26 
Land & Water 
August 8, 191 8 
five million ]K)uncls from Customs in iyi2. liut notliing is 
more certain than that Gennany ha$ obtained next to nothing 
by Customs since the war began. A very large part of iier 
tariff revenue comes from food-stuffs and, as I showed earlier, 
practically all the German food taxes are suspended, as are 
some on manufactures. And then there has been the block- 
ade, and until the Russian peace the land frontiers, except 
the Austrian, have been closed to her. Germany produces 
an ap])arent balance in her normal Budget : (i) by leaving 
out of account by far the largest item in her expenditure, 
the cost of the army and navy ; (2) by including among her 
receipts money which she has not in fact obtained, but which 
she considers she would have obtained under normal con- 
ditions, and (3) by imposing a weird programme of taxes, 
some of which will only yield during the war, \<hile most of 
the others can bring in nothing till it is over — if then. 
Window-DreJsing 
Possibly, these new German taxes were only intended for 
window-dressing purposes — to induce the German people 
to subscribe for war loans. Anyhow, they are suspect from 
the start. Except the war profits tax, which is, of course, 
temporary, they seem all to be indirect taxes, and the utriiost 
ingenuity of successive German financiers lias been devoted 
for years past to discovering means of raising money without 
resorting to an imperial income tax. It would be greatly 
under-rating the ability of Prussian financiers, faced with a 
chronic deficit and hungry for money, to believe they have 
left much in a field so closely gleaned. The taxes are, at 
best, an attempt to cream the skimmed milk, and to get 
very much more off it than ever it has yielded before. Gov- 
ernments don't acquiesce in continual deficits for the mere 
fun of the thing ; and we may be sure that if the German or 
any other European Government had known of a way to 
fill its coffers, without provoking the criticism that comes 
from direct taxation, it would have been tried long ago. 
We have no definite information as toJiow much has actually 
been obtaiired from the ta?ces imposed in igi6 and 1917, for, 
as I have shown, the German statement of receipts merely 
gives estimates of what it is presumed the taxes would have 
yielded in an assumed normal year — at least, when that is 
the most convenient way to give them. With regard to the 
ta.xes proposed this spring, Mr. Bonar Law is fully justified 
in his scepticism as to the amount they will realise. The 
most hopefid permanent item seems to me the proposed tax 
on transactions, from which the Government expects to get 
£50,000,000 a year (a thousand million marks). The round 
figure illustrates the reason why I consider it more hopeful 
than others, and suggests that neither the Germans nor any- 
one else can make more than a guess as to what it will yield. 
For the rest, the Excise and Customs duties will certainly 
bring next to nothing during the war, and depend entirely 
for their prospects after it on the doubtful assumption that 
the normal consumption of the German people will be the 
same after the war as before. This will certainly not be the 
case for a long time with luxuriesT-with many Germans the 
receipts for income ta.x payments will be the only ''luxuries" 
they can afford. 
Another important point arises when we consider the 
prospects of pre-war taxes. The Balfour of Burleigh Com- 
mittee estimated that about two-thirds of the German 
Customs revenue came from taxes on food. Practically all 
these taxes, in so far as they affect necessary food-stuffs 
are suspended, and the probability that they will have to 
remain suspended for years or for ever is much greater than 
that any of the new imposts will yield the revenue expected. 
The reason for suspending them at all was the high price of 
food, and food is quite certain to be dear for many years j'et, 
while the people will be far poorer than before, and probably 
in a very nasty and dangerous temper. They are not likely 
to permit their rulers to interpose the old tax of lis. lod. a 
quarter between them and the Russian or American grain 
that might relieve their necessities. Indeed, the thought of 
the world is moving altogether on other lines. It is being 
recognised now that some form of national rationing in food- 
stuffs" and raw materials will have to be adopted in order to 
secure for each country its fair share of the limited world 
supplies. But if any country imposes a duty to prevent 
some necessary food coming into it, how can its rulers main- 
tain that they are entitled to a share in that of which there is 
• not enough to go round ? I do not think the food tariffS' 
can be reconstructed either in Gennany or anywhere else 
for many a long day. 
