The Evening Star FRIDAY, OCTOBER 4, 1940. WAR FINANCE.

Evening Star, Issue 23698, 4 October 1940, Page 4

The Evening Star FRIDAY, OCTOBER 4, 1940. WAR FINANCE.

The Excess Profits Tax Bill, introduced in the House yesterday, is less rigorous than it might have been. The rate of the tax, which docs not apply to wages or salary in the ordinary sense, is to bo 60 per cent, of the excess profits left after income tax, social security charge, and tho national security charge have been paid on them. Tho tax applies to individuals as well as companies, and one assessment of tho standard income after which it begins—there are alternatives —is based on returns of the three income years ended March 31, 1937, 1933, and 1939. Excess profits do not become assessable for tax until after April, 1941, and the man who works harder to produce more will bo paid for Ids personal exertions. A special committee will rule on disputed assessments. There has never boon any objection to the principle of an excess profits tax in war time, though details may cause differences of opinion. Mr Nash expressed the hope that the Government would get nothing out of this taxation, because “ that will mean that no one is trying to profit out of the war.” It is conceivable that some persons, dealing in the right commodities, might profit by it without any attempt to do so, but the conditions of the time indicate that they will be few. There is precedent for taking less than the full amount of excess profits, though the British tax amounts now to 100 per cent. During tho last war, it moved from 40 to 60 and then to 80 per cent., so that a limit set is not necessarily final. There have been criticisms, however, of the 100 per cent, impost on the ground that when a margin is left it acts as a safeguard against apathy or carelessness in expenditure, and helps to preserve that initiative and regard for expansion in business which are much in tho public interest. No doubt those points were in tho mind of the New Zealand Government in fixing tho amount of its tax.

When the compulsory loan requirements were discussed in the House, both Mr Fraser and Mr Nash bore witness to the desire of all sections of tho people, since the war started, to giro of their best, making less obvious the necessity for compulsion. The discussion confirmed that there was no reason for making the Joan compulsory except that the Government was pledged to it. “Wo were pledged to the conscription of wealth, as of men,” said the Prime Minister, and no one has ever objected to that, apart from ways of doing it. There was a difference, however, in the two eases. Those who called for conscription of men did not do so for the sake of conscription, but merely for the sake of efficiency, and the Government would have got its loan money, at less cost, perhaps, to the general welfare in the long run, if it had applied for it in the ordinary way. Under the system adopted, some companies will have to lend who can only do so, up to the required amount, by an injury to production and development. If interest, even at a low rate, had been offered from the first, without compulsion, more money would have been obtained from other concerns which would not suffer that disadvantage. Mr Bodkin had reason to ask: “Why not take the idle money first, not tho money which is working?” At the same time Mr Nash, with an eye to companies who would have to raise overdrafts to meet their obligations, agreed that “ to the maximum degree that is possible tho loan should he subscribed out of current income,” and a great deal will depend on the hardships tribunal to which special cases will be referred. Again, while conscription of men was applied irrespective of classes, the Government has made no small point of exempting from the compulsory loan requirement the class on which it particularly depends for support. It is fair to add that, as the exemption rate has been fixed, it has also left free of compulsion a great many besides that section, and the individuals on whom its demands will press harshly, for war time, should be few. Those exempted from compulsory' subscription do not form part of the class from whom loan money is normally expected, and they will have their opportunity of contributing to the war finances with the inception of the national savings scheme which, Mr Nash has stated, is to be announced in a week’s time.