EXCESS PROFITS

Otago Daily Times, Issue 24420, 4 October 1940, Page 6

EXCESS PROFITS

TAXING PROPOSALS LEGISLATION INTRODUCED OUTLINE OF PROVISIONS RATE FIXED AT 60 PER CENT. (From Our Parliamentary Reporter) WELLINGTON, Oct. 3. The Governmeni’s proposals for taxing excess profits made during the war are given legislative effect by the Excess Profits Tax Bill, which was introduced in the House of Representatives to-day. The rate of the lax, which does not apply to salaries or wages in the ordinary sense, is to be 60 per cent, of the excess profits left after income tax. social security charge, and the national security tax have been paid on them. The Minister of Finance, Mr W. Nash, said the second reading debate on the Bill would be begun next week, probably on Tuesday. An explanatory memorandum circulated with the Bill states that the proposals involve ascertainment by the Commissioner of Taxes of the amount which (constitutes excess profits and the issue of assessment accordingly. Objections based solely on the ground that the commissioner’s assessment is not in accordance with the statutory provisions binding on him are to be determined under the ordinary income tax procedure, but objections on the ground that what appears to be excess profit is not so or is not wholly excess profit, are to be dealt with by a special committee constituted for that purpose. The commissioner is bound to find that sums in excess of the taxpayer’s standard income are excess profits. The standard income of an individual taxpayer is to be whichever of the following three sums he may select:— (a) The sum of £SOO. (b) A sum (called the normal income) equal to the greatest amount of assessable income derived by the taxpayer during any one of the three income years ended respectively on March 31, 1937, 1938 and 1939, or to the average of the assessable income for those three years plus 30 per cent., whichever is the less.

(c) A sum equal to 6 per cent, of the value of the assets used in producing the income, plus an allowance (not being less than £SOO or more than £1000) for the personal exertion of the taxpayer. For a company taxpayer the standard income is whichever of the following two sums the company selects:— (a) A sum (called the normal income) equal to the greatest amount of assessable income derived by the company during any one of the three income years ended respectively on March 31, 1937, 1938 and 1939, or to the average of the assessable income for those three years plus 30 per cent., whichever is the less. (b) The sum which, after paying from it income tax computed at the basic rate (the 1940 rate without the 15 per cent, war addition) represents 6 per .cent, of the value of the assets used in the production of the assessable income. Both with individuals and with companies the taxpayer is regarded as having selected for his standard the normal income basis (increased where necessary to the £SOO minimum for individuals) unless he notifies the Commissioner of Taxes .to the contrary, when the return of income is made. Special assessments may be made where the standard income cannot be assessed by the normal procedure. , If the commissioner’s finding is objected to the committee will have to fix the excess profits at a sum equal to such part of the assessable income, as in tbe opinion of the committee, exceeds the amount which the taxpayer might reasonably expect to derive under peace-time conditions of trade and industry, having regard to the nature of the business or occupation, the special circumstances of the case, and all other relevant considerations. a!-'-In ascei'taining the residue of excess profits, the income tax payable on excess profits is taken as the amount of which the total income tax payable has been increased because the excess profits were received. This means that the income tax on the excess profits is taken as the difference between the income tax payable on the whole income and the amount of income tax that would have been payable if the standard income only had been received. . ■ . , , Where the value of the assets used in producing income is material in order to determine the standard of income, that value is taken as being the difference between the value at the end of the income year of the taxpayer’s assets and his liabilities. The assets and liabilities are to be determined by the Commissioner of Taxes. The provisions relating to the standard income and the valuation of assets govern only the making of the commissioner’s original computation of the amount of the excess profits. The Excess Profits Committee is not bound by these provisions, and if an objection to the commissioner’s assessment is lodged the committee may, after taking all the relevant circumstances into account. fix the amount of the excess profits.

The committee, which is to consist of three persons appointed by the Governor-General, is to have the powers of a commission of inquiry, and its proceedings are to be largely informal.

