A few remarks on the evidence received by the Irish Taxation Committee. Together with a brief review of the subject

Front matter

A FEW REMARKS

ON THE

EVIDENCE RECEIVED

Chapter II

PROBABLE CAUSES OF INCREASE OF DEBT AND TAXATION BETWEEN 1800 AND 1817.

Before entering on the examination of the financial details on which rest the truth or falsehood of the different views referred to in the preceding chapter, it may not he uninteresting to consider those political transactions which during the same period produced such marvellous effects on the finances of the two countries. We have already seen that between 1800 and 1816 the debt of Great Britain had increased from £420,305,944 to £682,520,033, and the debt of Ireland, from £26,841,219 to £113,680,158, whilst at the same time the annual levy of taxation had progressively advanced year by year from £34,979,729 for Great Britain to £64,577,839, and for Ireland from £3,159,214 to £6,000,000. The debt of Great Britain we thus perceive was increased nearly two. thirds, the debt of Ireland was more than quadrupled, and this with an addition to the annual burdens of taxation in almost similar proportions in the two countries.

Looking to the terms of the act of union, quite a different state of things would seem to have been anticipated. The framers of that act evidently expected a steady and perhaps rapid reduction of the debt, and took great care to provide for the distribution of a surplus arising out of the receipts from ordinary revenues. In the 7th article of that Act we find the following clauses : —

11 That if at the end of any year, any surplus shall accrue from the revenues of Ireland after defraying the interest, sinking fund, and proportional contributions, and separate charges, to which the said country shall then be liable, taxes shall be taken off to the amount of such surplus , or the surplus shall be applied by the parliament of the United Kingdom to local purposes in Ireland, or to make good any deficiency which may arise in the revenues of Ireland in time of peace, or may be invested by the Commissioners of the National Debt of Ireland in the Funds, to accumulate for the benefit of Ireland at compound interest, in case of the contribution of Ireland in time of war, provided that the surplus so to accumulate shall at no future period be suffered to exceed the sum of £5,000,000”.

And again :

“ That if at any future day the separate debt of each country respectively shall have been liquidated , or if the values of the respective debts shall be to each other in the same proportion with the respective contributions of each country respectively, it shall be competent to the parliament to declare”, etc.

On the other hand neither in this nor any other article of the Act of Union is it easy to find any adequate provision for the eventualities which really arose, and hence the great doubts and difficulties thrown on the interpretation of the financial sections of the treaty of Union.

Reading this treaty together with the speeches of the statesmen who supported it, and then looking to the results which it produced, or rather to the state of things which existed after it had been i in operation sixteen years, we cannot help asking ourselves, how it was that the views so confidently put forward by the most eminent statesmen in 1800, were doomed to be so sadly disappointed, and how it was that a financial treaty professedly arranged on the principle of proportionate equality of burden, very nearly terminated in the financial bankruptcy of Ireland?

To answer these questions, it is absolutely necessary we should turn for a moment to the consideration of the great political events which have rendered those sixteen years memorable in the world’s history. During those sixteen years one of the greatest struggles ever recorded was going on; more thrones were overturned, more new dynasties formed, to be dissolved after a brief existence, than, in a like period, the world had ever before seen. Commencing with a directorate,. the French nation had passed under the almost supreme power of a consul, who in a short time changed its constitution into that of an aggressive empire. The ephemeral republics of the continent of Europe, formed through French influence, and supported by French power, successively merged into dependent monarchies, and with each and every one of the great powers of Europe did Napoleon in turn wage war. Nor was Great Britain exempt from taking part in those great conflicts. Protected to a great extent by her insular position from direct aggressive attack, no power in Europe was more mixed up with the struggle against French aggression. From first to last, she maintained the defence against France, and, unlike the other powers, was never found the one day the opponent, the next the ally, of the French ruler. Scarcely a year passed which was not made memorable by some great battle or decisive disaster to some of the great powers of Europe.

In the year 1805 a confederacy was formed between Great Britain and some of the continental powers, to resist the aggressions of the French, and the same year witnessed the battles of Ulm and Austerlitz, in the former of which the Austrians, in the latter the Russians and the allies, were completely defeated.

In 1806 Prussia, who stood practically neutral in the preceding year, when her neighbours were engaged in. a struggle for existence, had to pay the penalty of her inaction, and by the battle of Jena was placed almost at the mercy of Napoleon.

