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payable to Government by way of taxation on profits
from the net annual profits of the Company before surplus
profits are assessed for this purpose. This is based
on the analogy of the treatment of such other utility
companies as pay a royalty to Government which will be
permitted to deduct the royalty from their profits before
such are assessed for purposes of war taxation. It will
be observed that the remaining half of the surplus profits
remains at the disposal of the directors who need not
necessarily employ it for the purpose of increasing
dividends.
This arrangement will apply retrospectively to
the year 1939, so that Government may anticipate a
considerable addition to the royalty otherwise payable
in respect of that year. It is felt that Government, as
representative of the whole community, has a prior claim
to a share of the surplus profits in preference to the
subscribers who already enjoy a remarkably cheap rate
of subscription.
The management of reserves has been varied by
allowing depreciation of existing investments to be
charged to the capital reserve at once and in respect of
capital reserve in lieu of the appropriation of a sum
not exceeding 170,482 per annum there will be paid an
appropriation not exceeding 92,577 per annum, plus the
total amount of interest and dividends received during
the year from the investments made on account of this
reserve. This sum is calculated as sullicient to
accumulate the required amount in thirty-six years on a
sinking fund basis of 3 per cent. Interest on investments
made on behalf of the depreciation reserve will continue
to be credited to profit and loss account. Depreciation
of such investments will be debited against profits but