Note 748 — APPENDIXES
Reading edition
This has been held a justification for regarding the letter rate as a whole as a pure tax:—
"A special service is no doubt rendered to each contributor of the tax, as well as a general service to the whole community, by means of the facilities of communication always available; but the charge is what is technically known as a tax, and the fact that a particular, as well as a general, service is rendered, does not alter the tax nature of the charge. Apart from the theory it has also to be considered that the productive portion of the Post Office revenue is derived from charges where the cost is very little—from letters, for instance, in the metropolitan district, or in and between great centres of population, where the cost of conveyance and delivery does not exceed, probably, one-tenth of a penny per letter, and the surplus of nine-tenths is spent on other services of the Post Office on which there is a deficit."—Sir Robert Giffen, K.C.B. (Memoranda on Classification and Incidence, p. 94).
The argument is that in large towns the cost of the service is infinitesimal, and the charge is therefore tax. Obviously this has no application to country services.
Plehn does not take this view:—
"Postal surplus not the result of taxation."
"There are some writers who regard any surplus acquired in this way as practically the result of taxation, and class any charge for the public service, above the cost thereof, as a special tax. This classification presupposes that the service is, by nature, of a public character, an assumption contrary to the fact, for no function except that of governing itself, in the narrowest possible sense, is by nature of a public character, nor, on the other hand, by nature of a private character. On this consideration, therefore, it is better to class these gains, not as taxes, but as the earnings of a public industry."—C. C. Plehn, Introduction to Public Finance, p. 358.