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But we think that it would not be unfair, taking profits as a whole, to require some general sacrifice out of profits, and we suggest that the rate of profits tax on distributed profits should be moderately increased. This change would take effect as from 1st October and any distribution of profits attributable to the period after that date would bear the higher rate. AS in the case of the increase of profits tax in the Autumn Budget of two years ago, an appropriate safeguard would be included to prevent any avoidance of the intention of the clause in respect of the distribution of dividends after the 18th September. The intention to make this change with effect from 1st October would be announced immediately, but whether the necessary legis· lation would have to be undertaken in the near future or could be postponed, e. g. until next year's Budget, requires further examination which is being undertaken immediately.
t
17.
It will be appreciated that the proposal to increase the profits tax will have to be mentioned to the T.U.C. when we meet them, i.e. before it has been announced in the House of Commons. This involves a risk of premature disclosure, which we must take, and will almost certainly mean that we shall have to go ahead with this proposal whether or not the response to the proposal for a standstill on wages (with the exceptions mentioned in this paper) is satisfactory.
23rd September, 1949.
R. S. C. G. I.
ANNEX
EXTRACT FROM SPEECH BY THE CHANCELLOR OF THE EXCHEQUER ON 12TH FEBRUARY, 1948
"It may be that, even at the present time, some exceptional case exists where wage rates are not up to what might reasonably be regarded as a national subsistence level Owing to some very special time-lag in their adjustment. such a case, though it is difficult to imagine one, it would be justified from a national point of view to raise the wage level.
In
It is not possible to state precisely what the national subsistence level is, but it must obviously be deter- mined by the levels of wages ruling at the bottom end of the scale at any given time. Since, as I have said, we cannot afford any general increases of wages, it would only be in some very special and particular case that such an increase could fall within the exceptions stated in the White Paper. "
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