MUNITIONS SUPPLY

Waikato Times, Volume 125, Issue 20990, 18 December 1939, Page 12

MUNITIONS SUPPLY

LIMITATION OF PROFITS HEAVY TAXATION IMPOSED (Times Air Mail Service) LONDON, Nov. 17 The British Government is taking every precaution to prevent the making of undue profits by firms and individuals from the supply of armaments. And the definition of armaments is all embracing. The latest proposal is for the imposition of a duty of 60 per cent on profits over what £**e defined as /,andard profits. As explained by Mr Neville Chamoerlain in Parliament on June 15, the provision of the Ministry of Supply Bill, together with the ordinary contracts procedure, which has been revised from time to time to take account of changing conditions, goes far to prevent excessive profits. It was felt, however, that there might be cases where, particularly by reason of large increases in turnover, further measures of limitation were called for. These further measures are set forth in a White Paper issued in London following Mr Chamberlain’s speech. Duty of 60 Per Cent

The new duty will be charged at the rate of 60 per cent on the excess armament profits made in any accounting year ended after March 31, 1939, by any person carrying' on a trade of business declared by the Minister of Supply to be engaged in the supply of armaments, it is proposed to include as armaments food contracts for the armed forces of Crown, and contracts for the supply of t large quantities of storage. The declaration of the Minister will be issued for any such year in which ;he trader has received not less than £200;000 in respect of armament supply either by way of direct contract or sub-contract. The duty is to remain in force for three years.

The excess armament profits are defined a*s being the proportion attributable to armament supplies of the amount by which the profits made in the chargeable accounting period exceeds the standard profits of the trade or business. The proportion of profits on armament supplies will normally be the proportion which the turnover on armaments bears to total turnover, but where it can be shown that this proortion operates unfavourably to the taxpayer or to the revenue, the Board of Referees will be empowered to employ such other basis as it may consider to be fair and reasonable. Computing the Standard Standard profits in the case of businesses started on or before January 1, 1935, will be computed, at >the option of the trader, as the profits of the calendar year 1935, or the profits of the calendar year 1936, or the average profits of either of these years, and the calendar year 1937. Corresponding provisions are made for businesses starting later than January 1, 1935. The standard profits will be adjusted to reflect increases or decreases in the capital employed in the business. For increases 8 per cent of the extra capital involved will be added in case of companies and 10 per cent in the case of individuals or partnership, while for reductions of capital 6 per cent of the decrease will be deducted from the standard profits. In the computation of profits for

assessment of duty, the same allowances will be given in respect of depreciation of factory buildings and wear and tear of plant and machinery as are given for the purposes c-f • income tax. It is proposed, however, ! to give a further allowance for ex- j ceptional depreciation in cases where . buildings have been provided or j plant and machinery have been in- [ stalled for the purposes of the arma j ments programme, and the circumstances are such that these assets will ; be subject to exceptional depreciation. Any armament profit duty payable will be allowed as a deduction in computing profits for the purposes of | the National Defence contribution and income tax.