UNFAIR TAX BURDEN.

Northern Advocate, 10 January 1920, Page 1

UNFAIR TAX BURDEN.

ON BRITISH ENTERPRISE

SIR WILLIAM VESTEY'S EVI

DENCE

BEFORE THE ROYAL COMMIS-

SION

The Minutes of Evidence before the Royal Commission on the Income Tax provide, in at least one portion, strik. ing testimony a s to the iniquitous way in which British c?pital is taxed out of the country. Sir William Vestey, Bart., told the Commissioners how he had been forced to take his frozen meat companies out of Great Britain, because here they were burdened with taxes which the foreigner did not have to pay on operations over the same ground. Sir William Vestey showed by the statement that his companies' capital totalled £20,----000,000 that his wa s by far the largest Brintish frozen meat undertaking - , His firm, he said, was purely British and not interested in the American Beef Trust or any other foreign firm in any way. His evidence as a powerful indictment of British taxation methods is interesting to reproduce here: —•

Sir William, in his evidence in chief, said:—'Our firm, both as to the partners and the capital, is purely English. We are not interested in the American Beef Trust or any other foreign firm in any way.

We are proprietors and managers of freezing works, cold stores < or cat. tie ranches in Great Britain, Russia, China, Australia, New Zealand, United States, Venezuela, Brazil, Paraguay, Argentine, South Africa, Mada gasear. Franco, Spain, Portugal and other countries. The capital employed in the business-and that of the affiliated concerns under the same management is in excess of .£20,000,000; the business therefore ranks amongst the largest British industrial concerns and is larger than that of all other British freezing and cold storage companies combined. It i s quite as important as that of three out of the five members of the American Beef Trust. Up to the end of the year 191.5 we conducted the business from London. In that year taxation was imposed which made it impossible to continue working from England, We did all we could to be allowed to remain in England, but after several interviews with the highest officials who were most sympathetic, we had no alternative but to remove the business abroad and are now domiciled in the Argentine Republic.

Our competitors are the American Beef Trust; they are fierce competitors with more than £100,000,000 of capital; enterprising- and skilled in their business, and with the whole force of the American Government and of every employee of the Government everywhere working like beaver* for them. Under these circumstances, for any firm to try to com pete with them on anything but absolutely equal terms is useless, the slightest handicap means failure. I think the best evidence I can β-ive as to the effect of the Income Tax, Super-tax and Exces s Profits Duty is to give the concrete example of its effect in the case of our firm and to show the unfair and overwhelming advantages given to the American Beef Trust by the present method of taxation. In respect of all business begun since August 1914, if we were working from London, we should have to

work,

pay on the profits Income Tax, 4s 6d Super-tax, plus 40 per cent. Excess Profits Duty on all profits in excess of 9 per cent. In addition we should also have to pay 40 per cent. Estate Duty, which is merely deferred Income Tax, so the result would be as follows:— (In the following , calculation no ac count is taken of the effect of the 9 per cent, allowed on capital, as it is impossible to estimate what relation it would bear to the profits but it could not materially affect the calculation). Profit £100 0 0 40 p.c. Excess Profits Duty 40 0 0 60 0 0 Income Tax 6/-Super-tax 4/6 31 10 0 10/6 28 10 0 Death Dhties (merely deferred Income Tax 40 p.c.) 11 8 0 £17 2 0 so that the Government would take £82 12s in taxation, leaving up with I'l7 12s for the use of our capital I and to cover the risk and as payment for our time, energy, and enterprise; to do business on these terms is, of course, impossible. The Trust, on the other hand, pays the American taxes on the business they do in Ame. Rica just as we should do on our English business, but they have made their businesses outside America into foreign companies, and unless they take the profits to America, which they avoid doing as much as possible, they are free from American taxation. Most of the goods they sell to England are sold f.o.b. port of shipment, and are quite free of English , taxation. If they ship goods to Eng- \ land without selling first, then they are given special terms by the Eng- , lish Government. The net result is , that on more than 90 per cent, of ( their business with England from { their works outside America they ' pay no taxation whatever, and only 1 a mere trifle on the remaining 10 per ( cent., while we < if carrying on our ] business from England, should have j to pay £82 12s per cent on the pro- j fits if the goods were sold in Eng- g land or even were sold abroad and never saw England, a condition under t which it ia obviously impossible to .

