TAX ON PROFITS.

Auckland Star, Volume LXXI, Issue 217, 12 September 1940, Page 10

TAX ON PROFITS.

FARMERS , POSITION. PRODUCTION DURING WAR. Interest in the implications of the impending excess profits tax on farmers is at present not general in the Auckland district, due largely, it is stated, to the predominance of small farms. It is assumed that the majority of dairy farmers with small herde, orchardists, poultry keepers and market gardeners will be below or close to the exemption limit. "The farming community as a whole has not awakened to the imminence of the new tax," said a representative of organised farmers this morning. "This is because many do not expect to be affected much by it, as their incomes do not exceed those of wage earnere." 1 :nong sheep farmers and dairy farmers with large herds there exists considerable concern about the possible effects of an excess profits tax if based on average profits over the past three years. Four years ago farmers were beginning to feel the benefits of returning prosperity, and were spending more on the development of their properties and on manures and maintenance. This delayed the rise in their profits. In the middle year a severe outbreak of eczema occurred, resulting in the death of many thousands of sheep. The aftereffects continued into the next season, when fewer lambs were reared »anrl flocks of skeep v.'ere recovering from the epidemic. Therefore, the profits for each of the three years were below normal. Another aspect concerns farmers who have acquired properties since the depression years. In these cases, it is stated, the cost of development has temporarily depressed profits, and made the period unsatisfactory as a basis. The position of farmers attempting to increase production for the war present* problems of a special kind, and involves, in one form or another, additional outlay on stock, manures or farm equipment, an outlay which requires the expenditure of larger sums from earnings. "If an excess profits tax were applied, similar to the Fair Rents Act, the immediate effect would be to shackle farm development," said one authority. "If earnings were tied down to past levels, production could not expand. Larger production requires a continuous supply of free capital to draw on, and if the Government takes this in taxes production is bound to suffer." The general view is that the wide fluctuations in farm earnings over, the past decade, coupled with the great need of stimulating the primary industries at the present time, make it exceedingly difficult to arrive at a practicable basis for an excess profits tax on the farmers.