The Hawaiian gazette. [volume] (Honolulu [Oahu, Hawaii]) 1865-1918, 1917-08-07
Average Net

Immense sums - win be collected
from the sugar companies of Hawaii
under the "excess profits" provisions
of the War Revenue Bill now pending
in the senate. Twenty-Five of the
sugar companies whose stocks are list
ed on the local exchange will be called
upon to pay more than four millions Of
| dollars under these provisions of this
bill and one company alone will be
called upon for nearly seven hundred
thousand dollars. These taxes are in
addition to the regular income tax ON
corporation earnings. This will mean
that the sums available for distribu.
ton in dividends will be reduced
proportinately, that those twenty-five
companies will pay smaller dividends
by about four millions Of dollars.
Stocks Now Lag
/ Despite the fact that the price of
raw sugar is at the highest for more
than twenty eight years, there is little
demand for sugar company shares at
lower prices than were quoted few
months ago. While the possibility of
maximum price being fixed by food
controllers may enter as factor into
this condition, the general opinion is
that the probability, the practical
certainty, of a high tax on the earn.
ings of corporations is the cause which
holds back buyers and investors. They
are figuring that the proposed war
revenue taxes will tend TO materially
reduce dividends, that the present
prices of stocks are based on earnings
and dividend paying capacity and that
there must be readjustment of stock
prices to meet the readjustment of
dividend payments which viii have to
follow the passage of war tax legisia.
ton.
Glow will the war taxes affect the
sugar stocksf" is a question frequently
heard in the financial districts. "Will
dividends be materially reduced and If
so will market quotations follow a
downward trendf"
Excess Profits Are Taxed
Under the provisions of the War
Revenue Bill which is now pending in
the United States senate, according to
the terms of the copies which have
been received here, there is to be
collected from the earnings of every
corporation a tax of two per cent on
its earnings for the year 1917 and
each year thereafter. In addition to
this, there is provision for the collect
ion of an excess profits tax. The
figures here given refer only to this
excess profits tax and not to the
regular two per cent tax.
How Excess Is Figured
Section pol of the bill provides that
in addition to the taxes under the ex-
listing law, all corporations shall pay a
tax upon what are termed its excess
profits, which is based upon certain
percentages of the annual income of
the corporations to what is termed
their "pre-war income. This "pre-
war income" is the average income
for the three years Immediately pre-
ceding the war, 1911, 1912 and 1913.
In ascertaining the amount to be tax
ed and the rate Of taxation, such pre- J
war earnings are to be deducted from |
the net earnings of the year. This
gives the amount on which the excess
profits tax is to be assessed. The per
centage of such taxable sum to the |
pre.war income determines the rate
that is to be charged. This pre-. war
thO uCuuCIiOh
the bill. .-. .,.
How Rate Is Determined.
Where the amount of the excess
profits is not in excess of fifteen per
cent Of the deduction, the tax is
twelve per cent on the difference;
from fifteen to twenty five per cent
of the excess, the rate is sixteen per
cent; twenty-five to fifty per cent is
taxed at twenty per cent; fifty to
seventy.five per cent is twenty five
per cent; seventy-five to one hundred
per cent is taxed at thirty per cent;
one hundred to one hundred and fifty
per cent is thirty-fve per cent; $50
to 200 per cent is taxed forty per
cent; 200 to $50 per cent is taxed
forty five per cent; and above $50 per
cent excess the tax is to be fifty per
cent, -.
Examples Are Cited
Thus where a company earned an
average of 100000 in the pre.war
period and earns $l50,OOO this year,
here would be assessed and collected
IN excess tax on the difference, $50.
10 and at the rate of twenty. five per