Evening star., 1937-08-05

Coftg7SStoHdL WDeStlgdttOH TO de-
termtne reasons for tar shortages.
Under direction OF President Roose-
uet, the prOberS Uent into tar
euaston tactics of the 1Oeolthv;
dragged many notables into the
limeHght.
BY the Associated Press.
A Senate-House Tax Committee rec
commended today drastic increases In
domestic personal holding company
taxes as one means of preventing tax
avoidance
The committee, proposing for enact
ment at this session a 500. 900 900
elght-point program of legislation to
plug income tax leaks, also recon-
mended an innovation in the taxation
Of foreign personal holding companies.
1t suggested that undistributed net
income of such companies should be
figured il the gross income of the
American owners of the companies Just
as if it actually had been distributed
to them.
Treasury officials, who co-operated
with the joint committee in making
an investigation which brought in the
names of many prominent citizens, es-
tlmated roughly that enactment of the
committees recommendation would
mean an increase of 100000 900 in
Federal revenues.
Higher Taxes on Yachts.
In addition to the domestic and
foreign personal holding company pro-
poSals the committee recommended
stiffer tax treatment for the following
methods used by wealthy persons to
reduce their taxes: Incorporated yachts
and country estates, Incorporation of
personal talents (such as acting), arti-
fetal deductions for interest and busi-
ness expense, multitrusts. nonresident
aliens and artificial deductions for
losses from sales or exchanges of prop
erty.
Representative Vinson, Democrat,
Of Kentucky, said the committee had
left unchanged provisions permitting
deductions for racing stables and
losing vagers.
The committee report to the House
and Senate followed an investigation
extending over several weeks and un-
dertaken at the request of President
Roosevelt. The President said IN a
message to Congress that a compare
lively small number of wealthy persons
was reducing tax payments by methods
which he considered should be checked
by legislation.
During the investigation the Presi-
dents son James, who also is one of
his fathers secretaries, appeared on
the witness stand to deny that he ever
had been connected with a foreign per-
sonal holding company. a connection
which had been hinted at by Repre-
sentative Fish, Republican, of New
York.
The committee proposed to lift the
surtaxes on domestic personal holding
corporations to IS per cent on the un-
distributed net income not in excess
| OF $4,000 and IS per cent on the
amount above $4,000.
The present rates are to 48 per
cent.
"No Low Minimum Rate"
mo low minimum rate can be pro-
vided," the report said, without en-
| abling wealthy individuals to escape
substantial taxes through the forma-
ton of multiple personal holding
companies
In addition, the committee sug-
gested that deductions allowed such
companies be altered broadly, and
some revoked entirely.
With regard to taxing undistributed
net income of foreign personal hold
ing companies as though already dis
tributed to American owners, the COM
mittee said it was recommending "a
method Of taxation which is a de-
parture from any previously USED
with respect to corporate income"
THE committee feels, however" the
report added, that this innovation is
necessary to protect the revenue and
prevent further use of one of the most
glaring loopholes now existing"
| Thereupon the committee proposed
that tax laws should be revised to en-
courage dissolution of foreign personal
holding firms "as promptly as pos
sible."
The major recommendation here
was that in the liquidation of any for
eign personal holding firm not COM
| pleted by the end of this year, 100 per
cent of the gains from the liquidation
should be taken into account in COM
putting net income.
Under existing law it is possible for
as little as 80 per cent Of the gain to
be taken into account in computing
net income.
Asserting it found no justification
(See REPORT, Page A-5)