Sta,—When even Mr. Davenport has reservations about the actual operation of a tax which in prin- ciple he has always supported it is surely time to take a close look at the implications. All the examples which he has considered are of big business, but this is not the only sector of the British economy. The backbone of this country has always been the small trader who may or may not have built up to a medium-size business, and, in rare cases, to public company level. So far from encouraging retentions of profits by these concerns the Chancellor. has given notice that he will make income tax directions in appropriate cases on one-man companies where at present only surtax directions are considered in considerably fewer cases. But even assuming that Mr. Davenport is right, and that the intention of the corporation tax is to encourage retentions generally, this is only one side of the picture. The other side is that in so far as those retentions increase the ulti- mate value of the shares taxation will be taken out of them by way of capital gains tax at some time or another. When, in addition, it is certain that investment allowance will diminish in value under the new system (as Mr. Davenport admits in his article) so as to discourage modernisation, and when it seems that even the profits, if any, on govern- ment securities on redemption are to be subject to capital gains tax and 'some transitional arrange- ments' have to be made for companies with large overseas earnings, it would seem clear that to the minds behind this new proposal 'profits' is still a dirty word and something to be discouraged.
Mr. Davenport reserves his opinion as to whether these proposals will help the economic growth 'of the nation. Some of your readers may think that sufficient evidence is already in (pot only in the basis of these proposals or even in the way in which they have been presented by the Chancellor, but even more importantly in what the Chancellor has not said in respect of the many details referred to by Mr. Davenport) for them to form an opinion. JACK ROSS 16 John Dalton Street, Manchester, 2