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FEDERAL FINANCE. which has to bear practically the whole burden of defending the Empire, three-fourths of the expenditure are Imperial, and only one-fourth is local or national. A plan which may be workable in Australia may be totally inapplicable to the United Kingdom. The objections to this plan, and to the principle on which it is based, may be summarised as follows:—

1. An elaborate inquiry must be held periodically to fix the quota to be contributed by each country to Imperial expenditure. Such inquiry would lead to friction and to constant agitation on the part of the different countries that their quota should be reduced.

2. No sufficient financial responsibility would be imposed on the national authorities for meeting their new expenditure.

3. A budget surplus would belong to the national authorities and not to the Imperial authority, and therefore could not be utilised for the reduction of the national debt.

4. To allow to the national authorities the concurrent use of income tax would impair the elasticity of the Imperial revenues, and would fetter the action of the Imperial Chancellor of the Exchequer in meeting a national emergency.

5. The concurrent use of the same taxes would lead to difficulties of collection and confusion of accounts.

These objections are, in my judgment, fatal to the plan and to the principle on which it is based.

Let us now see whether it is possible to devise a plan based on the principle of providing the national authorities with sufficient revenue to meet the national (including local) expenditure. 111