indeed, I should like, if practicable, to see them developed 
in such a way as to secure part of the increment of capital value arising in 
eases of speculative purchase and resale of houses, securities, &c. (unless these 
can be assessed to income tax).’ 
Dr. Dalton thinks that ‘a moderate tax on transactions is neither a very 
good nor a very bad tax; it tends to check production less than some existing 
taxes, but more than others.’ Mr. Hoare thinks that these taxes ‘should be 
retained for a long time to come, so as to allow the worst taxes—c.g. those on 
tea and sugar—and local rates to be taken off before stamps are touched.’ 
Sir J. C. Stamp takes a different view. ‘There is very little justification 
for taxes of this kind, except so far as they serve as convenient methods of 
registration, or lending validity to transactions.’ 
_ Mr. Hilton Young replies emphatically: ‘A rotten tax! No relation to 
ability to pay; not even equitably spread over the limited area that it covers.’ 
Dr. Cannan replies: ‘Transactions are trade. When you have exhausted 
e better taxes and still want money you take the worse, as Adam Smith 
said.’ 
Mr. Lawrence and Mr. Mason reply ‘ Yes’ to the last part of the question. 
Mr. Shaw replies: ‘Every tax that hampers a beneficial human activity is 
economically bad. But it may be psychologically expedient.’ 
Qusstion 8.—/f the principle of ‘ability to pay’ be accepted, does it no 
follow that the greater part of the national revenue should be raised by income 
ta 
) 
_ This question also suggests the answer, and again we are able to reply 
Mainly in the affirmative. In November 1917 our Committee appointed a 
Sub-Committee on Income Tax Reform, and seventeen months later the Sub- 
Ccmmittee was invited to give evidence before the Royal Commission on the 
Income Tax. The Sub-Committee threw its opinions into a few short ‘ points’ 
9 sentences for its proof of evidence before the Royal Commission. The 
first six sentences ran as follows: 
1. That the income tax is the fairest, cheapest, and most productive of all 
possible taxes. 
Foornote.—We assume, of course, the existence of a constitutional 
Government; a despotic Government might use the income tax as 
an instrument of oppression. 
2. That the tax requires to be adjusted to the much-increased demand for 
revenue. 
3. That it is indefinitely elastic, and can be made to produce as much 
revenue as the citizens as a body think justifiable. 
_ 4. That if skilfully adjusted to the ‘ability’ of each taxpayer it imposes 
little real burden. 
