Page 2, 18th February 1955

18th February 1955
Page 2
Page 2, 18th February 1955 — PROFIT
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PROFIT

SHARING

Sir-In an address to the Merseyside Chambers of Commerce on February 11 Mr. Butler told us that the gain in the balance of payments in the first half of 1954 was no' maintained in the second halt. Ihe terms of trade are now tending to move against us.

Profits, dividends and share values have been increasing by 10 per cent., 20 per cent. and 40 per cent. in 1954 and a number of wage claims are now being pressed. Unless some arrangements are devised for distributing the earnings of industry in a way which will be more widely recognised as fair, the country may be faced again with loss of export markets due to rising costs and prices.

In your issue for February 4 Colonel Hope discussed the debate on co-partnership in the House of Commolis on January 28. Mr. Butler said on November 23 that there was" surprisingly little scope for the Government to encourage co-partnership and profit sharing by way of fiscal relief because the employer's contribution counts as a business expense." But the debate of January 28 and Colonel Hope's comments shewed that there are a number of things that might be done; and as the economy is fairly buoyant so that the Chancellor may he in a position to make concessions in this year's budget, it would. perhaps be useful for these problems to be publicly discussed during the coming weeks.

As Mr. Butter haa said. payments made In cash to workers under profit-sharing schemes are not treated as part of the trading profits for tax purposes, although they are, of course, subject to income tax under PAYE, usually at a reduced rate. Mr. Holt pointed out in the debate that distributions made in bonus shares instead of in cash are subject to the full rate of income and profits tax so that twenty times as much might be paid in taxation. 'I his is obviously likely to discourage the issue of bonus shares to workers and Mr. Welkinson said that the Financial Secretary of the Treasury Was going to look at the point very carefully.

Many schemes encounter taxation and administration difficultiesas did that introduced by

Sometimes it may be uncertainty about a scheme's effect upon Hability for estate duty, on other occasions difficulties about registering a ;society under the Industrial and Provident Societies' Acts. Or it may be that a scheme is held up by the 'I rust Funds (Validation) Act of 1927 or on account of the Stamp Duty payable on share transfers. The Parliamentary Secretary to the Ministry of Labour said that the Government would certainly do what it could to encourage copartnership and try to give a lead in fiscal and other matters.

In the debate Mr. F. M. Bennett suggested that positive tax reliefs coud be made as distinct from the removal of obstacles. For instance Mr. Marples in his book, The Road to Prosperity suggested seven .years ago that a company operating an approved scheme should pay income tax on its trading profits at a reduced rate depending upon the number of shares held by employees; and that employees should be allowed tax relief in respect of earnings which they. invest in the shares of the company in which they work as they are in respect of life insurance premiums.

Legislation is also possible-such as that suggested by Colonel Hope which would authorise the issue of Labour Shares of no capital value as was done ir New Zealand twenty years ago In the debate on copartnership Mr. Norman Smith suggested that companies might be required to allocate a proportion of any bonus shares issued to their employees Or legislation for the limitation of dividends might he introduced as urged by the T.U.C. There are all kinds of things that could be done to encourage a spirit of parte.nership in industry; arid it may be that public discussion of the various possibilities during the next couple of months "sight encourage the Government to do somethine. It Medved itself to do what it could in this field immediately after 'he 1951 election so some kind of action is overdue.

Paul Derrick.




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