We are told and believe that the Government would like to get England out of the c'utches of the American Beef Trust, but, in fact, the Trust themselves could never have conceived so perfect and simple a device for consolidating and extending their practical monopoly of the frozen meat trade as that the British Government should exempt them from taxation and impose a tax of £82 12 per cent on the profits of any British firms who might have the temerity to oppose them. It appears impossible, but that is the present position,

We should like very much to bring our organisations to. this country and work from London instead of Chicago or Buenos Aires, but we cannot do this unless we have equality of taxation with the American Beef Trust and the Argentine Meat Companies. It does seem ,a pitiable state of affairs that we should have to ask our own Government for equality of treatment with foreigners in our own country, or that we should have to remove our business abroad in order to be able to trade in England on an equality with foreigners. It is unnecessary to point out how vital it is that the supply of foodstuffs particularly of meats, should be in the hands of English subjects, whereas, whatever their intentions may be. the Government have done, and are doing, everything they can to fasten the American Beef Trust still more firmly upon the backs of our people.

Until ten years ago, the American Beef Trust had not one single freezing works outside the United States. Since then they have built very many in different parts of the world, solely to supply the English market, and are now building freezing works at San Paulo, Santa Aana de Livramento, another quite near that place, and two at Rio Grande de Sul. Patagonia, and have bought land and are about to commence the erection of another at Rosario de Sante Fe, in the Argentine Republic. They are also commencing building in Colombia, I believe at Baranquilla, also sending out material to build in South Africa, and have their men out acquiring sites in other countries. They have, to my knowledge, offered to buy important works In the Colonies. All their works in the past have been built almost solely to supply the English market. While all this work is being done by the Trust, not one Engish freezing works has been built abroad by any other firm than our own. It does seem to me that the preferences which are given in every possible way to the American Beef Trust by the English Government should be stopped and English firms given equality of treatment. We do not ask for any preference in any way but merely equality of taxation.

One of the most shameful things is that the American Beef Trust are allowed to open freezing works in Aus tralia (a British Colony), sell the whole of the beef from those works to the Birtish Government, and not pay one farthing of taxation in England either for Income Tax, Supertax, or Excess Profits Duty, while, upon any profits which might be derived from our Australian works were we domiciled in England, we should have to pay £82 12s per cent, in taxation. That this state of affairs should be allowed to exist for one minute after attention is called to it is beyond belief.

We have been asking for many

years for equality with the foreigner. Every Government official we see agres with us that the position is unjust and deplorable. Seeing the great interests which are at stake j and what a matter of national importance it is that the frozen meat industry should be in English hands and conducted from England, cannot taxation be so arranged that English firms can commence to work from this country at once on an equality with the for-

eigner?

So far as I know there are only two English companies engaged in the meat freezing industry abroad. The American Beef Trust had nearly killed them both, when the War broke out and saved them, but it is quite certain that when the trade gets back to its normal state they will either have to be given equality of treatment with the American Beef Trust so far as taxation is concerned, or they must conduct their businesses from abroad, j sell out to the Trust, or go out of bu-

siness.

In conclusion there is no reason whatever why England should not have the lion's share of the frozen meat industry; it can be conducted quite as well from London as from Chicago or Buenos Aires; but the foreign works controlled from England must be free from English taxation so long as the profits are not brought to England (this was the case until six or seven years ago). If any taxation should be imposed upon the Trust's business with England f English firms should pay on the same basis, but it is idle to think for one moment, that they are going to be able to pay any taxation in England, on business done from their foreign works, with countries outside England ; competition is too fierce to permit of any handicap.

So far as revenue is concerned, the Government would receive far more indirectly by freeing the industry from taxation, otherwise it is only a matter of a short time before there will be no industry to tax. Take our own case for instance, if we were granted equality of taxation with the Trust we would as soon as possible move our business to England and control our foreign businesses from England directly and indirectly finding employment for a very large number of men. Further, I am quite sure that when the trade knew that the English Government would give them equality of treatment with the American Beef Trust so far as the taxation of foreign businesses was concerned, and would not handicap them by taxing them more heavily than the American Beef Trust on any business they might do with England they would soon begin to form companies and largely increase England's share in the trade, so that directly and indirectly the trade would be the source of a large revenue. If this line is not taken it cannot be long before there will cease to be any revenue direct or indirect from English freezing works abroad, as the two English companies will have been taxed out of existence no new ones will be started and the American Beef Trust aided by the English Government will have secure practical ly a monopoly of the supply of for- j eign beef to England, |