Evening Post. WEDNESDAY, JULY 6, 1921. TAXING BENEFIT FUNDS

Evening Post, Volume CII, Issue 5, 6 July 1921, Page 4

Evening Post. WEDNESDAY, JULY 6, 1921. TAXING BENEFIT FUNDS

Despite the strongly expressed dissent of Mr. Justice Stringer, the decision of the Court of Appeal in the caße of Wright, Stephenson, and Co. versus the Commissioner of Taxes must unfortunately be accepted as legally correct. The presumption in favour of the majority's decision, which confirmed that of the Supreme Court, is strengthened by the fact that they showed themselves just as wide awake as their dissenting colleague to the conflict between the effect of their decision and the demands of public policy. The question was whether or not the appellant company was entitled to an exemption from income tax in respect of moneys set aside during the year and paid into superannuation and benefit funds for its employees. The judgment of the Acting-Chief Justice, Mr., Justice Sim, opened with a very warm tribute to the value of the scheme in question.

The main object (he said) of the appellant company's excellent scheme appears to be to promote diligence and efficiency on the part of the company's servants. Such a scheme is' worthy of every encouragement in these days, when "going slow," with its resulting inefficiency and dishonesty, is deliberately advocated and practised. It is desirable, thereiore, that the contributions nfade by the company to the funds' in question should be held, if possible, to be exempt from taxation as part 6£ the company's income.

Though less emphatically, Mr. Justice Salmond also indicated his good opinion of the scheme from the standpoint of public policy, but it was of course a question not of public polics but of law that the Court had to decide. The question turned on whether or not the contribution made by the company to the pension and benefit funds of its employees was- paid out of profits. " It is true," said Mr. Justice Sim, ''that the sum is to be applied-as part of the remuneration of the company's servants, and in pursuance of a contract to that effect. But that does not make it any the less' a payment out wof profits, although thfey may go to persons who are not members of the company." Mr. Justice Salmond took the same view. , "No system of profit-sharing," he said, "in any manner affected the fundamental principle that- the company must account for and pay tax the whole of its profits." From this point of view the very term "profitsharing" may be said to give the appellants' case aw-ay, for if it is profits that are shared, and profits are as such taxable, regardless of their subsequent allocation, the principle affirmed by the Commissioner of Taxes is hardly distinguishable from an identical proposition.

The position taken up by Mr. Justice Stringer in his dissenting judgment was that a share of the so-called profits of' the company which, in pursuance of a pre-exist-ing contract, was set aside to supplement the fixed amounts payable in salaries and wages could not properly be treated as a part of the " profits and- gains " which are taxable. Not being profits from the business point of view, he did not consider them to be profits from the legal poilit of view. " I cannot see," said Mr. Justice Stringer, " what possible difference it would make to the owner of a business whether ho paid for necessary service by fixed salaries and wages, or by ajiy other method of '.remuneration." From the standpoint of public'policy it is perfectly clear tbat there should be no difference, and on, this point, as we have already suggested, the Judges were really unanimous. , The public will also be unanimously of the same, opinion. Workers and capitalists are equally concerned to see all obstacles removed from the path of such excellent schemes as that which the Court of Appeal had to consider, and they should insist upon the immediate removal of the penalty which they have to pay in the shape of taxation.