EVADING THE LAW

Dominion, Volume 8, Issue 2333, 15 December 1914, Page 6

EVADING THE LAW

METHOD OF'GERMAN COMPANIES. *, ■ *:-■-■•

■ The possibility of overseas' firms carrying on business in New Zealand, and by their mode of.operations avoiding their fair 6hare of taxation, to the consequent detriment- of local tax-pay-ers, was a subject raised by Mr. Ashcrot't Edwards at the meeting of the Central Chamber of, Commerce yesterday. ■ Mr. Edwards said that the matter was first brought under his notice by a report he received on the business of the Continental Rubber Company, Ltd., Victoria, Australia. The report showed that the capital of the company was nominally £10,000 in one pound shares, and of that £5000 was paid up. On that £5000 the company paid a turnover throughout Australia of considerably over £300,000. Its declared profit was £2000 only. If they, looked at the actual capital employed,' they found stock held on consignment from the parent' company, the. Continental Rubber Co., Ltd., of Hanover,Germany, was £105,000, loan from parent company £150,000, paid-up capital £5000, making a total of £250,000. Fees paid in taxation would be: License fee on £10,000, income tax on £2000. The method of working':-in .the particular instance was. that the parent company, a Germ.au' firm in Hanover, out. of the £5000.0ne pound shares, provided 4997 one pound shares and three one pound shares, were provided by Australians. One of those dno pound shares was held by an Australian, who afterwards turned out to be a German, thus leaving £2 of Australasian capital in the business. Tho parent company, therefore, supplied the capital of £5000, £150,000 loan and £J05,0U0 stock. They charged the ■ Australian company such a price for their goods that they just cleared expenses, and made practically no profit upon which they would be asked to pay iu<xmi9 tax. • . > In Germany the Continental Rubber Company paid enormous dividends.to its.shareholders, in some years as high as 40 per cent, and bonuses to staff, etc. He considered that in instances such as that the Government did not receiyo its fair share of taxes. He wafe aware the case was a hard one to deal with, owing to, there being no adequate law dealing with the matter, but he laid the matter before the council, as the information might prove of value in detecting similar evasions'. In his opinion legislation should be brought down .to allow of similar eases being dealt with legally. ' ! The subject was referred to the Executive for consideration. ■■■~.