New-York tribune., 1917-06-19
Manufacturers Reported to
Have Made Only Partial
Returns
Plants Face Penalty
Inquiry by u. S. Agents Ex.
pected to Bring S36, $780,
600 More

Washington. June 1s.-Widespread
attempts on the part Of munition max
ers 70 evade the payment OF profits
taxes imposed By Congress last Sep
tember have been reported by internal
revenue agents. who have been work.
ing quietly for the last two months
checking up the manufacturers returns
The extent OF the attempted evasion
thus far brought to the attention of the
Treasury totals more than SI0,000,000,
or approximately 40 per cent OF the
returns voluntarily made. Indications
are that the figure will 20 as high as
Sl2,000.000 or Sl3,000,00
Scores of manufacturers Of munitions
are said 10 have attempted TO defeat
the full operation OF the law by making
only partial returns OF their profits.
Some OF the largest concerns in the in
dustry failed TO make complete returns
OF profits. il is charged.
Under the law. munitions makers are
required TO report 20 the Commits
sioner of Internal Revenue their profits
each year and TO pay the government
tax OF 12i2 per cent. Virtually>all of
the 600 or 700 manufacturers made
their returns. apparently in conform
aroe with the law, showing profits
which netted the government approx
mately s26, 100000 in taxes.
II was assumed, apparently, that the
bureau would check the returns leis-
urely, as it had been checking the re-
tutns on the income tax reports. Com
missioner Osborne, however, instead OF
waiting, set a field force of investi-
gators 10 work almost Immediately
after the munitions returns had been
receiNd. They were thus enabled TO
check the figures given the govern
nent before there had been any radi-
cal change in conditions at the plants.
Investigators reported profits largely
in excess of those reported TO the gov
ernment in many instances. Not all
the manufacturers made incorrect re-
turns, but the percentage Of those who
did is said TO have been remarkably
high. One of the methods frequently
adopted TO bring down the total profits
was 70 charge off as expenses proper
tions of the cost OF special munitions
plants.
A number Of plants charged off the
entire cost of such plants, deductlng
the amount from the net profits. JUS
tiication of this was attempted by the
plea that the plants would be WORTHLESS
when the war ended. and that lt was
apparent that the war would not last
much longer. Investigators reported
that whilel the special establishments
would be worthless at the end OF the
war so far as the manufacture OF mu-
nitions was concerned, they could be
utilized in other ways, and by no means
would be a total loss.
As a result of the investigation, re-
turns 10 the governments have been re-
vised in many instances ard will be IN
others. so that the total which the gov
eminent will obtain in taxes will be at
least s36,500.00
Activity OF the governments agents
became known az plants which were
about to be investigated and a number
of requests were received oy the bu-
reau asking that the returns De sent
back for revision. One firm whic5 re-
ported originally that 1t had made no
profits altered its report upon recon
sideration while the Investigators were
at work in other plants and before It's
own had been reached, and sent the
government a check for approximately
Sl50,000 in payment Of taxes.
The penalty for making false returns
is fine or Imprisonment, or both. Of
ficials have not yet decided what course
they will take. The investigation Is
proceeding, though nearing a close.