TH JN a wu VUE 
     
   
   
  
  
   
   
   
  
  
   
  
  
  
  
   
   
  
  
  
  
  
  
  
  
   
    
  
   
    
   
  
   
   
   
    
    
  
  
   
   
   
   
   
   
  
   
  
    
   
  
   
    
    
  
  
5 
4 very excellent system for promoting enterprise in business. If 
the little capitalist is to continue to take an interest in business 
through the Joint Stock Companies, it is very apparent that the 
| management of those Joint Stock Companies should be inherently 
| sound, Excess Profits Duty has already had a very great influence 
| in changing the .mind of those who are managing Joint Stock 
BE Companies as to what is the wisest way to run their businesses. 
i When the Bill as to Joint Stock Companies first came in it was 
not uncommon for a man to have converted into profit all he could 
| and not provide for the future of the Company. The Directors 
! who floated industries in the seventies mostly did that, but another 
i generation has come along now. Accountants would tell you that 
on the whole the efforts of Limited Companies” Directors for ‘the 
last twenty or thirty years have been devoted to building up 
reserves and writing down stocks, paying moderate dividends, 
and strengthening their resources, writing down the assets, and 
making the English Company system the sound and reliable 
_ method of business it bas been. That spirit would have continued 
but for the Excess Profits Duty. The prudent man has found 
under the Excess Profits Duty his prudence has been confiscated 
by the fact that his assets put down at a low value had to be written 
up to the values dictated to him by the State, and thereby he 
sacrificed his prudence, not of one year, but in many cases of 
twenty years, and he has had the mortification of seeing the a 
| unscrupulous man of business who had an inflated balance sheet, ol 
! or the man of business who had to do the best he could to raise @ | 
} capital and keep his credit going, underpinning his business and a il 
making it sound out of the monies he might otherwise have handed _ - ain 
over to the State. The result has been that it has had a greater LEH 
influence than 1 think is realised in making everybody feel that 
they must by every possible means put their goods no longer in 
the back shop, but in the front shop, and inflate their assets, with § 
the result that the tendency of the Excess Profits Duty” is towards ’ 
unsoundness and not towards soundness in business. From that 
point of view I think the Duty has had a very regrettable influence 
over the management of Limited Companies. A good deal of this 
4 capitalisation of reserves, and a good deal of this policy of 
amalgamation, had behind it the motive of getting these assets 
re-established so that if at some future date there was any attempt i 
to impose a Capital Tax, or to limit profits upon Industry, there i 
should be a sufficient amount of justifiable assets established in Ll 1b 
the balance sheet so that the profit would not be entirely limited CR 
by the prudence and soundness with which the assets had been i 
valued in the past. From this point of view we feel that the Duty 
is very bad. When we came to you with the flat rate suggestion 
of a tax, we have never quite understood why you have since taken 
exception to it on the ground that we were shifting our burden to 
other people. We have felt that the Excess Profits Duty would be 
fairer if it were applied to all profits that were earned above the 
pre-war standard, professionally and otherwise. I urged that on 
Mr. McKenna early on in the war, and 1 think it was on that 
occasion that 1 urged on Mr. McKenna the doubling of the Farmer’s 
Income Tax on his rent. He took that as a suggestion to raise 
revenue and put it into his Budget. I can draw your attention to 
the fact that Farmers have in many cases made ‘enormous profits.