§ But whilst I consider that these proposals are not merely justified but are required by the abnormal conditions now prevailing, I also hold that this tax itself, like those conditions, is, or should be, abnormal and temporary in its character. I propose therefore to introduce this year a new tax which, for the time being, will be levied concurrently with the Excess Profits Duty, but which, either in the form in which I propose it or in an amended form, may in the future prove a substitute for it. The character of the new tax, a permanent tax, has been the subject of most anxious consideration by the Government and myself and, as I have previously mentioned in the House, last year I sent out a mission to Canada and the United States to investi- 98 gate and to study the schemes of Profits Taxation in force in those countries, and to see whether we could derive any lessons of use to us from their practice and experience. The results of the inquiry and of independent investigation in this country have not served to remove the difficulties which presented themselves on our first consideration of the proposal for a taxation of profits in excess of a certain return upon invested capital, and have not enabled us to see our way to adjust such a tax to existing business conditions and customs in this country. We, therefore, abandoned the idea of creating a tax on profits in excess of a fixed standard and we propose to have recourse to a different measure. I may describe our proposal as a Corporation Tax levied at the rate of 1s. in the £ on the profits and income of concerns with limited liability, engaged in trade or similar transactions. This tax will run concurrently with Excess Profits Duty until that Duty is repealed. Where a concern, is liable to both taxes, any Excess Profits Duty payable will be treated as a working expense in arriving at the profits for the purpose of the new tax. Both Excess Profits Duty and Corporation Tax will be deducted before the assessment of profits for Income Tax, and to prevent the new tax constituting too severe a burden on the ordinary shareholder of existing concerns in which there are large issues of debenture and preference shares, where a considerable proportion of the profit has to be allocated to the payment of interest and fixed dividends thereon, we propose that in no case shall the duty exceed 2s. in the £ on the profits which remain after the payment of such interest and dividends on existing issues of debentures and preference shares. I would remind the Committee that under the provisions of the Excess Profits Duty prosperous concerns with a large pre-War profit standard may escape liability for the tax because their present profits, though high, are not in excess of their standard, and, at any rate, they pay tax on what all of us think an unduly low scale. Incidentally, the new tax will do something to correct this anomaly But I justify it on much broader grounds. Companies incorporated with a limited liability enjoy 99 privileges and conveniences by virtue of the law for which they may well be asked to pay some acknowledgement. But more than that, partners in a private partnership pay Super-tax not merely on the profits which they divide, but also on the undivided profits which they place to reserve. No such charge falls upon the undivided profits of limited liability companies. The Corporation Tax is justified by this distinction of the existing law in favour of such corporations, and it may be regarded as a composition in lieu of the liability to Super-tax. How soon it may be possible to discontinue the Excess Profits Duty and to rely upon this new tax alone must depend on many circumstances, upon the duration of the abnormal conditions and abnormal prices and profits which we now witness, but, most of all, on the results of the inquiry which the Select Committee on War Wealth is now conducting upstairs. I estimate, on the basis of existing prices and rate of profits and assuming the continued development of industry, the yield of the new tax by itself should in a full year amount to £50,000,000 and, while levied as an addition to Excess Profits Duty at the rate of 60 per cent., will in a full year produce £35,000,000. The largest part of the tax levied and accruing this year will not reach the Exchequer till next year, and for this reason. I do not anticipate that the sum obtained in the current year will be more than £3,000,000.