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Tax Incidence On Industry (Inquiry)

Volume 463: debated on Wednesday 6 April 1949

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The whole question of calculating profits in a way which can take care of marked changes in price formed part of representations made to me by the Federation of British Industries. The proposal I have just described will, I hope, go far to meet the immediate needs of industry. But there is a number of other issues, arising out of the present structure of taxation, including the incidence of tax and its effects on risk bearing, which I think, requires further examination. We must, of course, continue to look to industry, broadly speaking, for the same total contribution to the National Revenue as at present; but, within this limitation, it may well be that the present arrangements could be modified, to enable the burden to be more easily borne.

An inquiry covering the whole subject would be a very extensive undertaking indeed, and I propose, therefore, to make a start by taking the technical issues which arise in connection with the computation of taxable profits. A number of such issues, of importance to industry, has been raised both with my predecessors and with myself, and I think it would be convenient if, as a first step, these technical matters were examined by a small independent committee, whose terms of reference, in effect, would be to inquire into the method of computing trade profits, for the purpose of charging them to Income Tax and Profits Tax, and into the question of the basis period to be taken in assessing the tax on the profits so ascertained.

I propose therefore to set up such a committee accordingly. It will not be part of this committee's functions to inquire into the general question of the incidence of tax upon industry, but its work will clear the ground for the comprehensive inquiry which, as I have indicated, I hope to set on foot at a later stage. The inquiry of the committee which I am now proposing to set up will necessarily take some time, and its results will not be available for consideration in connection with this year's Finance Bill.