30 THE STATISTICAL VERIFICATION OF 
tax cannot form part of the costs of production. But 
many business men hold strongly the contrary view, 
and say that a tax on income, like a tax on goods, is 
diffused over the whole community by means of higher 
prices. It is obvious that this is an absolutely crucial 
question in Public Finance and social theory. Mr. Coates 
took the relation between Turnover and Profit for a very 
large number of concerns for different years, and ex- 
tracted from them all the usual statistical constants. 
He put two main questions for the application of this test. 
¢ First, were typical industries of the country mainly 
in the hands of representative concerns, whose normal 
cost of production determines price, so that, by includ- 
ing income-tax in that cost, they could pass on the tax 
in price, as the business school contends, or, on the 
contrary, were they in the hands of concerns whose 
varying circumstances and ability show, in competi- 
tive conditions, results varying from losses, or small 
profits, up to large profits per unit of business ? 
Secondly, how did the rate of profit secured by in- 
dustry under conditions of high taxation compare 
with the rate of profit secured under conditions of 
low taxation ? If the contention that high taxation 
is passed on to the consumer were correct, it seemed 
clear that the rate of profit (before payment of the 
tax) would need to be considerably higher when taxa- 
tion was high than when it was low.’ 
The first of these questions was answered clearly in 
the negative. The analysis for each trade group, for 
each period, showed the familiar distribution common 
to practically all natural phenomena when treated statis- 
tically. ‘The practical existence of the marginal con- 
cerns postulated by economicdoctrine was clearly shown.’ 
In every case there was a material portion of the total 
business being done at a loss or no profit. 
The second question, whether a proportionately higher 
rate of profit was secured during a period of high taxa- 
tion, than that obtained in a period of low taxation, was 
also answered by the statistics in the negative. The