FEDERAL FINANCE.
Scotland 78·4 per cent., Ireland only contributes 37·8 per cent, of her revenue to Imperial purposes. From this fact it results that it is impossible to adjust the financial relations between the Imperial and national authorities on a general plan applicable to each country alike.
Thirdly, it must be noted that Imperial expenditure exceeds the proceeds of either direct or indirect taxation, so that it cannot be defrayed out of either taken alone.
Having stated the principal difficulties of the problem before us, it becomes necessary to determine the conditions of a satisfactory solution.
Sources of Imperial revenue.1. The Imperial revenue must be elastic, and therefore ought to be drawn from sources capable of producing a considerable and immediate increase.—If the Empire becomes involved in war, if a large increase in shipbuilding for the Navy is required owing to the activity in foreign navies, the Chancellor of the Exchequer has immediately to raise funds. The income tax is the first tax he resorts to. It is essentially his reserve to meet demands such as those described. It clearly cannot be handed over to the national authorities; and the same remark applies in a somewhat lesser degree to customs and excise.
2. It is desirable that the revenues of both the Imperial and national authorities should be raised from direct as well as indirect taxes, so that neither may be felt to press unduly on any class of the community.—There are four principal heads of taxation:—Customs, excise, estate duties, and income tax. The two latter fall almost entirely on the well-to-do-classes, the former on the whole community. If the Imperial authority were to depend altogether on the revenue from customs and99
