COMPANY TAXATION.

Auckland Star, Volume LIV, Issue 48, 26 February 1923, Page 3

COMPANY TAXATION.

A NOTE OIT GRADATIONS. QUESTION OF STOCK VALUATrOXS. (By AJT ACCOUNTANT.)

Although our system of taxation of company profits at very high rates, and with steep gradations, is some years eld, there are good reasons to believe that; even among business men there arc many who do not realise fully the seriousness of all its applications and implications. They do not jrrasp completely in all its details the application of the eyetem to the higher levels of! profit, and especially the proportion that increase of taxation bears tv increase of profit. Let mc illustrate hy some examples under the old scale than ran up to 7/6 in the £. The following table shows the profits assessable, the taxation payable, and the difference between the imposts at the various levels.

A firm making a profit of £5000 one year and £6500 the next would £910 13/9 additional taxation —£910 oa £1500, which ie at the rate of more than ten shillings in the £. Under the 8/9 maximum we get the following results: —

A difference between £7000 and £10,000 in profit meant a difference in taxation of £1845. Under the preeenti rate of 7/4 the tax on £6000 of profit is £1700, on £7000 £2129, on £10,000 £3616. The temptation to declare profits at the lowest possible figure must be strong under such circumstancee. A firm may realise that by writing down its stock by another thousand or two it will escape quite a large amount in taxation. A business man with the highest sense of his duty to the State may reflect that he aleo has a duty to the shareholders. Is it fair to them that the Stock Should be returned at a figure that involves payment of hundreds of pounds of taxation , that could be avoided? It is very questionable whether business men should be placed in such a position. ~_,. ~„_., .

Profits. £ 3000 3500 4000 4500 5000 5500 6000 0500 Taxation. £ s. d. 534 7 6 716 13 4 925 0 0 1164 7 6 1417 15 O 1710 4 10 2023 15 0 2328 8 9 Uifferpure. £ «. <1. 1S2 5 10 208 6 8 239 7 « 253 7 « 9 10 313 10 2 304 13 M

Profits. £ 4000 5000 6000 7000 8000 9000 10,000 Taxation. £ 960 14B0 2040 2555 3120 3T35 4400 ] Difl ffereae*. a, 490 590 515 . 565 <nr> 665