INEQUALITIES IN NEW TAX

Southland Times, Issue 23181, 23 April 1937, Page 7

INEQUALITIES IN NEW TAX

Fear Of Check On Enterprise MARKETS REVIVE AFTER GLOOMY START

(United Press Assn.—Telegraph Copyright) LONDON, April 21. Not only City business men but a large number of Conservative members of the House of Commons criticize the “injustice” of the new tax on profits, and fears have been expressed that it will retard the establishment of new enterprise in the distressed areas. The Financial News estimates that the tax will take about 15 per cent, of the increased profits of industry and adds: “As 25 per cent, already goes in income tax it is a wonder people will trouble to hold shares at all.” One of the shrewdest Labour members told the Parliamentary correspondent of The Times that the tax would not be removed from the Statute Book in his life time. The Daily Herald, in a full page editorial on the Budget, praises the courage of the Chancellor of the Exchequer (Mr Neville Chamberlain), but considers that if he had carried any of his principles to their logical conclusion he would have prohibited any direct profits from armaments. The tax may not be as crippling as was at first feared, but calculations based on company results for the past year reveal glaring inequalities in incidence, says the City editor of the Australian Associated Press. Imperial Chemical Industries whose profit was £7,200,000, would have had to contribute £170,000, or around about 2| per cent, of the profits, if the tax were at present operative. Vickers Armstrong, with a profit of £1,162,000, would have had to make a contribution of £58,000, or over 5 per cent. < John Brown, who was most severely hit by the depression, out of a profit of £400,000 would have contributed £90,000, or about 23 per cent. Barker’s Department Stores, which were scarcely affected by the slump, out of a profit of £1,891,000 would have made a contribution of only £4OOO, or less than J per cent. City business men suggest that the tax should be amended to take the years 1934-36 as a standard instead of from 1933, which was the depth of the depression. Many companies whose efficiency raised them from the depression are now penalized, they claim. The disposition of the City this morning was to take a gloomy view of the Budget Industrials opened weak, and armament and shipping shares especially were depressed. The markets took better heart in the afternoon, as it was realized not only that industrials are considerably under the year’s high levels but that the new tax will leave the companies a substantial proportion of increased profits. Iron and steel shares remain depressed, but shipping shares are slightly better. Rubber shares are stronger, and commodity shares are active and strong. The markets closed raggedly, generally being lower, but there was little trading pending a clarification of the new tax.

The general opinion is that dealers marked down prices too sharply.