If so, the German Customs will cea.se to be an important 
source of revenue, while the poverty of the people is likely to 
cause a corresponding shrinkage in the income from Excise 
and the Post Office. These three items form the backbone 
of the permanent German revenue as it stood before the war. 
On the whole, I am convinced that nothing will alter the 
substantial truth of the position that either the German 
Government must repudiate its war debt, which by March 
next year will amount to £8,000,000,000, or the Junkers and 
capitalists who formed the war party must pay the interest 
on it in direct taxation. 
The French Government have been more honest than the 
German, 'but they, too, have been faced with similar difficul- 
ties. Their revenue, also, necessarily fell off at the beginning 
of the war, and for the same reason — that so little of it was 
derived from direct internal taxes which could be increased 
at will — while the Customs Revenue necessarily went to 
pieces. The methods of French finance prevent us knowing 
actual results as distinct from estimates, therefore it is possi- 
ble that time may morhfy the state of things revealed in the 
Budget of December, 1917, the first presented to the Chamber 
since the war began. New taxes had been enacted, however, 
v\'hich, together with those in force before the war, were 
expected to bring the French revenue up to £267,000,000, 
leaving a deficit without providing lor the expenses of the 
army and navy on a peace footing, of nearly one hundred 
million pounds. To meet this, further taxation was pro- 
posed, but the French financiers, like the German, leave the 
whole question of defence in the future out of account. Even 
if all their hopes are realised, the armies and navies, if there 
are any, of the future Europe will have to be provided by 
entirely new direct taxation coming out of the pockets of 
people who are already ta.xed in every possible direction. 
In one important respect France has been more courageous 
than German3^ During the war she has laid the foundation 
of an income tax, and that, properly developed, will pro- 
bably do more to help her than all her other new taxes put 
g together. 
Liabilities of the Future 
Three only of the great Powers stand in a comparatively 
favourable position. Italy, Great Britain, and the United 
States may, if the hopes of their financiers are realised, and 
the war ends quickly, be able to pay the first calls for interest 
on their debts, and provide for a civil and military expendi- 
ture on something like the scale kept up before the war. 
Looking through the scheme of new taxes imposed in Italy, 
the beginning of which was made before she entered the war, 
there seems to me a better prospect that they will realise 
the money expected than those even of France, let alone 
Germany. The Italian War Debt last summer had risen by 
£1,000,000,000, and it is hoped that these taxes will jdeld 
ninety millions a year. The war profits tax is, of course, 
temporary, but possibly there may be a surplus after meeting 
interest and civil expenses. We may meet our liabilities, 
if the war ends soon, without further taxation, and at the 
worst we have in the income tax a fully organised means 
for meeting them. Onlj' in the LInited States, however, 
which since Mr. Wilson came into oflice has laid the founda- 
tions of an income tax and has developed it heroically, can 
there be much to spare. With an income tax graduated 
up to 65 per cent, on the multi-milHonaire, the war is not likely 
to last long enough to ruin the American Government. The 
other countries are none.of them in a position to meet the 
half-yearlj' payments for interest on debt, amounting in the 
case of Germany to nearly £200,000,000, rmtil they have 
had time to make v\''hat amounts to a far-reaching revolution 
in the' whole structure of the State. 
It is after a war and not during it that the consequences 
of bad finance come home to the Governments guiltv of it. 
After the war you must, produce a definite balance-sheet of 
receipts and expenditure, and then everybody knows on what 
security they are asked to lend more money. And more 
money the Powers of Europe will be compelled to borrow, as 
soon as the war is over, for interest and for reconstruction. 
To do so they must so revise their taxation as to show a sur- 
plus sufficient to pay for these charges. That surplus will 
amount to hundreds of millions and can only be got by impos- 
ing crushing taxation on the very classes who have made 
the war. To them militarism will then present a very different 
aspect than before. The upkeep of armies and navies on 
anything like the old scale will certainly mean to them an 
intolerable demand in addition to the unwelcome imposts 
which they will have to bear in any case. Nay, the total 
ending of militarism may be the only way to save the State 
from bankruptcy and themselves from ruin ; for while it 
might be quite possible to obtain loans from the only country 
likely to have any money to spare, the United States, for a 
disarmed and peaceful Europe, it is hardly likely any 
American financier will care to risk his money (n building up 
another armed peace. 