In 1807 the battle of Friedland shook the power of Russia, and forced her into alliance with France. In 1808 Joseph Buonaparte was proclaimed king of Spain, and the tremendous peninsular struggle commenced. In 1809 the Austrians saw their capital occupied by French troops, and after the battle of W agram the humiliating peace of Vienna had to be signed. The years 1810 and 1811 witnessed the great conflict of the British and French in Spain and Portugal, and the first blow was given to French power by the triumphant defence of the lines of Torres Yedras. 1812 witnessed the campaign of Moscow, and the disastrous retreat which completely turned the tide of prosperity against Napoleon. In 1813 by the battle of Yittoria Joseph Buonaparte was driven out of Spain, and by the battle of Leipsic, in the same year, Napoleon himself was forced to retreat ; the year 1814 saw his downfall and abdication; 1815, his return and final overthrow at Waterloo.

In all these eventful proceedings Great Britain took a prominent part. Where her soldiers or sailors were not engaged, there were her warlike stores and her supplies of money, and the armies which assembled on the Elbe and the Danube were at times as dependent for their support on the United Kingdom as those under the command of Wellington in the Peninsula. Nor were British exertions confined to the Continent of Europe. During the same period a war had to be maintained in America, and though of shorter duration and much less magnitude than the European conflict, yet through the injury it did her commerce, it tried England’s resources even more than some of the struggles with Napoleon.

Considering, then, the vastness of the enterprise undertaken by Great Britain during those fifteen years, we cannot wonder that her expenditure largely increased, and that with a considerable increase of taxation a large addition had still to be made to the national debt.

That the great European conflict was not anticipated in 1800, is evident from the statements then made, and from the condition in which Europe then was. The French Republic had at that time been in existence about thirteen years, during which it had been in constant warfare with its neighbours; but a term to those conflicts seemed close at hand. France had evidently suffered much both from her own internal commotions and her disagreement with foreign nations, and there was every prospect that before very long some arrangement would be entered into by which the peace of Europe would be restored. The realization of this expectation was not long delayed, and towards the close of the year 1801 negociations were commenced which terminated in the peace of Amiens, by which, apparently, the long desired restoration of tranquillity was accomplished.

The existence of peace, or at least the cessation from any expensive warlike proceedings, in the earlier years after the passing of the Act of Union, made a sensible impression on the condition of the finances of the empire, and accordingly we find that in the first few years, the proportions between debt incurred and taxation levied on Great Britain and Ireland, did not vary very much from the proportions fixed by the treaty, the enormous disproportionate increase in the debt of Ireland being reserved for later times. The hopes, however, raised by the treaty of Amiens were not destined to be of long duration, and, as we have seen, Europe, before the year 1805, was fully engaged in that destructive war to which we have alluded.

It must not, however, be supposed that the events which occurred in Europe during the period of the war were, in a financial point of view, of unmixed evil to Great Britain. On the contrary, if on the one hand she had to pay largely for the prosecution of the war, on the other, through its instrumentality her trade and commerce received a great impulse. To injure that trade and destroy Britain’s maritime supremacy, was Napoleon’s pet idea; but in this he altogether failed, and although successful in shutting, through what was termed the “ Continental system”, many of the' European ports to British ships, yet any loss consequent on this was more than made up by the development of British colonial power. Moreover, during the entire time Great Britain was internally at peace; no foreign invader disturbed her insular tranquillity; and, almost the only country in Europe free to cultivate the arts of peace without disturbance, she became the workshop of Europe. In spite of all the endeavours of Napoleon, the carrying trade of the world passed into her hands, and British merchants, manufacturers, and traders, became undoubtedly the great gainers by the paralysed state into which Europe was thrown. Thus, if her taxation were doubled and her debt increased by two-thirds, yet at the end of the period she was in a more flourishing financial state than at its commencement.

The same unfortunately cannot be said with regard to Ireland. Her commerce was very contracted, her trade and manufactures very limited, and although having to contribute her proportion to the increased expenditure, she did not receive similar compensating advantages. As we have seen, the enormous expenditure attendant on the Napoleonic war was not anticipated at the time when the proportion of contribution was arranged, and although Ireland, under ordinary circumstances, might have been able to contribute two-seventeenths of a peace expenditure, she entirely failed to contribute that proportion by revenue, ■$dien the expenditure had so enormously increased.

The great European war and the expenses attendant on it, may then to a certain extent account for the fact, that the expectations held out in 1800 were never realized, and that the debt and revenue increased with such rapid strides between 1800 and 1816.

Chapter III. Separate Taxation Borne By Great Britain Between 1800 And 1817

In the preceding chapter some of the causes which led to the heavy burdens imposed on the United Kingdom between 1800 and 1816 have been alluded to, but, as before remarked, those burdens were not similarly supported in Great Britain and Ireland. In the former country a far larger proportion of the annual charge was met by revenue than in the latter country, and many taxes were imposed on Great Britain from which Ireland was free. This separate taxation on the part of Great Britain has led to many curious deductions, and, as the most erroneous views seem to have arisen from it, I purpose briefly to examine what appears to me to be the only com elusion which it proves.

