REDUCED PROFIT

Dominion, Volume 33, Issue 106, 29 January 1940, Page 10

REDUCED PROFIT

N.Z. Loan And Mercantile Co. BURDEN OF TAXATION The directors of the New Zealand Loan and .Mercantile Agency Company. Ltd., in their report for the year emie< June 30, 1030, stated that the profit ami loss account, after charging debenture stock interest (£6S,OOU), showed a ba.ance of £74,526, to which had been atlueu the balance brought forward from last year, £47,127, making available £121,b00. The ’ directors recommend that there should be paid: Dividend on the u percent. cumulative preference stock lor the year to June 30, 1930, £50,000; dividend at the rate of 2 per eent. per annum on ordinary stock, £25,000; leaving to be carried forward £46,653. . Income tax at the rate of o/b in the i (i.e., at the standard rate of 7/'-, less Dominion income tax relief, l/b), was deducted from both the above dividends. The trading profits, interest and dividends, showed a decrease, with the previous year, of £50,0t>4, mainly due to a diminution in the income from live stock business, low wool prices, and increased expenses beyond the control ol the company. At the forty-fifth annual general meeting of the company, the chairman, Mr. Harold G. Brown, welcomed Sir George Elliot on his appointment as a member of the London board following many years service on the local board for New Zealand. , , . , The chairman referred to the burden Ol taxation which devolved upon companies trading in various parts of the Empire, and said, without taking into account national defence contribution, or excess profits tax in the United Kingdom, the company's profits, after allowing for all rebates "for double taxation, are taxed to the extent of at least 9/6 in the-pound. The greater burden of this taxation fails on the ordinary stockholder, since the deduction from payments of debenture interest is limited to the British standard rate, which, as from the fiscal year 104041, will be 7/6 in the .pound, and in the case of the deduction from the preference stockholders, the relief obtained in the United Kingdom in respect of double taxation had to be taken into account, so that at present rates only about 5/6 in the pound may be deducted. This means that a total of fIC.SOO of tax on that part of the profits which go to debenture holders and preference stockholders falls on the ordinary stockholder, which is equivalent to a dividend of nearly 1| per cent. Furthermore, the ordinary stock has to bear the full taxation on the balance of the profits and the whole burden of national defence contribution or excess profits tax, whichever is the greater. For some years the company's. assessments had not been finalized owing to the necessity for awaiting a decision in the House of Lords on certain difficult questions which were the subject of litigation by another company. These past assessments have now been satisfactorily settled with the British revenue authorities up to and including the year 193738. and as a result the company happily finds that provisions made in previous years w r ere more than necessary, and the transfer of £25.000 to profit and loss ac-. count was considered justified by the company's taxation experts. That being so, it was thought, only fair that the ordinary stockholders, out of whose profits those excessive reserves bad been made, should reap the benefit.