TAXING EXCESS PROFITS

Evening Post, Volume CXXX, Issue 83, 4 October 1940, Page 6

TAXING EXCESS PROFITS

We are entirely agreed that no one should make a profit out of the war. Public sentiment in New Zealand is strongly of that opinion. It is probably in response to that opinion, and not in the hope of obtaining much revenue, that the Government has undei-taken the exceedingly difficult task of framing an Excess Profits Tax Bill. The great difficulty arises because it is impossible to define war profits generally in such a way as to avoid injustice in numerous individual cases. In fact a general measure, applied without discrimination, would probably result in penalising praiseworthy effort which should rather be rewarded. Recognition of this danger is shown in the exclusion of salaries and wages. Possibly many workers, by working harder and longer, will earn more than in previous years, and it would be most unjust, after urging them to do so, to condemn them by imposing additional taxation. Similar circumstances will apply to many taxpayers in production and industry. They have exerted themselves strenuously to meet the country's need and, merit praise. There are several complications arising in New Zealand. Prior to the war producers and manufacturers were asked to put forth special efforts to meet necessities arising from the sterling crisis. From the effort made in response they may or may not have derived a profit in excess of their previous returns. But this must be taken into account: it was an emergency effort, made under emergency conditions, possibly with higher costs, and with no certainty of continuing profits. This applies also to production for war purposes. A manufacturer may have increased his plant to meet a war demand, with the risk that cessation of that demand will see his business burdened with excessive plant absorbing far more than the profits he has made. To avoid injustice, and particularly to avoid action which would be to the public detriment, an Excess Profits Tax Bill must take account of the probable future and its possible losses, as well as of the past. The Bill introduced yesterday has evidently been drafted with care, but we are not sure that this aspect of the case has been provided for. We hope that the Government will submit it to commercial and accountancy examination to see what safeguards can be introduced. Otherwise there is a serious risk that the war profits net will drag in, not war profiteers, but public-spirited citizens who have been doing their utmost to respond to the Government's call for more production.