The Daily News. MONDAY, FEBRUARY 26, 1917. EXCESS PROFITS TAX.

Taranaki Daily News, 26 February 1917, Page 4

The Daily News. MONDAY, FEBRUARY 26, 1917. EXCESS PROFITS TAX.

Vn the last issue of the Mercantile Gazette appears a forceful article on tlie Excess Profits Tax, one of the most unjust taxes ever imposed. It is so important that we make no apology for reproducing it. The Gazette says:—The legislation of last year under which every person whose income, not derived from salary or wages, ia now greater than it was before the war, is subject to the usual exemption of £3OO, com- ■ pelled to pay 45 per cent, of the surplus into the Treasury, was not, we consider, , justified by the financial position of the country, or sound in principle. When special taxation 'becomes necesary in order to meet some exceptional demand which cannot be met out of the ordinary revenue of the country, there should be equality of sacrifice. There i 3 no moral obligation on the part of any person to pay a. form of taxation from which other persons whose circumstances are the same are exempt. If a duty of 2d per lb were levied on sugar it might be compatible with busines principles to exempt from the operation of the tax all those whose incomes were under £l5O per year, but it would be unfair and inequitable if an invidious distinction were made between different classes of the people whose ability to pay was equal. At the present time certain of our business firms are being compelled to contribute very large proportions of their profits, while other traders in the same line of business, who are making as great, if not more profits than the others, pay nothing. If, since the war, any trader has made profits directly attributable to the war, which profits he could not possibly have made had the Empire not been engaged in the present conflict, no one can deny the right of the State to compel a retranaferenee to itself of the profits, in whole, or in part, which have been so made. The case however, is altogether different- when profits hare been mi" 1 which have not arisen directly or inii n:ctly through the war. We know the ease .of businesses which were started a year or so prior to August, 1914. Like nearly all other eases tlie first year or two a lot of money was spent in exploitation work, but in the last two years the corner was turned and profits made. It seems inequitable that such a business should have to return nearly 50 per cent., when perhaps the original loss "was still unliquidated, while another concern in the same street made during 1915 and 1010 more than double the profits and pay nothing by way of excess. We think also that the taxing of interest received and the charging of excess profits on interest is and will be detrimental to the well being of the country. This impost is neiv and has taken the place of the Mortgage Tax, the change having been made appatently without much consideration and with very little knowledge as to how it would operate. We can give an instance of what happens A man vas asked the other day to lend £4OOO on first-class security at 0 per cent. He had inherited a good deal of money and wanted an investment. After considering the matter his answer was "As tie interest will give me an inccwe of £2® jjer year in excess of ai: j Ajy

ever had before I shall have to return about £IOH for excess profits, that is, of six per cent, and there it is I shall get' about 3% per cent, instead not-good enough." That will happen in •a great many cases. The country owing to its primary products realising! good prices lias Tor many years before the war been accumulating wealth very rapidly, and there is no reason to suppose that when peace is made wool and other staples will fall below the ante, war prices. We are only a million people all told, and if we export twentyfive to thirty millions of produce at ordinary prices—we are not considering the present inflated values—no other country in the world can show so large a per,eapita income. But if the Government means to annex one half of the total yearly increase of the profits made by the people all incentive to save and build up capital—our greatest requirement—will cease. Canada has adopted a very practical way of dealing with Income Tax. The Commissioner takes simply 25 per cent, of the total income, large or small, subjpet to certain exemptions, but if a business is working on capital supplied by the proprietors, 7 per cent, is deducted from the total profits and tax is paid on the balance. We should have the same law, let every nc. who receives income from profits of ;iisines.s pay a straightont 25 per cent, ivitli an exemption of £3OO. The tax on interest should be abolished and the mortgage charge re-enacted. At present nothing could be more unfair than the way some people are compelled to pay while others whose circumstanecs are exactly the same do not, and under the system of charging excess upon interest received, all money will be held, and the Government if they oil'er a 4J per cent, loan free of income tax or excess will simply find itself overwhelmed with money to the detriment of the banks and ordinary mortgagees.