It is quite clear, in the commencement, that had Ireland met her contribution by revenue in the same proportion as Great Britain did, it would have been a matter of perfect indifference in what way she met it. Whether the taxes she paid were similar to those in use in Great Britain, or whether they were not, she would have equally fulfilled her obligations, and would not have been open to any charge of exemption from taxation. But this was not the case. Ireland’s revenue failed to meet her contributions, a failure ascribed to her exemption from many British taxes; and as the amount contributed by those taxes in Great Britain was very large, the exemption enjoyed by Ireland is set down as being also very considerable.

The amount levied by separate taxes in Great Britain has been variously estimated, and is not very easily arrived at, and to ascertain it now with perfect accuracy would be almost an impossibility. According to Mr. Chisholm’s returns,* it would appear that nearly two-thirds of the revenue of Great Britain was raised by taxes peculiar to that country. Out of a revenue of £888,000,000, he calculates that £582,000,000 were raised by taxes not imposed on Ireland; and this no doubt, at first sight, would lead one to the belief that Ireland must have been very lightly taxed as compared with Great Britain. As some writers have gone so far as to estimate the whole of this £582,000,000 as excessive taxation on the part of Great Britain, it may not be useless to examine in detail how far it really can be considered as such.

Before entering on this, however, we must remark that this calculation of £582,000,000 of separate taxation paid by Great Britain, is only an estimate, and that it is an estimate formed on principles which have never been explained, and which therefore it is not easy to follow.

* Ap. to Report, session 1865, p. 143.

In the year 1834 a return* was presented to parliament purporting to show the gross receipts from excise and taxes levied in Great Britain, but not in Ireland, during the thirty-three preceding years. This return did not particularize the amount received each year, nor did it give in any separate form the receipts between the years 1800 and 1816. In it also appeared a calculation of the separate taxation of Great Britain under the head of customs duty, a calculation, however, based not on the receipts in Great Britain, but on the receipts in Ireland, an estimate being made of what the receipts in the latter country would have been, had the rate of the duty been assimilated to the British rate.

On this return Mr. Chisholm founds his estimate, with this difference, that he calculates the customs duties, “ as far as can now be ascertained”, on the same principle as that followed in the return regarding the excise, and makes an average of the amount contributed each year, which he multiplies by sixteen to discover the receipts between 1800 and 1816. With the correctness of this return, or of Mr. Chisholm’s calculations on it, I hardly desire to deal, but still it is necessary to remark that the return itself does not profess to give a correct account of the actual nett receipts from separate taxation in Great Britain, and in the next place, that the system of taking an annual average cannot give us anything but a rough idea of the state of things, as the same taxes were not in operation all the time.

It is on the principle of the argument arising from the apparent results of this calculation that I wish to dwell, and therefore, for the time being, I will not dispute the correctness of the figures. Assuming then that a large sum, say £500,000,000, was raised in Great Britain by taxes not imposed on Ireland, does this prove that Great Britain paid £500,000,000 of excess as compared with Ireland, or that the latter country was proportionately leniently treated? Certainly it does not. In the first place, it does not at all follow, had the taxes through which this large sum was collected, never been imposed, that none of the £500,000,000 would have found its way into the exchequer. On the contrary, we may very confidently assert that, in all probability, a very large portion of it would have been received through increased receipts from the other branches of revenue. Moreover, a considerable amount of this £500,000,000 is made up from a calculation of the higher rate of duty charged on certain articles in Great Britain over that charged in Ireland, and to conclude that the entire of this amount was due to the increased duty is clearly a fallacy, as there is scarcely a principle in finance more generally admitted, than that that a reduction in the rate of customs and excise duties does not lead to the loss of the entire revenue contributed by the higher duty, a great portion of the loss consequent on the reduction being made up by increased consumption at the lower rates. Therefore, even so far as Great Britain was concerned, it would be a most erroneous conclusion to draw from the figures given us, that she paid £500,000,000 in taxation which she would never have raised had the taxation been similar with that of Ireland.

Proceeding, however, in our investigation, and assuming that, had her taxation been assimilated to that of Ireland, she would have been relieved of £500,000,000 of payments, does this show that the payment of this sum was, as compared to Ireland, excessive taxation ? Certainly it does not, unless we assume that the mode of living of the people of the two countries, their habits and customs, the trades in existence there, and the productions of the soil were all similar; because, unless all this be granted, no argument can be derived as to the excessive taxation of Great Britain when compared with Ireland, from a calculation of the amount contributed in the former country by taxes specially levied there. I hardly know whether it is necessary to attempt any illustration of this, but an example may not be useless.

