Evening star., 1942-05-29
Salary Bonuses Halt
May Plug Tax Leaks,
President States
Doesn't Know Names
Of Those Mentioned
By Moreenthou

fTcSlQcuC ROOSEVELT LOlQ press
conference today that unreasonable
wartime salary bonuses may consti-
tute tax avoidance loop hole which
should be stopped.
Secretary of the Treasury Nor
genthau already has appealed to q
House committee for legislative ac-
ton to check any dangerous tax
leaks through the bonus system.
The Secretary has complained to
the committee that some important
instances of this practice have been
found in the war industries.
The President said today that he
had no idea who such individuals or
corporations might be.
Mr.. Roosevelt recalled that when
Congress set out to block tax-avoid-
ance loop holes several years ago,
the identity of offending corpora
tions and individuals was disclosed
first on Capitol Hill and at the
insistence Of Ways and Means Com
mittee members.
Won't Compare Salaries.
Asked today If he believed some
officials of the war industries should
receive three or four times the
compensation of the President of
the United States, MIR. Roosevelt
said he saw no relationship.
The Treasury already has set out
to stop the practice of tax avoid
ance by firms giving unusual sal
aries and bonuses, the Associated
Press reported.
Secretary Morgenthau presented a
series Of examples of that type OF
tax avoidance to the Joint Com
mittee on Internal Revenue Taxa
ton at . private meeting at the
Capitol last night and Immediately
received a vote Of confidence.
To question as to whether the
committee might ask Congress to
enact new legislation, Chairman
Doughton replied:
well. that's for the committee to
decide If it wants to do something"
Morgenthau Cites Gases.
Secretary Morgenthau said that
quick check Of 1941 returns showed,
for example:
One company which makes equip
ment for airplane pilots paid $31 ,1O4
in rent to the wife OF the president
for property which cost $45 5,4l2. A
brother Of the principal stockholder,
without special training, drew a
SIS, 900 salary and a son and daugh-
ter just out Of school received $500
each.
A company which makes forgings
increased salaries OF employees who
were stockholders and relatives Of
stockholders 523 per cent from 1888
to 194l.
Secretary Morgenthau said that 1t
was up to the joint committee
whether to make public the names
Of the persons involved.
I'VE are taking two steps to de-
tect and deal with the evils I have
mentioned" the Secretary said. I'VE
are expediting examination Of the
tax returns and records of all cor
porations. We are disallow-
ing excessive expenditures which
have the effect of reducing corporate
tax liabilities"
Guide Used by Treasury.
He listed six general considera-
tions" which would guide the Treas
ury. On one of them entitled
Amounts paid for advertising" he
said:
"The test Of whether expenditures
for advertising are deductible is
whether they are ordinary and nee
essary and bear a reasonable rela-
ton to the business activities in
which the enterprise is engaged.
This Is not intended to exclude
institutional advertising in reason
able amounts or good will advertis-
ing calculated to influence the buy
ing habits of the public. If such ex-
penditures are extravagant and out
OF proportion to the size Of the COM
pany or to the amount OF its ad-
vertising budget in the past, or If
they are not directed to public
patronage which might reasonably
be expected in the future, such
payments will be disallowed as de-