Chapter VI: Post Office Revenue

In England, Germany, and France the Post Office has, almost from the first, been a source of revenue to the State. What has happened has been that since the reform the Governments have been glad to take whatever net revenue a penny rate would yield, but, in general, they have not been prepared to raise that rate in order to obtain a greater revenue.[738] The only one of the five countries which does not make, and on principle does not wish to make, a revenue out of the Post Office is the United States of America.

The penny letter rate is not by any means as low as the cost of the service. It is, however, not a burdensome charge in any circumstances, and, although so much greater than the cost, represents in a large number of instances much less than the full measure of benefit which the provision of the service confers on the beneficiary. This is, of course, the ordinary case of the purchaser of a commodity securing a "consumer's surplus."[739] Rates which yield a profit of 50 per cent. (pp. 76 and 311) must, however, be admitted to contain some element of taxation. In France particularly the Post Office occupies a definite place in the fiscal system.[740] There is, however, considerable diversity of opinion among economists with regard to the theoretical character of this revenue. Indeed, the general classification of public revenues is itself not yet agreed upon.[741] Under any classification there is difficulty in assigning a place for the Post Office revenue. With the simplest and most fundamental division it has been regarded as falling under one or other heading, according to the notion of the writer, or in accordance with certain changes of conception based on variations in attendant circumstances.[742]

The difficulty of classification arises from the fact that of the total amount of the postage charges actually levied, only a portion can in any case be regarded as taxation. A person who purchases a commodity from the State, but in purchasing it is charged something more than its actual value, is not taxed to the extent of the whole of the amount which he is charged. There can be no taxation in that part of the amount for which he receives equivalent value in the commodity purchased. It is easy to say of the gross postal revenue that so much is tax (i.e. the net revenue), and so much is cost of service (i.e. the actual expenses), though it may not be easy to justify even this distinction;[743] but what principle is to be followed in determining whether a particular postage charge (e.g. the letter rate or the parcel rate), or any part of it, is taxation?

Taxes are reckoned according to the rate of charge. Thus, the income tax is 2s. 3d. in the pound on earned incomes; but approached in this way postage is not a tax. If the charge only covers the cost of the service, there can be no tax.[744] And when there is a surplus (above normal commercial profit) it cannot be argued that the whole charge becomes a tax. The solution seems to be that in such a case it is neither tax nor industrial price. It contains elements of both, and cannot be classed wholly under either.[745]

The differing analyses of Post Office revenue result largely from their being based on consideration of the balance-sheet of the Post Office, as indicating whether postal charges are to be regarded as taxes.[746] The character of postal charges should not, however, be determined by reference solely to the amount of the surplus revenue. The true classification rests on the conception that the character of public revenue (including Post Office revenue) varies with varying circumstances.[747]

The penny letter rate is a source of very considerable profit, and is therefore not a pure price. Nor can it be said that this penny rate, although it is the source of practically all the profit, is a pure tax. In the case of a large number of letters there is no surplus beyond the cost of the service, and often the cost is greater than the yield of the postage on the particular letters dealt with. In such cases the rate does not contain any element of tax. In other cases the proportion of surplus over cost which the rate yields is exceedingly large.[748] But in all cases it contains some element of remuneration for service rendered. That part of it which is appropriated to cover the cost of conducting the service is of the nature of a price for a service rendered. The remaining part (when found), after allowance has been made for the element of monopoly, is a tax.[749] But it does not exist in all cases. Three categories of letters are therefore found; and the letter rate in general may, according to the circumstances under which the service is rendered, be (1) of composite character, partly price and partly tax, (2) a pure price, (3) a mere fee.

The other rates (excepting for the moment the parcel rate) have all for some specific purpose of State been fixed at a lower level than the letter rate; but, for the most part, without any nice adjustment to the cost of service. Consequently these subsidiary rates are not prices, and do not contain any element of taxation.[750] They are, however, charges made to individuals in respect of certain services performed by the State, and fall, therefore, under the heading of fees.

The parcel rates in England and Germany may be put under the same heading. In both cases the service is conducted at a loss, and the charges cannot therefore be regarded as prices. In the United States and in Canada the law provides that the rates for parcels must in all cases be such as to yield a revenue sufficient to cover the cost of the service, and the presumption is therefore that in those countries the rates will partake of the nature of prices.[751]

Although there has been diversity of opinion regarding the nature of Post Office revenue, there has been remarkable unanimity as to the propriety of raising a net revenue for the State on the service for the transmission of letters. In the days of high rates and relatively high revenue it was not challenged.[752] Sir Rowland Hill's reform took away any sort of feeling that the revenue obtained from the Post Office lay as a burdensome tax, but the amount of surplus revenue was still so considerable that it could fairly be regarded as containing an element of tax.[753] It has, moreover, steadily increased, and its existence been made the justification for claims for further reductions of rate.[754]

The use of the Post Office for the purpose of taxation, that is, the refusal to give away in improvements of service, or by reduction of rates, the net surplus of revenue, is accepted by economists as justifiable[755] and the public acquiesces. The surplus is obtained with the minimum of sacrifice on the part of those who pay, and it would be difficult to discover a tax in substitution which would fall as lightly. Apart from the fact that rates higher than would be necessary for defraying the actual cost of the service must of necessity operate to some extent to the disadvantage of trade and commerce,[756] there is little to urge against the raising of revenue from the Post Office, especially as it is obtained from such popular charges as a penny and a halfpenny, which are well within the reach of the poorest. Payment is, moreover, in a large degree voluntary. The number of letters which a private individual must write, and cannot avoid writing, in the course of a year is very small. If he has anything of importance to write, he does not think a penny an excessive sum to pay for its transmission. If he has nothing to write, there is no law to compel him to pay postage. The profits of postage are, however, large; and the existence of the State monopoly, and the essentially fiscal character of the rates charged, should not be overlooked.[757]

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