BRITISH PROFITS TAX.

Manawatu Standard, Volume LVII, Issue 156, 3 June 1937, Page 8

BRITISH PROFITS TAX.

Tiie Prime Minister (Mr Neville Chamberlain) has met pronounced objection to the proposed tax on the growth of business profits by withdrawing the relative section of the Finance Bill. It was not the principle, but the anomalies and inequities of the tax that aroused strong opposition from all quarters. When delivering the Budget Mr Chamberlain estimated in this financial year a yield of ,£2.000,000 anil from £20,000,000 to £25,000,000 in a full year. The national defence contribution, as it was called, together with other factors caused a pronounced slump on the British Stock Exchanges, and since then the weight of public opinion has strengthened against ’the tax. It was alleged with a good show of reason tnat the tax was not on rearmament “windfall” profits, or even on “excess” protits considered as an undue, remuneration on invested capital, but on the profits of recovery from the depression. It takes (the London Morning Post observed) very little from the company which, for whatever reason, earns high but relatively stable profits in good times or bad, but it takes a great deal from companies which earn nothing, or less than nothing, in bad times, and rely on “recovery” to recoup themselves. Thus it is apt to penalise just those companies or industries which are most deserving of indulgence. It tends further to discriminate against new enterprise and good management in favour of established enterprise and indifferent management; Finally, its incidence on the same profits earned from the same amount of capital varies materially according to the relative proportions of capital held in debentures, preference shares, or ordinary shares. During a debate in tlie House of Commons on April 2/, on the resolution to give effect to the proposals, Mr Chamberlain, in defending the principle of the contribution, promised to examine the objections industry and other interested bodies placed before him, and to do his best to prevent inequalities and injustices. At the same time he regarded their very unfavourable reception as largely based on a .premature judgment. Now'Mr Chamberlain by a courageous act has yielded to the forces the tax gathered around it, and in the meantime the new Chancellor (Sir John Simon) will work out proposals for a “simpler tax upom the profits of industry;” His view that he “should not only be doing something less than prudent if he persisted in the proposal when he can get the money by simpfer methods and in larger amounts” must appeal to all classes. Britain must have money for her defence commitments,, but inequitable taxation only creates opposition. The new scheme will be awaited with keen interest.