"Taranaki Central Press” MONDAY, JUNE 21, 1937. A NEW DEFENCE TAX.

Taranaki Central Press, Volume IV, Issue 452, 21 June 1937, Page 4

"Taranaki Central Press” MONDAY, JUNE 21, 1937. A NEW DEFENCE TAX.

The British Government’s revised scheme for a tax on profits to pay part of the cost of its rearmament programme, summarised in the cable news on Saturday, is a complete answer to the critics who said that Mr Neville Chamberlain’s ill-conceiv-ed National Defence Contribution was not a sincere proposal. Mr Chamberlain’s scheme, it will be remembered, was for a graduated tax on excess profits. The graduation depended on the ratio which the profits bore to the capital employed in the business, and the exemption limit was to be either 6 per cent, of the capital employed in the business or the average of profits for the years I 933-35, whichever was the higher. The administrative difficulties of such a tax would have been almost insuperable. “Capital’’ is a term difficult to define and still more difficult to give a practical application; and the task of assessing the capital employed in every business in Great Britain w’ould have been quite beyond the resources of the Department of Inland Revenue. To average industrial profits over a period of years would have been scarcely less difficult. The complaint that the National Defence Contribution was “a tax on prosperity” was on the whole justified. The new Chancellor of the Exchequer, Sir John Simon, has abandoned the idea of a tax on excess profits for a period of five years begining from April last. By so_ doing, he avoids the need for any assessment of the capital used in industry or any calculation of past profits. Nor is his tax open to the reproach that it falls with undue harshness on those industries which are just emerging from the depression. Indeed, given the need for a rearmament programme and for some additional source of revenue to pay for that programme, Sir John Simon's proposals are probably as equitable as any that could be devised. It is inevitable, however, that the tax will have some retarding influence on the development of industry, if only by decreasing the attractiveness of industry as a field of investment. The entrepreneur is penalised; the rentier gets off scot free.