TAX ON PROFITS OVER £2000

Southland Times, Issue 23180, 22 April 1937, Page 5

TAX ON PROFITS OVER £2000

BRITISH BUDGET SURPRISE “NATIONAL DEFENCE CONTRIBUTION” INCREASE OF 3d IN INCOME TAX (United Press Assn.—Telegraph .Copyright) (Received April 21, 6.30 p.m.) LONDON, April 20' A tax on businesses whose profits exceed £2OOO a year, described as a national contribution to Britain’s defence, was announced by the Chancellor of the Exchequer (Mr Neville Chamberlain) when he presented the Budget in the House of Commons today. Income tax is increased by 3d, and the standard rate will now be 5/- in the £. The Budget showed an actual deficit of £5,597,000. But for the excess of the defence expenditure of £8,000,000 Mr Chamberlain would have ended the

year with a formal surplus of nearly £2,250,000, after providing more than £13,000,000 for redemption of debt. Income tax fell short of expectations by £1,750,000 This is significant in view of the* argument that Mr Chamberlain could have had the money he needed without fresh taxation if he had been more optimistic. The total “realizable” revenue was £797,289,000—an increase of £44,369,000. Customs and excise exceeded the estimate and stamps provided a record figure. The surtax was disapnointing, and showed a drop of £3.000,000. The licence duty on male servants is abolished. The new legislation necessary for the Ottawa agreement will include reducing the preferential duties on silk stockings from the Empire; the duty on imported hops will be continued for four years; income tax allowances are unchanged, as a succession of new taxes would only cause maximum disturbance. Mr Chamberlain said he aimed at expanding the source of revenue, and the increase of 3d in income tax would vield £15,000,000 for a full year and £13,000,000 during the current year. The standard of calculating the new tax on industry will be the profits or the capital employed, and where the profit standard is adopted it will be on the profits for the years, 1933, 1934 and 1935, the charge being on the amount of the increase in the profits. Thus on profits to 6 per cent, it will be nil; between 6 per cent and 10 per cent, onefifth of the gross, between 10 per cent, and 15 per cent., one-quarter; and above 15 per cent., one-third. Losses since 1933 will be offset against profits. Increased Profits Expected Where the capital standard is adopted it will be on any profit in the case of a company in excess of 6 per cent and of individual firms 8 per cent. The Chancellor expects that profits will continue to increase for some time. He expects that the tax will yield £2,000,000 this year and between £20,000,000 and £25,000,000 next year. The Chancellor feels no apprehension about any possible failure in revenue. It would be admitted, he said, that the Government played a large part in the revival of trade. It is estimated the increased income tax, profits tax and the abolition of “share-washing” will produce a total of £15,150,000, resulting in an estimated surplus of £252,000. The profits tax will end with the completion of rearmament. Mr Chamberlain said he had increased taxation by a method which he trusted would check any speculation or foolish activity which would destroy or imperil the present upward trend of national welfare. The Post Office is expanding remarkably. It is considered that the results are extremely satisfactory and give an indication of expanding trade and an increase in the national purchasing power. Among notable increases are spirits, beer, tobacco and oil. The low cost of Treasury issues saved £20,000,000. It is proposed to keep the old figure of £24,000,000 as a fixed debt charge and it is intended as a precaution to take power to borrow for a statutory sinking fund. The total expenditure for the coming year, excluding the self-balancing items amounts to £862,848,000. It is expected the Coronation will increase the Customs and excise revenue by more than £12,000,000 compared with last year. It is estimated that the revenue during the coming year will be £847,950000, leaving a prospective deficit of £14,898,000. It is expected that income tax will show an increase of £18,000,000 and the surtax an increase of £4,500,000. It is intended to propose two measures to defeat the avoidance of taxation, one dealing with one-man companies which would be made retrospective for the surtax for the year 1935-36 and the other with “bondwashing” by which securities sold at a price covering the accrued dividend ‘were bought back after the dividend at a lower price. Shadow Of Rearmament A British Official Wireless message says that the floor and the galleries of the House of Commons were packed when Mr Neville Chamberlain opened his sixth and what is assumed to be his last Budget, normal public interest in which has been brought to a high pitch by the great increases in expenditure associated with the defence programme and the expectation of inevitable additional taxation. The Chancellor prefaced his review of the past year and the explanation

of his proposals, which lasted just over 60 minutes, by recalling that the national finances must for several years be dominated by the overshadowing feature of the vast expenditure on defence. He announced an increase of the income tax to a rate of 5/- in the £, but no increase in indirect taxation. The total revenue from the income tax surtax and death duties together fell short by £5,570,000 of his expectations, but on the other hand stamp dulies yielded £2,000,000 more than he had estimated at the record figure of £29,140,000. Reflecting the activity in the Stock Exchange, Customs and excise gave £3,250,000 more than he had estimated, due in part to the new duties on beef and veal imposed at the end of December. Mr Chamberlain reminded the House of the balance which the Government had already indicated it desired to see preserved between borrowing and the raising by taxation of the large additional sums required in years ahead for the defence expenditure and therefore of the longer view than usual which he as Chancellor had had to take in this Budget to obviate repeated changes in taxation. He described his search for a device capable of growth, but which would not bear unfairly on the various classes upon whom the burden of his other increases last year and this had fallen and said it had seemed not unreasonable to him that the growth in business profits should be made the occasion of some special and temporary contribution towards the cost of national defence. Mr Chamberlain said that the contribution to national defence would be payable on profits by all persons engaged in an industry, trade or business of any kind, but not by professions whose profits in any year exceeded £2OOO. Referring to the exchange equalization account, the Chancellor said that its operations must still be wrapped in mystery, but he would give an assurance that it still showed a profit. Mr Chamberlain addressed himself to the question of the country’s ability to carry the vast burden which the pressure of rearmament imposed, and expressed confidence in the continued expansion of revenue, corresponding with an orderly and regular advance of general prosperity. A great world disturbance might disappoint that expectation, but Britain would continue to use her power and influence to avoid such a disaster. He claimed that his proposals were well designed to exercise a steadying effect in the present phase of recovery. He had avoided the large increase in taxation which would have been necessitated by attempting to defray without borrowing the full cost of rearmament, and which would have checked and perhaps even reversed economic revival