TAXATION OF WAR PROFITS

Evening Post, Volume XCI, Issue 146, 21 June 1916, Page 2

TAXATION OF WAR PROFITS

10 IHB EDITOR. Sir, —Most people in this country will agree that the intention of the Government to tax war profits to the extent of 45 per cent, is fair and reasonable, but the same people will further agree that the Government's method of arriving at war profits, as expressed by Sir Joseph Ward, is neither fair nor reasonable. Sir Joseph Ward laid down that war profits for the year ending 31st March, 1916, would be held to be those .profits made by any trader for that year in excess of his average yearly profits for the three preceding years. Surely, Sir, this is a crude method of arriving at war profits. If it is a just one, then it must be assumed that the trading community of this country was in a state of stagnation at the time war wa-s declared. The Government, in effect, affirms that no trader or farmer in this Dominion would have progressed if there had been no war. Such a proposition is manifestly absurd. By all means let war profits be heavily taxed, but first of all let us be quite sure that war profits are arrived at in a sane manner, otherwise a very grave injustice will be done to many a struggling business, and many a hard-working farmer.

When the man in the street is asked what is meant by war profits, he says : —"The extra profits made by the big squatters from the high prices of wool, and by the big merchants who held large stocks of merchandise, which appreciated under war conditions." For once the man in -the street is right, but if the Government's definition of war profits is the correct one, then the small trader and farmer, who have been slowly and painfully progressing and struggling for capital for years, are going to be hit much harder by the tax than either the big squatter or the big merchant. The following supposititious case will show how the proposed tax is likely to hit many a small trader :—"A" is a man with a capital of, say, £1000. For many years he ha-s striven manfully to improve his business, .and his profits have been gradually increasing. His net profits for the twelve months ending 31st March, 1916, _is £700. His net profit for the previous twelve months was £600. His average yearly profit for the previous.. three years is, however, only £400.- Consequently the Tax Department, under the proposed definition, of war profits will, in their wisdom, declare £300' of his £700 profit made during the last year to be war profits, and will tax him to the extent of £135. The injustice of such a sum being taken from such a trader is so manifest that it is not necessary to labour the point further. ■: In all probability, his profits for the twelve months ending 31st March last were less than they would have been in normal times-

Surely it should not be difficult for our legislators to devise som& scheme whereby actual war profits would be heavily taxed, without inflicting undue hardship on those traders who have expanded in a legitimate way in spite of war conditions. When the tax was brought into operation in England right of appeal was granted, in order to prevent such injustice, but no mention of any such, provision was made by Sir Joseph Ward when introducing the* Bill. I trust, Sir, that yon will manage to find space for this letter, and that you may be in a position to suggest a fair and reasonable manner of arriving at war profits.—l am, etc., JUSTICE. 19th June, 1916.