Suppose we take two countries, in one of which the common beverage of the people is beer or ale, and in the other wine or spirits, and suppose a common tax on wine or spirits is imposed on both, will this affect each similarly? According to our supposition, in the first country, which we will call A, very little wine or spirits at all is drunk, its use being substituted there by beer or ale, whilst in the second country, B, wine or spirits is the ordinary beverage of the people. Is it not clear that this common tax on wine or spirits presses far more heavily on B than on A, and that with this similar taxation A really is enjoying an exemption, whilst B, as compared with it, is excessively taxed? W ell, supposing that, to meet this inequality, a tax is imposed in A on ale and beer, but that this tax is not imposed in B, how do things then stand? A then may be over-taxed as compared with B; but which does that over-taxation arise from the tax on the beer or the tax on the spirits ? From the preceding comparison it is evident that the tax on the beer was absolutely necessary to put A and B on an equality, and if A has now anything to complain of, it is not the tax on the beer, but the tax on the spirits — a tax on a commodity corresponding to that one which in the other country still remains free from taxation. If then any one were to assume that the whole amount contributed by A under the tax on beer was excessive, because that tax was not extended to B, it is clear that he would assume what in point of fact was completely erroneous. Well, this is exactly what is done when it is assumed that all the revenue raised in Great Britain by separate taxes was excessive taxation. A great amount of these taxes were taxes on articles of almost purely British consumption or production, such as beer, printed calicoes, etc. As they formed the staple articles either of consumption or production, it cannot be said that by a tax on them Great Britain was unduly burdened, unless it can be shown that on corresponding though not similar articles no tax was borne in Ireland.

If then it cannot be assumed that the total amount contributed by separate taxes in Great Britain was excessive taxation on that country, still less can it be argued that to a proportionate amount Ireland w~as leniently treated. The exemptions enjoyed by Ireland cannot in any possible way be calculated on the basis of the amounts contributed by Great Britain. For instance, between 1800 and 1834, according to the returns of 1834, £40,000,000 were raised in Great Britain by a tax on printed calicoes, from which tax Ireland was exempt: but surely from this fact it is not possible to ascertain what exemption Ireland enjoyed. Indeed, it is possible, and even probable, that from the non-imposition of certain British taxes the Irish revenue suffered no loss whatever. Had many of these taxes been extended to Ireland, they would scarcely have paid the cost of collection, whilst on the other hand such an extension, by diminishing the receipts arising from other duties, might rather have injured than increased the public income.

I think I have therefore shown that from a vague, indefinite, and even incorrect estimate of the amount contributed by Great Britain in separate taxes, no possible conclusion can be drawn either as to the over-taxation of that country, or the under-taxation of Ireland; because equality of taxation in no way depends on similarity in the actual taxes, nor can the amount contributed by certain taxes in the one country give us any criterion by which to judge of the amount which would have been contributed by the other, had the same system been adopted in it.

I have dwelt particularly on this topic, and gone perhaps into too much detail, because I was anxious carefully to consider an argument often used, and referred to in a preceding chapter, viz., that Ireland failed to meet her liabilities, and became involved in debt, because she was impatient of taxation and never bore many of the burdens imposed on Great Britain. Whether this argument is true in fact or not, I do not undertake here to determine, but I think it is pretty clear that it cannot be proved from the fact that a certain large amount of taxation was levied in Great Britain by taxes not extended to Ireland. Had those taxes been made general over the United Kingdom, it is possible that the revenue raised from Ireland might have been less than it was, and at least the actual amount contributed by these taxes in Great Britain affords us no criterion by which to judge of the exemption enjoyed by Ireland.

Equality in taxation, or more properly, similarity in the taxes imposed, might have been brought about in two ways; either by absolving Great Britain from all those taxes which were not extended to Ireland, or by extending them to the latter country. Had the former system been adopted, and were the calculations concerning the amount realized by those taxes correct, the only result would have been, that at the end of the sixteen years Great Britain would have been involved in far more heavy debt than Ireland. According to Mr. Chisholm, nearly two-thirds of the British revenue was raised by these taxes, and if we are to presume that their remission would cause a loss of these two-thirds, of course it follows that the deficiency would give rise to an increased debt, and thus, though Ireland would not be directly affected, Great Britain would be in a much worse position than before. On the other hand, were the similarity established by the extension of all the British taxes to Ireland, it is impossible to say what would have been the result. The revenue of Ireland might have been increased — it might have been left as it was— it is even possible to suppose that it might have been diminished. As, therefore, the establishment of similarity in the first way would not have affected Ireland at all, and the result of its establishment in the second way cannot by possibility be accurately ascertained, it is hardly necessary to urge that no practical conclusion can be drawn, as to the exemption enjoyed by Ireland, from a consideration of the amount of revenue contributed in Great Britain by taxes not extended to the sister country.

