Excess Profits Levy
The Excess Profits Levy was a bad tax in its very conception, and no amount, of tinkering with it in committee will turn it into "a good one. It was intended to deprive companies of some of the profit increases due to rearmament, but as the Chancellor himself pointed out in the Commons on Tuesday it is impossible to separate those firms which benefit from rearmament from those which do not. So. the tax was attempting the impossible. It is true that some of its worst features have been ironed out. The base period, from which profit increases are measured, has been made more flexible and, in the case of companies operating in former Japanese-occupied territories, stretched, so that fewer firms will be compelled to accept a bad year, or a series of bad years, as providing the standard of reasonable profit. Mining and oil-extracting companies will not be penalised for producing more now than they did in the base period, and thus making a higher profit, always provided that the Treasury certifies that their increased activity is really necessary. The overriding maximum rate of liability to E.P.L. is reduced. And much of the revenue that is thus lost to E.P.L. will be made up in profits tax, the new rate of which is to be increased from 171- per cent. to 22-1 per cent. for distributed profits. The principle running through all these changes is a good one, though Mr. Butler could naturally not acknowledge it. It is that since E.P.L. is a thoroughly bad tax anyway the less work it has to do the better. Even so it will yield about £150 million a year—much of it squeezed out of the wrong firms, by the wrong methods for the wrong reasons.
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