TAXING WAGES AND WAR PROFITS. [To ran EOM's oars. stir:mos:a:1
Snt,—In your article on "Taxing Wages and War Profits" you call attention to the fact that Super Tax is payable on sums on which ordinary Income Tax has already been levied, regardless of the heavy deduction which this involves. Let me call your attention to, and enlist your support for the
removal of, a still greater injustice, for, though the cause of the Super Tax payer can hardly be a popular one, even he is surely entitled to be treated with common fairness. In so far as the Super Tax payer's income is derived from a profession or business, his income is at present assessed upon his share of the profits of such profession or business for the previous year, as assessed to Income Tan. Those profits in turn are assessed upon the average of the three preceding years. In assessing the subject, therefore, to Super Tax for the year 1915-16, you take hie share of profits for the year 1914-15. These latter are assessed upon the average of the profits for the three years 1911-12, 1912-13, and 1913-14. Assuming, then, that the accounts of the business are made up to December 81st in each year, the profits on which the subject has to pay Super Tax for the year 1915-16 include two and a half years unaffected by the war. But in many oases the war has reduced profits to a fourth, or even a fifth, of what they were in those years. Take the case of a professional man whose share of his firm's profits, as assessed to Income Tax for the year 1914-15, amounted to 26,000, and whose income for 1915-16 is reduced to 21,250—quite a common case. Not only has he to pay ordinary Income Tax at two and sixpence in the pound, or perhaps even a higher rate, on a much larger sum than £1,250 (for even with the relief granted by the second Finance Act of 1914 the two preceding years have to be brought into the average), but he has also to pay Super Tax on the basis of an assumed or "statutory" income of 26,000! When he has done this, there will be precious little, if anything, left of his reduced income of 21,250. In fact, it may well pay him to go out of business to escape the tax! The only way to remedy this grave injustice, which cannot be to the advantage of the State, is to make the Super Tax payable on actual, not on purely fictitious, income. I say "fictitious" because not only is the 26,000 not his real income in the case I have put for the year in question, but the tax- payer may not even have been a member of the firm during the years when the profits upon which his "statutory" income is based were earned. If this injustice were removed I am satisfied that no one would at the present crisis grudge paying such rate of Super Tax on his actual income as the Government thinks just and equitable—I am, Sir, too., W. W. PLINK.
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