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EFFECTS OF THE WAR ON CREDIT, CURRENCY, AND FINANCE. 287 
actually spent each year, whether for goods or services by final consumer. 
Taxpayers to be assessed on previous year’s expenditure. This tax would 
tend to increased saving, lower interest rates, and tend to increased production.’ 
Dr. Dalton also has ‘no confidence whatever either in the practicability (at 
reasonable cost) or in the economic desirability of taxes on turnover, sales, &c.’ 
Mr. Allen writes: ‘The Tax cn Turnover has been strongly advocated by 
Lord Leverhulme and by some financial journals in London. Lord Leverhulme 
suggests a Tax on Turnover not exceeding 1 per cent. ; ‘‘ the Tax on Turnover 
would be a flat rate, not graded or varied for luxuries or necessities’’ (Z'he 
Organiser, Decemher 1920). 
‘Surely this idea of a Tax on Turnover is a survival from the Feudal 
System, and is as obsolete as chain mail and the common field. How could 
such a tax be applied at the same rate to the purchase of furs, champagne, 
and motor cars as to the purchase of boots, bread, and rail or tram tickets? 
Much business is done, especially in the City of London, and no doubt in 
our other large towns, on a tiny margin of profit. How would Lord Lever- 
hulme apply his 14 per cent. to ‘“‘ day to day’ loans at 4 per cent. per annum? 
How, too, would the tax be applied to purchases of Consols, War Loans, or 
other stocks bought to employ temporary balances? In this country we say 
that certain kinds of expenditure, e.g. on wines, spirits, beer, cigars, tobacco, 
motor cars, game-shooting, cinema and theatre tickets, indicate a taxable 
margin, and so we tax them. Most other kinds of expenditure, e.g. on clothes, 
food, schools, rent, doctors, depend largely on the size of a man’s family and 
offer no indication of his capacity to pay taxes; if anything, they indicate 
the opposite. 
“So far as I can ascertain, the Turnover Tax in France has proved a dis- 
‘appointment, and is said to have led to much dishonesty on the part of sellers. 
Evidently a tax on turnover is meant to be passed on to the consumer, and in 
most cases it would be. Probably it would fall most heavily on genuine business 
transactions or on the purchase of necessaries, and least heavily on the purchase 
of luxuries; therefore it would increase the cost of living; it is bound also to 
differentiate in favour of large concerns and multiple shops against the smaller 
concerns and the individual shopkeeper. It must involve, too, a prodigious 
extension of Government activity and constant interference by officials with 
trade and production of every kind. Experience since the Armistice shows 
how much injury can be done to trade and to the nation’s prosperity by the 
interference of Government oflicials with trade.’ 
We should be glad to recommend some exemption of savings from income 
tax, seeing that the need of new capital is so great; but probably, as Dr. Dalton 
writes, the administrative difficulties are insuperable. 
Dr. Dalton suggests certain changes in our tax system: ‘I am in favour 
of a tax on the capital site values of land, but probably this would be most 
conveniently treated as a source of revenue for local authorities. I am in 
favour of changes in the Death Duties, as a result. of which (a) the present 
legacy and succession duties should be amalgamated and steeply graduated 
according to the amounts received by inheritors; and (6) the present estate 
duty should, if administratively practicable, be replaced by a tax of the 
type suggested by Professor Rignano, of Milan. (See my review of Professor 
Rignano’s ‘ Del Diritto Successorio’ in the Hconomic Journal, March 1921, and 
also my ‘Inequalities of Income,’ Part IV., Chapters IX. and X.) 
The mainstays of the British tax system should, in my opinion, be (a) Income 
Tax, (6) Inheritance Tax, (c) Taxes on Alcohol and Tobacco, with (d) Capital 
Levy as an exceptional and transitory measure.’ 
Mr. Bernard Shaw ‘is strongly of opinion that the principle of exempting 
invested income—that is, income transformed into capital—from income tax 
should be made general; so that expenditure, not savings, should be taxed.’ 
Question 13.—Describe the process and results of deflation. 
Most of our members and correspondents have omitted to deal with this 
question, which evidently requires considerable reference to statistics. These 
statistics, however, are given and discussed in the report of our Sub-Committee 
on Currency and the Gold Standard. 
» Perhaps our collective views are fairly expressed by Sir J. C. Stamp, who 
replies : ‘I think that these are sufficiently well known, without my being 
able to add very much. In any pronouncement on the subject it should be 
