COMPANY MEETING

TRINIDAD PETROLEUM DEVELOPMENT

THE annual ordinary general meeting of Trinidad Petroleum Development Co., Ltd., was held on October 19th at River Plate House, Finsbury Circus, E.C.

Mr. Kenneth A. E. Moore, F.C.A. (the chairman of the company), presided.

The Chairman said: Gentlemen,—When I addressed you a year ago I indicated that after a period of rapid development a phase of consolidation and of planned stabilisation of output had been entered upon as a matter of policy. The results disclosed by the accounts and reports which are before you today reflect that phase, and the best tribute to the soundness of that policy lies in the fact that we have achieved with the minimum of expenditure the desired production of some three million barrels of oil, and have succeeded, in a year of continuous depression in crude oil prices, in maintaining our profits around the £18o,000 mark. At the same time much useful work has been done during the year to lay the founda- tions for a further expansion of production—storage capacity has been materially increased, the light products recovery plant has been duplicated, pipelines and roads have been con- structed, and the central depot has been completed and brought into use.

DRILLING ACTIVITIES By the most careful organisation of drilling it has been possible with only four rigs in operation to achieve almost the same footage as was the case with 5 rigs in the previous year, and, as you will have seen from the report, out of 49 wells drilled during the year, 48 are producers.

A minor but useful addition to our potential oil reserves has been made by the acquisition during the year of oil-mining leases covering about t,000 acres.

Here, in London, in addition to normal management affairs, a matter of vital importance—namely, the contract under which our oil is sold—has engaged the attention of the board. The old contract would normally have expired in 1941. As the outcome of negotiations, the old contract has been superseded by a new contract with United British Oilfields of Trinidad, Ltd., for a period of to years on terms which should operate to the advantage of both companies in their respective spheres. Your directors recommend a dividend of 15 per cent.

THE EXCESS PROFIT'S 'Luc As regards taxation, it is impossible at present to make any- thing but an approximate estimate of the incidence of the new excess profits tax in our case. On the face of it, however, businesses which in recent years have been, and still are, in the development stage will be severely hit, and so far as can be seen from the Finance (No. 2) Bill, which has recently been rushed through Parliament without the customary discussion, no serious attempt has been made to do rough justice in the case of young and progressive businesses or businesses which were in the process of resuscitation in pre-war years.

I think it is generally agreed that the evils associated with the old Excess Profits Duty arose principally from three fundamental causes :— I. That many injustices and anomalies arose from the prescribed method of computation of the pre-war standard of profits whether that standard was based on profits or capital. These injustices were by no means all on the side of the tax- payer, and it is common knowledge that certain industries escaped their moral liability; but, on the other hand, for a variety of reasons, there were glaring discrepancies in the incidence of the duty as between individual businesses engaged in the same industry and as between various classes of industry.

2. There was introduced into industry an unhealthy element of extravagance in expenditure and disregard of control of wages and costs which gave impetus to the vicious spiral of rising prices, &c.

3. That the scale of taxation rose to heights at which many ordinarily honest people failed to remain so. SUGGESTED SAFEGUARDS I believe that these evils could be avoided to some extent on this occasion, or at least minimised, by the adoption of certain safeguards, including the following : (a) As regards the pre-war standard, that in addition to certain obvious detailed allowances for such matters as un- remunerative capital, undue depression in a particular industry in the standard years, &c., there should be an overriding pro- vision giving the right of appeal in hard cases to a suitable tribunal for some measure of rough justice in the computation of pre-war standards, unlimited in scope as is Clause 13, Section 7, in the draft Finance (No. 2) Bill, as amended.

(b) As regards undue extravagance, &c., that there should be general Government control of ihe level of wages and restriction of competition for labour between various classes of industry, and that increases in salaries should be liable to sur- charge if unwarranted. Further, that on prima facie evidence of wanton extravagance in administration inspired by the knowledge that it was at the cost of the Exchequer, Inspectors of Taxes should be empowered to bring the matter before a suitable tribunal with power to inflict heavy penalties. While difficult to administer, this latter provision would no doubt act as a powerful deterrent.

(c) As regards dishonesty, the best way of minimising the possible deterioration of the morals of the business community in relation to taxation is to remove any feeling that the incidence of taxation is capricious and unjust. I believe the suggestion which I have already made for the introduction of the principle of rough justice in otherwise hard cases would go a long way in this direction.

Finally, there are two specific points among others in the present Bill which, if not met, will cause endless heart- burning, discontent and injustice :—

I. To limit the pre-war standard years to 1935, 1936 and 1937 may have been all very well for the armament industry, but to retain those years for industry in general is quite indefensible. I therefore suggest that the year 1938 should be added in the case of all businesses not subject to the original armaments profits duty, .and that in addition in the case of undue depression in any industry in the four standard years a wider choice of years—say four out of the last six pre-war years—should be at the option of the taxpayer.

2. The Bill in its present form—particularly Clause 13, Section 7—does not adequately provide for the case of busi- nesses, whether old or new, which were in the process of development or resuscitation in pre-war years and may still be in that process. Such businesses should have the right of appeal to a special tribunal with power to do full justice to the circumstances of each case.

POSITION OF THIS COMPANY

Our company, whose business is confined to the production of oil in Trinidad, affords a concrete example. Founded in 1918, it was for many years only partially successful in winning oil. In 1937, additional capital was provided and renewed efforts were made to increase production. Those efforts are beginning to bear fruit and the production and profits of the company have recently been doubled, not as a result of the war, but simply as a result of this fresh money and fresh effort. During the war this company would no doubt be required, in the national interest and regardless, perhaps, of ordinary commercial considerations, to increase its production very materially and, as matters stand at present, it would be saddled with an entirely unrepresentative pre- war standard based on the lower production and profits of the years 1935, 1936, 1937, and a large part of its profits will be absorbed by Excess Profits Tax, quite regardless of the fact that it will be exhausting its reserves of oil and thus, perhaps, mortgaging the. future.

I suggest that to meet such cases somewhere in this Bill there should be a provision, at least, that where reserves are being depleted, the pre-war standard should be increased proportionately to the increased production of oil, copper, gold, or whatever it may be, in the accounting periods as compared with the standard period.

FACTORS IN THE OUTLOOK In present circumstances you will appreciate that it is impossible for me to give any reliable indication of the prospects for the current year, but, while we shall no doubt have to meet increased costs and taxation and difficulties and complications arising out of the war, there are at present two favourable factors—namely, that there has recently been a substantial rise in Gulf Coast export prices of crude oil products and that, as our oil is paid for in American dollars, the sterling equivalent which we receive over here has been increased by reason of the appreciation in the dollar.

The report and accounts were unanimously adopted.