WAIRARAPA FARMERS

Evening Post, Volume CXXVI, Issue 83, 5 October 1938, Page 5

WAIRARAPA FARMERS

OVERHEAD BURDEN

PROFITS AND TAXATION

(Special to the "Evening Post.")

MASTERTON, This Day.

A considerable strengthening of the company's position, in spite of trading conditions during the past year having been in some respects abnormally difficult, was a feature brought out by the chairman of directors of the W.F.C.A., Ltd. (Mr. V. E. Donald), at the annual meeting of shareholders held yesterday.

"The turnover in the merchandise department showed further expansion over the previous year, and actually reached the highest figure since the year 1930," said Mr. Donald. "This enabled the gross profit to reach £102,235, which was slightly in excess of last year.

"As against this, however, overhead costs showed a substantial increase of £4009, largely due to the result of legislative action over which we have no control. These additional costs did not bring a corresponding increase in the gross profit.

"After paying interest on debentures, amounting to £3000, depreciating plant and fittings £2693, expending a sum of £2449' in alterations and renovations at Wellington and other branches, and fully providing for all bad and doubtful accounts, the net profit amounts to £13,568. I am pleased to advise that this net profit will extinguish the balance of accumulated losses of past years, and for the first time since 1930 the profit and loss appropriation account exhibits a credit balance. It has been deemed desirable to adopt a prudent policy, and out of the net earnings the sum of £3000 has been placed to a general reserve account, a further £1000 transferred to taxation reserve account, leaving the profit and loss appropriation account in credit to the extent of £1740. Your board considers it inexpedient to actually distribute this remaining balance, but recommends that it be transferred to the credit of dividend account, thereby expressly earmarking it for inclusion with next year's profits for distribution to preference shareholders. As the cumulative dividend, ataching to the preference shares accrues as from August 1, 1938, your directors hope that the above credit balance, plus future profits, will make possible the payment of dividends to preference shareholders in future years without intermission.

"Shareholders will note, that apart from the elimination of the old deficit, the financial position, of the company has been considerably strengthened. A commencement has been made to set aside reserves to take care of contingencies; the bank overdraft has during the year been reduced by £21,380, and is actually lower than it has been since the yearS!9l9; adequate provision has been made for possible losses in bad debts; and all adjustments as a result of the hearing of cases before the Adjustment Commission, dealing with applications lodged under the Mortgagors' and Lessees' Rehabilitation Act 1936, have been made; stock in trade, plant, etc., have all been conservatively valued; and all contingencies provided for to the best of our knowledge." "A MOST UNJUST TAX!" Observations on the injustice to companies by the imposition of the graduated land tax were also made by Mr. Donald. "We have previously drawn attention to the injustice meted out to our company and others similarly placed in the imposition of graduated land tax," said Mr. Donald. "Despite the fact that certain branches have been unable to earn a net profit or only one of modest proportions, we are called upon to pay land tax aggregating £1703 against £288 two years ago. Legislation made provision for the granting of relief at the discretion of the Minister of Finance. In view of the fact that shareholders have not received any dividends since 1925, the capital of the ordinary shareholders was reduced to provide for past losses, and the preference shareholders agreed to forgo cumulative dividends, it was considered we had a just claim for the granting of relief, and made application accordingly. "I can only assume that the desire to secure taxes outweighs the merit of relief, as our application was refused. The additional tax of £1400 is a most unjust one, and must come out of the pockets of the shareholders, as it is impossible to pass such a charge on to the public. "The .average holding of ordinary shares is only 41 shares, and including preference shares, the combined nominal capital is approximately £66 per head value; so it is only too apparent that the tax so far as our company is concerned is a most iniquitous one. Likewise, the additional burden, whereby a Social Security tax of Is in the £ of profits earned has recently been imposed upon public, companies. If companies were to receive some benefits from the Social Security legislation there may be merit in the 'charge—but it certainly looks as if the Government has realised that Is in the £ from individual income is likely to fall short of the cost of the scheme, and has looked round for an easy method of collection, hence another most unjust tax," said Mr. Donald.

The report and balance-sheet were adopted. There being no other nominations, the retiring directors, Messrs. V. E. Donald and W. Howard Booth (representing ordinary shareholders) and C. M. Bowden (representing preference shareholders), were declared re-elected.

Messrs. Sellar and Sellar were reelected auditors. A vote of thanks was passed to the general manager, Mr. J, H. Cunningham.