EXCESS PROFITS TAX.
[To THE EDITOR OF THE "SPECTATOR."] SIR,—While the Government are rightly urging the necessity for increased production, the extent to which they are hamper- ing output by the retention of the Excess Profits Tax is not generally appreciated by the public, which is mostly concerned in stopping "profiteering." The motto should be "Get your output first, and tax afterwards," but at present the tax is levied at the wrong point in the cycle of production. I suggest that the right course is to encourage increased turnover with a pro rata increase of profits, and to tax on an ascending scale
the recipients of any dividends or distribution above 10 per cent., this being the yield on Industrials which is necessary to justify investment. Manufacturers will then be able to expand on sound lines instead of having to borrow from banks to pay the Excess Profits Tax, while the Treasury can be secured the same return. The " pouching " of profits can only take place temporarily, and the issue of bonus shares in lieu of dividend can be made subject to the same scale of tax.
The following, heard in a train, is typical of what is occur- ring: "I already work longer hours than my men, who are getting double wages and doing one-third less work than before the war. Why should I grind further to increase output in order to provide money for paying all these useless Government Departments? I have sent back several large orders recently."
Incidentally, my suggestion would have the effect of lowering prices, as there would be a tendency not to exceed the 10 per cent, allowed, whereas at present a manufacturer is inclined to add to the price an amount to cover the tax. I think you will agree that anything which is hindering production should be altered with the least possible delay.—I am, Sir, &sc.,
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