§ I turn now to the Profits Tax. I have noticed, with regret, a continuing and 401 persistent inclination on the part of many concerns to declare increased dividends. This is contrary to advice which I have ventured to offer from time to time; it is inflationary, because it puts more purchasing power into circulation; and it is very disturbing to industrial relations. Moreover, profits as a whole are still running at a very high level. I, therefore, propose to double the Profits Tax on all profits made as from 1st January, 1947, thus raising the rate from 12½ per cent. to 25 per cent. on distributed profits and from 5 per cent. to 10 per cent. on undistributed profits. This will increase the yield of the Profits Tax by £85 million in a full year, bringing its yield next year to just over £170 million. The net gain to the Revenue next year, allowing for offset of Income Tax at the present standard rate, is £47 million. The additional net yield this year is small—it will amount to about £2 million.
§ I propose one other change in the field of Inland Revenue. At present, expenditure on advertisement is allowed as an expense against business profits, both for Income Tax under Schedule D and for Profits Tax. But in these days much of the advertising which goes on is a serious waste of money, of labour and of material. There is certainly scope here for economy in the national interest. I, therefore, propose that, for the future, only one half, instead of the whole, of advertisement expenditure should rank as an allowable expense. There will be certain exemptions in the Finance Bill, when we come to it—where we shall naturally, as our custom is, set matters out in greater detail—including advertisement for the export trade, which obviously stands on a special footing, and advertisement in trade and technical journals. I estimate the additional revenue from this change, which will operate at once, at £10 million in a full year, though nothing this year.