§ 53. Sir R. Blair
asked the Chancellor of the Exchequer to what extent Clause 24 of the Finance Bill, as amended in Committee, will increase the liability to Excess Profits Tax; to how many persons, in trade and business throughout the country, is it estimated that this increased liability will apply; and with what estimate he was furnished of the total annual amount of the increased liability imposed on those adversely affected by the provisions of this Clause?
§ Sir K. Wood
I have no estimate of the extent to which Clause 24 of the Finance Bill may in particular cases increase liability to Excess Profits Tax. Over the whole field of industry, and particularly in the sphere in which the taxpayer has to extend his business as part of the war effort, the effect of the Clause will be to abate the liability of Excess Profits Tax for the treatment of borrowed money as capital employed in the business allows a profit margin to industry representing the excess of the statutory percentage over the interest paid on borrowed money. The cases in which it will be disadvantageous to the taxpayer are those in which the former method of computation failed to take into account as capital borrowed moneys employed in the business. In that respect, the old method was defective, and resulted in may cases where borrowed money had been reduced, in an allowance being given for an increase of capital, although, in fact, there had been no increase in the total capital employed in the business.
§ Mr. Hammersley
Does not that indicate that this proposal has not been very carefully thought out; and that as a result those companies which have endeavoured to reduce their capital will be penalised at the expense of those which have stabilised their capital expenditure?
§ Sir K. Wood
No, Sir; that is quite a wrong interpretation of my reply. I have no doubt that there will be an opportunity to discuss the matter further to-day.