ARMAMENT PROFITS

Grey River Argus, 6 September 1939, Page 5

ARMAMENT PROFITS

SCOPE FOR ACCOUNTANTS. The new armaments profit duty in Great Britain is the subject or a thoughtful editorial article in “Accountancy” (London). “If we must have this new tax, it is desirable that it should be regarded as only a subsidiary method of dealing with the problem of excess profits,” the writer declares. “Just as the revenue authorities have found that the best method of collecting income tax is to go to the source, so the most satisfactory means of preventing exress profits would be to go to the original rearmament contracts. “If the cost laid down in the contracts placed with industrialists by the Government —what may be tennr. ed the ‘aboriginal’ cost—were-<riguiiy determined so as to exclude surplus, profit, .there would be no need for a new tax, difficulties with regard to the profits of sub-coritractors would not' arise and the original allocations to the Defence Departments would be kept on a lower plane. Until quite' recently the Government adhered to this line of argument but found that i control in the pricing of the contracts was not sufficiently strict. The moral j to which that undoubted fact points! is not, however, that a new tax will' solve the problem but that the methods of control must be improved. “In our opinion, an outstanding reason why control of rearmament contracts has not proved satisfactory Js the fact that the accountancy profession has not been brought into co-op-eration in this work by the Government. The profession, with its accumulated knowledge of costing and, accounting technique, should be able j to render a great service to the community in helping to fix the terms of I Government contracts. The fact that the accountant stands in a fiduciary, relationship to his clients does not prevent him from working in co-op-eration with the revenue authorities in income tax work, and similar cooperation is possible in the costing of Government contracts though it does not at present exist. In our view, the method of control at the source has not been fully tried until the profession is more actively engaged in this work. Only the professional accoyn-j tant, standing as he does in the independent position of ‘arbiter of commercial probity,’ as Lord _ Stamp has aptly termed him, can fulfil this fu nc * tion adequately. It is to be hoped that even now, despite this new tax, the more direct and effective method of; control will be strictly enforced- and that the profession will be called upon to play its full part in the process. ,

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