PRINCIPLES AND METHODS OF TAXATION.* This useful little book is
one more proof, if such is needed, of the vitality of economic science in this country, and a welcome indication that distinguished economic teachers and writers are more and more turning their thoughts to the financial problems which have too long been regarded as mysteries only to be grasped by practical statesmen and administrators. We are, as our readers know, among those who hold that the needs of the present day require the applica- tion of thought and knowledge to every department of govern. ment, and who rejoice at every sign that empirical and hand- to-mouth methods will no longer be so largely relied upon in the future as in the past. Such signs are already apparent in the Board of Trade and the War Office, and we venture to think that the deep interest which Mr. Chamberlain's propa- ganda has awakened in questions of taxation will compel the attention of the authorities to the necessity of thoroughly overhauling the organisation for the supply of infotmation on all points, whether of theory, of statistics, or of foreign legis- lation, connected with fiscal administration. In saying this we by no means imply that our present fiscal system in its broad general outlines, and with reference to the equity of its incidence, has anything to fear from comparison with that of foreign countries. We believe, on the contrary, that the more it is examined the greater will be the confidence that this country has advanced further on the path of justice as between the different classes of taxpayers than any of its rivals. Nor do we wish to depreciate the competence of the official Departments to which, under the guidance of the great generation of Victorian Finance Ministers, this result is largely due. But when we note the levity with which changes are advocated which, whatever benefits they may be expected to secure, must at all events have the effect of imposing greater revenue burdens on the poor ; when we observe the irresponsibility of the great mass, ignorant apparently of the extent of their present burdens, and willing to believe that a largely increased expenditure can be incurred which will fall on a small, if wealthy, class without reaction upon themselves; when we recognise, finally, the complexity of questions, such as those of local taxation and licensing, which immediately confront the present Chancellor of the Exchequer,—it is easy to realise that no sound conclusion can be reached without a wide diffusion of exact knowledge, and the co-operation in the work of instruction and reform of both the thinkers and the practical administrators. Such work as that done by Professor Bastable, Messrs. Rowntree and Sherwell, and Mr. Armitage- Smith, to name two or three only of many who are to-day giving their minds to pressing economic problems, is therefore of the utmost value, and we could wish, speaking as outside critics, that some means might be found for putting advisers of this class into more direct relations, with the official experts.
The main object of Mr. Armitage-Smith has been to give a clear account of the principles of our system of taxation, and of the relation of each part of it to the rest. The writer, as readers of his former volume on Free-trade will recognise, is a master of the art of terse and luminous expositien, and
• Principles and Methods of Taxation. By G. Armitage-Smith, M.A., Principal of the Birkbeck College. London : John Murray. Ds.]
in the present work he deals in less than two hundred pages with all the chief points of Imperial and local finance in a manner which leaves little to be desired, and which will, we think, satisfy both the special student and the general public. Mr. Armitage-Smith writes throughout mainly as an exponent and not as a critic of accepted principles and methods, and while he also discusses the various proposals which have been put forward for radical changes, such as those for a larger degree of graduation in the Income-tax (of which he seems to approve in theory) and for the taxation of ground values, he usually confines himself in such cases to summarising the arguments on both sides. But he never loses the opportunity of enforcing the lessons which a survey of taxation systems suggests, as, for instance, when he insists in weighty language on the fact that all taxation is an evil, though a necessary evil :—
"Taxation," he remarks, "is sometimes represented as 'a good investment, and one which returns interest to the community.' This statement cannot be accepted simply as a general truth ; it requires careful interpretation, otherwise it might constitute a dangerous encouragement to extravagance, and lead to a ruinous degree of taxation. The condition of Egypt under Ismail Pasha and that of Great Britain in the early part of the nineteenth century, not- withstanding the counteracting influences of the new industrial developments, afford startling evidence of the disastrous effects of excessive taxation. All taxes are deductions from the spending power of individuals, and therefore from their demand for products of industry ; they thus diminish voluntary consumption and pro- duction. Since taxation does not create wealth but only diverts it into the hands of government, it cannot be justified except by its expediency, and it is only a good investment when its objects are clearly beneficial to the community, and when taxes are raised by methods which are just and economic."
On these principles Mr. Armitage-Smith justifies the large expenditure upon the productive works of railways, irrigation, &c., in India, where "the duty of stimulating progress and advancing economic conditions falls mainly upon the rulers of the country" in the absence of native capital or enterprise. Mr. Armitage-Smith does not perhaps sufficiently take account of the poverty of the masses in an Eastern country, and goes further than some authorities in his general approval of the Indian system ; but his account of that system, as also of the French revenue system, shows his freedom from insular prejudice, and is a welcome addition to a commentary upon British methods. All the more striking, therefore, is his defence, against Tariff Reformers on the one hand and Socialist thinkers on the other, of the policy of taxation for revenue only. "It is a contradiction in terms to say that a tax can be both protective and revenue-yielding ; in so far as it does the one it excludes the other." The truth of this remark is shown by the relative productivity of the Customs in England and France. In the latter country, which raises a total annual revenue about equal to our own, the Customs yield little more than half what it does here, and the great bulk of it is derived "from a small number of non-protective duties, of which those on coffee and petroleum yield the largest proportion." Equally emphatic is his condemnation of the mutually destructive arguments for the re-establishment of Protective taxation in this country. "These arguments may severally appeal to different classes, but it is logically impossible for all three objects [viz., Colonial preference, encouragement of home industries by exclusion of foreign products, and retaliation] to be attained by any system of tariffs, while it is equally certain that the reimposition of protective duties would be the cause of great economic loss to Great Britain."
In conclusion, we would add that this is the kind of book—
in spite of the above quotation, entirely non-political in character—which we should like to see introduced into the curriculum of our great public schools. It is probably im- possible to interest schoolboys in the law of value or the theory of rent as laid down in the ordinary text-books of political economy. But a book like this would attract any intelligent youth, and might lead him on to further economic studies ; and it is surely an anomaly that institu- tions which aim at turning out men equipped to take their share in the government of this nation and Empire should continue to send them forth ignorant of the most elementary facts connected with administration, the foundation of which must always be finance. No French boy labours under such a disadvantage.
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