Whether Ireland was comparatively undertaxed between 1800 and 1816, may be judged of by other tests, and with some of these I purpose to deal in the succeeding chapters.

Chapter IV. The Proportion Fixed On Ireland Excessive

It by no means follows from the argument used in the last chapter, that Ireland did not enjoy certain exemptions from taxation during the period from the Union to the amalgamation of the exchequers. We know as a fact that many taxes were not imposed on her, and although the amount contributed by these taxes in Great Britain cannot give us any criterion by which to judge of the actual exemption enjoyed by Ireland, yet it is possible, and at first sight seems probable, that the resources of the latter country were not so severely taxed as those of the former. Whether such was the case or not, and whether the proportions of two to fifteen were in reality too heavy for Ireland, depends altogether on different conditions, to which I purpose now to proceed.

Examining more in detail those years during which the war expenditure existed, and dividing it into three parts, we find that the revenue of Great Britain successively advanced from £35,262,508* in 1801, to £50,228,236 in 1805, being an increase of about 42 per cent., from which there was a still further advance in 1810 to £68,573,702, or an increase of 36 per cent., and in 1815 to £76,869,272, or an increase of 12 per cent., whilst the total advance in the revenue raised in the last year over that raised in the first, amounted to 117 per cent. Meanwhile the funded unredeemed debt had risen from £420,000,000 to £524,000,000, £552,000,000, and £700,000,000, respectively, showing an increase on the whole of about 66 per cent.

As far as the revenue was concerned, almost similar results took place in Ireland. In the year 1805 the Irish revenue was 22 per cent, over what it was in 1800; in 1810 it was 20 per cent, over what it was in 1805; and between 1810 and 1815 it increased 40 per cent., whilst the total advance on the whole period was over 107 per cent. As to the Irish debt, it had, as before remarked, been quadrupled.

We thus perceive that the actual increase in the Irish revenue was greater than that which took place in the British; and when we examine the nature of the taxes imposed in the two countries, we will find that the Irish permanent revenue had increased in far greater ratio than that of Great Britain. On this point the committee that inquired into the subject in 1815, report :

“ Ireland has advanced in permanent taxation more rapidly than Great Britain herself, notwithstanding the immense exertions of the latter country, and including the extraordinary war taxes.

The permanent revenue of Great Britain having increased from the year 1801, in the proportion of 16£ to 10, and the revenue of Ireland in the proportion of 23 to 10”.

Although, therefore, Ireland was exempted from many taxes imposed on England, it is clear this did not result in a diminished call on her resources.

The enormous and disproportionate increase in the Irish debt has been before alluded to ; but this does not give us the actual loss sustained by this borrowing. Many of the loans were negociated on very disadvantageous terms, and although the stock created on account of loans for Ireland during the period amounted to £113,000,000, yet the amount received was only £76,000,000. However, of the money thus required for her service, she was scarcely able to supply any herself, most of the loans for the service of Ireland being negociated in England.

The proportionate amounts of the different loans furnished by Great Britain and Ireland, are given in tables presented to the Committee by Mr. Chisholm; and from these it appears that, of the whole amount raised for the service of the United Kiugdom, Ireland furnished only 4 5 per cent. Of the amounts raised for the service of Ireland, Great Britain furnished 75*5 per cent, and Ireland only 24*5, whilst Mr. Chisholm goes on to say:*

* Ap. to Report, session 1865, p. 141.

“ There is evidence to prove that it was the inability of Ireland to raise money from her own resources, which alone compelled her thus to fall back upon the more abundant and increasing wealth of Great Britain”.

If Ireland therefore was unable to furnish more than so small a proportion of the money required for her own service, and if, contemporaneously with an enormousdncrease in her debt, her taxation was increasing as rapidly as that of Great Britain, we can hardly avoid coming to the conclusion that the contributions fixed at the time of the Union, though perhaps at that time just, had subsequently become much too high, and pressed too heavily on the resources of Ireland. This conclusion is borne out by the expressed opinion of very high authorities, both in parliament and elsewhere, many of which will be found quoted in the appendix to the Taxation Committee Report. Mr. Chisholm himself concludes his remarks on this branch of the subject with the following observation :