MORE ABOUT WAR PROFITS

Dominion, Volume 9, Issue 2822, 13 July 1916, Page 6

MORE ABOUT WAR PROFITS

VIEWS OF N.Z. SOCIETY OF ACCOUNTANTS PROPOSED SYSTEM OF TAXATION INEQUITABLE SUGGESTIONS FOR AMENDMENT. On Monday last representatives from various parts of the Dominion of tho New Zealand Society of Accountants waited on the Minister of Finance and placed before him r certain suggestions regarding the Finance Bill and tno Land and Income Tax Bill, now linder' the consideration •ot Parliament. Sir Joseph Ward gave the deputation a very attentive hearing' and promised that certain of their proposals would receive careful consideration. Following is a summary of the suggestions made:— 1. Whilst fully recognising that heavily increased taxation is absolutely necessary, this committee is satisfied that the underlying principle of the Finance Bill, 1910, is inequitable. It is submitted that it will give rse to numerous instances of hardship, by reason of the many and glaring anomalies which are apparent When it is sought to apply the provisions of Part 2 thereof to the conditions of numerous business firms and individuals. It is therefore recommended:

(a) That an increasod ecalo of gradn-' ated income tax be substituted for the excess profits tax, this having for its objects the removal of the most of tho anomalies referred to above, and equity in its incidence, or, in 'the alternative (b) That the excess profits duty be re. tam«l in the Bill with an additional provision for the constitution of a, Board of Referees, having powers somewhat similar to those possessed by the Board ol Referees under the Imperial Act, and in" particular to decide the application of excess profits as. affecting— (1) New businesses which c'amo into active operation just prior to, or subsequent to the war, the profits of which are not attributable to the war or war conditions: (2) Small businesses in tho course of development and showing only a normal increase, and particularly where such increase is' essential for development purposes: (3) Businesses which just prior to, or subsequent to the war, were sub- ■ jected to reorganisation as . the result of more efficient management, re- . salting in increased profits not. attributable to the war: (4) Businesses which have, just prior to, or since the -war, acquired an<l,worked now agencies or otherwise expanded their businesses, the profits from which new agencies or expansion aro not attributable to the war, and (5) Any other business where it is .clear an anomaly exists.In any such case the Board of Eeforees to have power to decide that the provisions as to tho ascertainment of standard income would be inequitable; and in such case tho board to fix the amonnt which, In its opinion, should equitably bp taxed as excees profits." '

I-Note-The committeo has Investigated typical cases showing some remarkable anomalies, Thefie nre l«r<rely grounded on the fact that the excess profit tax of a long established business might be based on a standard income of 15 per cent, to 20 per cent., whilst that of a newly established business is based on a maximum of 6 per cent. . A small and growing business might not only pay a higher rate-of' excess profit'duty v than a large business with mucil larger profits, but it might even pay " more .actual excess profit tax than a larger business with considerably greater profits.!' < 2. It is submitted that the rate of interest allowed by Section 10 (d) should not be arbitrarily fixed at 6 per cunt., but that at least the Board roferred to should have power to allow an inoreas-, ed amount in certain cases. It is submitted tbat 6 !per cent, is insufficient even for a trading business, especially manufacturing, and it nhould bo quite obvious that a rate which is sufficient for such a business would be quite insufficient for those undertakings lyhich use up their main asset in the ordinary course of operations (the working of a wasting asset), and pay dividends of mixed capital and incomer-such, for instance, as mining and timber businesses. 3. It is submitted that, seeing tho excess war profit in New Zealand and in England is; if not a war tax, at least a tax- imposed by reason of' the war and for_ Imperial purposes, there should bo reciprocal recognition by the Parliaments of tho Empire to avoid double taxation in regard to excess profits. [Note: As the suggested excess profits duty in New Zealand is 45 per cent, anjl in England CO nor cent., a*n English ■ jcompany . doing frusuicßfi in Now Zealand may in the absence of such a provision as we are asking for. have the whole of its excess profits extinguished, and its ordinary profits broached for the . purposes of the excess profits taxation.] •

4. It is submitted that some consideration should be shown to taxpayers iyliosh incomes o.re earned by personal exertion, particularly those' following professions. Hera again we hiive th(j aTiOnialy of a young practitioner, with a comparatively small but growing' ihcorne, paying a heavy excess profit duty, whilst his well-established rival, with a large but steady income, ctfcapes this tax. altogether.

5. Attention is directed to Section 25 m the Finance Act, which, after providing that salaries shall not bo chargeable with excess profits duty, contains a proviso that a share of the profits of a business or a commission computed by reference to such profits, shall not be deemed to be included in the term "salary." It is submitted that this would involve an injustice on numerous classes of employees whose remuneration takes tho form of a small salary plus a commission based on the profits. It is suggested that a provision should bo included that in such cases the recipient should bo allowed free from tho duty in addition to his salary, a sum not exceeding .£SOO (as personal exertiort) by way of profit commission in cases where such profit commission is paid. G. ■ It isj suggested that Clause 20 of the Finance Bill r<\ restriction of rates of interest be deleted. 7. "With reference to the Land and Income Assessment Bill, 1918, it is suggested that co-operative dairy companies be required, as agents for their respective suppliers, to render returns of the amounts disbursed by them to suppliers of butter-fat, and that they be directly taxed on tho-excess payments made to their suppliers as compared with the average price paid for butter-fat for fhe years 1912-13-U. {Note.—The reason for suggesting this alternative is that tho suppliers —shareholders of butter and cheese co-oporativo companies—have benefited largely by the enhanced prices received for' butter and cheese exported, and to enable tho easy collection of profits made by the farmer in this direction, and to place tlie matter on the same relative basis as companies acting as agents for debenture-holders, that these co-op-erative -companies should pay taxation on increased pr>fltw as couiparc* with normal years.]