INCOME TAX AND NET INTEREST.
Successive increases in income tax in the last year or two must depress the ratio, and it is the net rate of interest earned that counts. Can the decrease in net interest be counteracted by obtaining higher gross rates Capital can now be invested at as satisfactory a rate as at any time. Opportunities for profitable investment abound in all directions, but these profitable rates can be earned only on new investments and leave the tax-diminished yield on the mass of existing security holdings untouched. Life offices have large amounts of new money for investment from the excess of current income over outgo and from the redemption of stocks held. As stated above, surrenders at present are abnormal and may curtail the excess of current income. In any case, the volume of new money, large in itself, is small in relation to the mass of existing investments and the leavening of the old by the new is a slow process. Default in payment of interest on securities held may eat into investment-income, though the quality of the holdings is a protection against the inroad proceeding far. Conversion of National War Loan is a more potent menace to bonuses. Life offices are large holders of this stock and any paring of the interest will be a serious matter for them, on top of the higher income tax. A set-off to higher income tax is the higher income tax rebate allowed on life assurance premiums. In effect, this constitutes an immediate cash bonus, or alternatively, may be regarded as increasing a bonus relatively-to the amount-of premium paid.after deducting the rebate. Thus, though a. reduction -in bonuses is threatened, a; life' policy should still- prove-over a period a very satisfactory investment. F. M. TOOVEY.•
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