Provision is made for the reduction of excess profits for any income year by the amount by which the income for any of the former years fell short of the standard income for that former year. Losses incurred in former years in respect of which the taxpayer would be entitled to an allowance in the computation of his taxable income for income tax purposes, are to be deducted

from the assessable income before the amount of the excess profits is computed. Where the commissioner makes an assessment cf excess profits tax the assessments of income tax, social security charge, and national security tax are to be made in the usual way. These assessments will not be varied by any later alteration in the amount of the excess profits by the committee. The only amendment subsequent to the original assessment, except in cases where the total income is found to have been incorrectly stated, will be any necessary adjustment to the assessment of excess profits tax which will be payable at the same time as income tax. Incomes which are to be exempt from the excess profits lax are as follows: — (a) Income from royalties received from the grant of rights to cut standing timber or to remove gravel or other minerals. tb) Proprietary income derived by shareholders from proprietary companies because the excess profit derived by the company itself is liable for this tax in the hands of the company. (c) Salaries and wages except in cases where excessive salaries are paid by proprietary companies to the directors or shareholders or to their relatives. (d) The income of gold and petroleum mining companies. The Bill was lead a first time.

A SIMPLE PROCEDURE EXPLANATION BY MINISTER NO DESIRE FOR REVENUE (From Our Parliamentary Reporter) WELLINGTON, Oct. 3 “I hope we will get nothing out of this taxation.” said the Minister of Finance (Mr W. Nash), in reply to a question in the House of Representatives to-day as to the estimated proceeds of the proposed excess profits tax. “ I hope there will be no revenue from it,” he continued, “for that will mean that no one is trying to profit out of the war. That is the purpose of the Excess Profits Tax Bill.” An explanation generally in terms of the memorandum accompanying the Bill, which \yas introduced to-day and read a first time, was given by the Minister. He said that excess profits were divided on a 60-40 basis with the Government. An Opposition member: Who gets the 40? The Minister: The State gets the 60.—(Laughter.) Provision was made for the taxpayer who performed personal exertions in earning his income, Mr Nash continued. After defining excess profits,. he said that such a taxpayer might be allowed either a £SOO minimum or a £IOOO maximum for personal exertion. The Leader of the Opposition (Mr Adam Hamilton): When does this start? The Minister: Excess profits do not become assessable for tax until after April. 1941. If the normal procedure is follcwed no excess profits will be naid until February, 1942.

“It is a very simple procedure,” Mr Nash continued. “The Commissioner of Taxes assesses the excess profit. A committee is to be set up, and it wil' be given power to determine the excess profit if the taxpayer appeals. It will be limited in only two ways. It cannot assess excess profit lower than the figure the taxpayer admits or higher than the Commissioner of Taxes claims, and will have no power to interfere with an assessment of normal income tax.” The Minister said that the committee would comprise three persons with judicial and other competent minds. Mr F. W. Doidge (Opposition, Tauranga): Are farmers involved? The Minister: Yes, everyone. Mr Doidge: But if he works harder to produce more? The Minister: He will get paid for his bersonal exertions. Mr Nash also explained in reply to another question that there was provision to -meet cases of companies which had altered their . capital :and’ those that had been newly formed.

DAILY INTERCESSION I cry unto the Lord with my voice, and He answereth me out of His holy hill. I laid me down and slept; I awaked, for the Lord sustaineth me. I will not be afraid of ten thousands of the people that have set thejnselves against me round about. Arise, O Lord; save me, Omy God. Victory belongeth unto the Lord; Thy blessing be upon Thy people (Psalm in: 4-8). Blessed be God Who hath given us the confidence wherein we standMay He incline our hearts unto Himself, that we may walk in His ways. Make us, as a nation, true instruments of Thy will, that those who guide our destinies may be led by Thee, and the cause of truth, right, and freedom, that has been thrust upon us, he led to triumph. Victory belongs only to Thee; make us worthy of Thy blessing.