A TAX ON PROGRESS

Evening Post, Volume CXXV, Issue 145, 22 June 1938, Page 10

A TAX ON PROGRESS

One of the professed objects of the Labour Government is to encourage industrial development, but it is becoming increasingly obvious that the aim is being defeated very largely by a taxation policy which makes exorbitant demands on those who are prepared to invest their money. As. was pointed out by the Associated Chambers of Commerce yesterday, a company must make a heavy payment to the State at a

i maximum rate of 7s 6d in the £ and. . in order to justify itself with its shareholders, pay a dividend suffi- ■ cient to give a reasonable return on capital outlay. Failure on the part of a company to provide a reasonable dividend causes shareholders to : become dissatisfied and to seek other avenues of investment. In the long run, people with money to invest become shy and industrial development by means of private enterprise is restricted. There is a mistaken idea that company taxation is a tax on wealth. It is nothing of the sort. As has been pointed out previously,, the majority of shareholders in companies are people with limited means who desire to secure the best possible return on the capital they possess. Because they choose to invest their money in trading concerns 'which, under ordinary circumstances, might be expected to give ■ that return, they are called upon to ' meet a taxation charge out of all proportion to their financial position. Companies which desire to keep faith with their shareholders are forced to seek means of passing the heavy taxation impost on to other shoulders. This is not always possible, and to some extent companies must bear the burden, but generally ■the tendency must be to seek a greater return in higher prices for goods and services. That, in turn, means an increase in the cost of living and the public suffer. As has been stated, one effect of high company taxation is to restrict the field for the expansion of industry. In effect, the policy of the Minister of Finance clashes with the policy of the Minister of Industries and Commerce. In 1936 the Government was faced with the necessity of obtaining increased revenue to meet the demands of a policy of lavish expenditure, and the Minister of Finance selected increased company taxation as one means, possibly because it was easy : to collect. Experience may show that the easy road is in the end a i hard one for progress.