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Otago Daily Times, Issue 18293, 9 July 1921, Page 10

PROFIT-SHARING AND TAXATION

TO TUB EDITOR Sib, —It ,is becoming more and more generally recognised in these days of industrial unrest that one of the surest means of encouraging employees to become more diligent and consequently more useful to themselves and to the community is the inauguration of some profit-sharing scheme, whereby tho remuneration paid such, employees is increased- in proportion to the earnings of the business, it will come as a surprise to many people to learn that the law as it stands discourages such schemes.' 1 feel sure it would be ot interest to your readers if you could give a full report of the judgment printed in the Wellington papers oi (ho 6th inst. by which the Court of Appeal dismissed the case in which a New Zealand firm of stock and station agents appealed against a Supreme Court ruling that it must pay income tax on contributions to its pensions and benevolent funds.

It is dearly necessary that the question of amending the present law should deceive urgent consideration. As the law stands, all remuneration received by an employee is taxable, and yet it is held Una it is also taxable as part of the income 01 the company employing him. If a company’s net earnings amount to ££o,ooo. of which £IO,OOO js paid out by way of bonus io us emn.ocecs aur; vie other £IO.OOO is distributed amongst the shareholders as dividend, is it equitable for the Government to say that although the Com. missioner will ‘ be satisfied to collect one tax from the .company on its dividend ana none from the shareholders, nevertheless, he may insist, on the company paying a tax on the bonus to its employees although, ho will also collect a tax from each employee on his share of the bonus? Surely a company should be encouraged to share profits with its employees (and thereby increase its prolits for its shareholders) by making such distributions to employees deductible in the same way as salaries and wages are recognised as necessary expenditure. Most people will agree with the opinion expressed by Mr Justice Stringer, in his dissenting judgment, that it should make no possible difference to an employer •‘whether ho pays for necessary services by lixod wages or by any other method of remuneration; whatever the amount is, he has to pay it before ho can realise any profit, from the business.” The case quoted draws attention once again to the handicap imposed on business enterprise, at a time when increased production is essential to the prosperity of the dominion.—l am. etc., J. M. July 7.