BILL’S APPEARANCE

Manawatu Standard, Volume LX, Issue 263, 4 October 1940, Page 4

BILL’S APPEARANCE

PROCEDURE OUTLINED. STANDARD DECLARED. Per Press Association. WELLINGTON, Oot. 3. Tlic Government’s proposals Tor taxing excess profits made during tfie war arc given legislative effect by ilie Excess Profits Tax Bill which was introduced in the House of Representatives to-day. The rate of the tax, which does not apply to salaries or wages, is to be CO per cent, of the excess profits left after the income fax. social security charge, and national security tax have been paid. The Minister of Finance (Hon. W. Nash) said the second reading ol the debate on the Bill, would begin next week, probably,on Tuesday. An explanatory memorandum circulated with the Bill states that the proposals involve the ascertainment by the Commissioner of Taxes of the amount which constitutes excess profits and the issue of the assessment accordingly. Objection based solely on the ground that the Commissioner’s assessment is not in accordance with the statutory provisions binding oil him are to be determined under the ordinary income tax procedure, but objections on the ground that what appears to be an excess profit is not so or is not wholly an excess profit are to be dealt with by a special committee constituted for that purpose. The Commission is bound to find that sums in excess of the taxpayers’ standard income arc excess profits. STANDARD INCOME.

The standard income of the individual taxpayer is to be whichever of the following three sums he may select: — (a) The sum of £SOO. (b) A sum (called .normal income) equal to the greatest amount of the assessable income derived by the taxpayer during any..one of three income years ended, respectively, on March 31. 1937, 1938 and 1939, or to the average of assessable income for those three years plus 30 per cent., whichever is less.

(e) A sum equal to 6 per cent, of the! value of the assets used in producing! the income plus an allowance (not being lees than £SOO or more than £1000) for the iiersonal exertion of the taxpayer. For the company taxpayer the standard income is whichever of the following two sums the company selects : —; (a) A sum (called normal income) ■ equal to the greatest amount of assess- : able income derived I>V the company [ during any one of the three income j years ended, respectively, on March 31, 1937, 1938 and 1939, or to the average of the assessable income for those three years plus' 30 per cent., , whichever is less/ _ . | (b) The sum which, after paying | from it income tax computed at the, basic rate (the 1940 rate without the | 15 per cent, war addition), repre-, sents 6 per cent, of the value of the assets used in the production of tlie assessable income. ; Roth with individuals and with companies the taxpayer is regarded as having selected for his standard the normal income basis (increased where necessary to £SOO minimum for in- 1 dividuals) unless he notifies the Lorn-, missioner of Taxes to the conti ary. when his return of income is made. I Special assessments may be where the-standard income cannot be assessed by normal procedure. COMMITTEE’S FUNCTION. If the Commissioner’s finding is objected to, the committee will have to iix the excess profits at a sum equal to such part of the assessable income as in the opinion of the committee exceeds the amount which the taxpayer might reasonably’ expect to derive under peace time conditions of trade and industry having regard to the nature o the business or occupation, the special | -circumstances of the case and all otliei relevant considerations. In ascertaining the residue ol excess profits, the income tax payable on excess profits is taken as the amount by which the total income tax payable has been increased because the excess profits were received. Ibis means that, the income tax on the excess profits is taken as the difference between tfie income tax payable on the whole income and the amount of the income tax that .would-have been payable u the standard income only had been received. , • ! Where the value of assets used' in the producing of the income is mu-i terial in order to determine the stall-1 daru of income that value is taken a.sj being the difference between tfie value at tlie end of the income, year ol the taxpayer’s assets and liabilities. j ~e assets and liabilities are to be determined bv the Commissioner of axes. Provisions relating to standard income and the valuation of assets go vein only the making of the Commissioner s original computation of the amount ol excess profits. The excess profits committee is not bound by these, provisions, and if objection to the Commissioner s assessment is lodged the committee may, alter taking all relevant circumstances into account, fix the amount of the excess profits. '1 lie committee, which is to consist of three persons appointed bv the Governor-General, is to have the powers of a commission of inquiry and the proceedings are to be largely informal. REDUCTION OF PROFITS.

'Provision is made lor the reduction of excess profits for any income year by the amount by which the income tor any of the three former years fell short of the standard income for that former year. Losses incurred in former years in respect to which a taxpayer would be entitled to an allowance in the computation of his taxable income for income tax purposes are to he deducted from the assessable income before the amount of the excess profits is computed. Where the. Commissioner makes an assessment of excess profits tax, the assessments of income tax, the social security charge, and the national security tax are to he made in the usual way. The«e assessments will .not be varied by any later alteration in the amount of excess profits l>v the committee. The only amendment subsequent to the original assessment, except in cases where the total ineom« is found to have been incorrectly stated; will be any necessary adjustment to the assessment of the ext,’ess profits tax which will be payable at the same time as the income tax. Incomes which are to be exempt from the excess profits tax are as follow: (a) Income from royalties received from a <rrant of rights to cut standing timber oi to remove gravel or giber minerals. . (bj Proprietary income derived by shareholders from proprietary companies as the excess profit derived by the company itself is liable for this tax in the hands of the company. (c) Salaries and wages- except in cases where excessive salaries are paid by proprietary companies to directors or shareholders or to their relatives. (d) Income of gold and petroleum mining companies. The Bill was road the first time.