Orders of the Day — Excess Profits Duty.

Part of the debate – in the House of Commons on 28th April 1920.

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Photo of Mr John Remer Mr John Remer , Macclesfield

The Chancellor of the Exchequer said in his Budget speech that if he had known how good trade was going to be he would not have reduced the tax from 80 per cent. to 40 per cent. last year. I think it is equally true to say if he had not reduced the tax from 80 per cent. to 40 per cent. last year, trade would not have been so good as it has been during the past twelve months. The right hon. Gentleman also referred to the fact that some hon. Members have stated that high prices were the result of the increase of the Excess Profits Duty. When some of us stated that that was our view, he turned round to us and asked whether the converse was true, that prices had been reduced when the Excess Profits Duty was reduced last year. I think it is true. Prices would have gone much higher than they have during the last twelve months if he had not reduced the Excess Profits Duty from 80 to 40 per cent. He has also given us to understand that the only alternative which he is prepared to consider is the War Profits Tax, which a Committee is now considering. If he would abolish the Excess Profits Duty and give up any idea of a War Wealth Tax, and would adopt the principle of getting his money from Income Tax and Super-tax, and an extension of the Corporation Tax from 1s. to 2s., he would get more money than from the Excess Profits Duty, and he would by that means secure the confidence of the business community. I should like to refer the right hon. Gentleman to a letter which appeared in the "Liverpool Daily Post" of last Friday, signed by Mr. Sydney Dawson, an eminent Liverpool accountant, in which he gives figures of exceptional interest. He said that if a business man makes an excess profit of 10 per cent. he actually pays in taxation an amount of 21s. 8d. in the £ on the excess. If, on the other hand, he makes a bigger excess, an excess of 50 per cent., the amount that he pays in Excess Profits Duty is 14s. 8d. in the £ on the excess, showing that if a man is profiteering, and decides to charge exhorbitant prices, he is not taxed so heavily as the man who decides that he will be reasonable and will put forward reasonable prices.

I should like to refer to what the Financial Secretary has said about the business community. He said he did not think that the business community Would protest against this tax. Before coming into this House to-day, I attended a trade luncheon, and although I had no intention of speaking, I was asked by the chairman to say what I thought about the Excess Profits Duty. I only mention that to show that the traders of this country are deeply concerned about this tax, not because they have to pay it, but because it does not fall equally upon all classes. The business people of this country are quite prepared to pay so long as the tax falls equally upon all people, including the big trusts. The people who avoid taxation are the big trusts, and it is by the Corporation Tax that the tax would fall equally upon all sections of the community. A further reason why I am strongly opposed to this form of taxation is that it is so contrary to the best interests of enterprise. It cripples all new developments. During the past week I was in consultation with a very eminent banker, and he told me that two propositions had been put to him by concerns who wanted to make extensive additions to their works for the purpose of export trade; but in both cases the managing directors of those concerns had come forward and stated that they did not now want facilities, because, owing to the Excess Profits Duty, they were not going to proceed with these particular developments. The Chancellor of the Exchequer will agree that it is a very bad thing that such enterprise is not to go on, in view of the fact that the development of our export trade will have a very considerable effect upon the exchange problem.

A further reason why I am strongly opposed to the Excess Profits Duty is that it leads to wild speculation. The trader goes into the market with the knowledge that if it comes right he will make some small profit, but if the speculation goes wrong the Government makes up the loss. That is bad from every point of view. Powerful concerns and big trusts are placed in an entrenched position. I ask hon. Members to think of one of the biggest trusts in this country, Messrs. Lever Bros. Supposing anyone was attempting to compete with Messrs. Lever Bros. in soap manufacture. They would find it very difficult in any case, but owing to the existence of the Excess Profits Duty it would be practically impossible. Messrs. Lever Bros. would be able to under-sell them at every turn, simply because they know that they have a big pre-war standard and would be able to claim back from the Government the very large profits which they have made. The only chance for new concerns would be to build up reserves out of their profits, and take a very small sum out of their business, but that would be impossible if the Excess Profits Duty takes from those concerns the money which they -want for building up a reserve.

There is also the question of evasion. One hon. Member stated that this was a reflection on the surveyors. I do not think he would say that, if be knew some of the Surveyors of Taxes. I have a relative who is a Surveyor of Taxes, and I have discussed this question with him very often, and he tells me that evasion is one of the greatest difficulties they have. They know that evasion is going on, but the difficulty of checking evasion is one of the problems with which they have to contend all the time. There is evasion which is quite legitimate. There is an evasion of taxation by a firm which everybody has heard of, Messrs. Courtauld's, the well-known artificial soap manufacturers. They have in their assets a very large amount of property in the United States, which they have declined to bring over to this country until the Excess Profits Duty is reduced. I am told that the profits from that particular concern amounts to £5,000,000 Therefore, on that head alone, the Chancellor of the Exchequer is losing nearly £2,000,000 in taxation. There is a further way in which the Excess Profits Duty is evaded. I was told to-day of a concern with two partners. Instead of having two partners now they have only one partner. The other partner receives a salary as a salaried official. By that means the Excess Profits Duty is being evaded. The hon. Member who moved this Amendment has mentioned advertising. Every business man who has studied this question knows that the Excess Profits Duty leads to bad trading and loose methods. You have the office boy asking for a rise, because the Excess Profits Duty will have to pay for it. Everybody thinks that the Government is going to pay for extravagance.

There is another bad point which is bound to arise. I was travelling last week in the train with a friend, and he told me he was going to the south of France. He stated that he had made his pre-war standard and he added: "If the Government think that I am going to slave my soul-case out working for them they are mistaken. I am not going to do it. I am going to the south of France to enjoy myself on the profits which I have made." That is a very bad thing for the country. The country would be very much better off if everybody would put their back into the work and see that the best was done. I am satisfied that this tax will lead to less revenue being secured, and that if the Chancellor of the Exchequer would abolish it, he would secure more revenue. It is only by having a sound, equitable system of taxation that the country can be placed on a sound, business-like footing.