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Thursday, 25 May 1939

Mr HUTCHINSON (Deakin) . - I give notice of my intention to move the insertion of the following new paragraph after paragraph e: -

Any profits made by any annexe created at the direction of the Department of Defence and/or the Department of Supply and Development, or any profits made by any private company engaged in the manufacture of munitions, shall not be in excess of 4 per cent. per annum calculated on the capital invested. " Munitions ", for the purpose of this section, means armaments, arms and ammunition, or parts relating thereto, as supplied to the Navy, Army and Air Force.

I remind the committee that paragraph e states -

Arrangements for ascertaining costs and for the control- and limitation of profits in relation to the production of munitions.

The definition of "munitions" in clause 4 is-

Armaments, turns anil ammunition, and includes such equipment, machines, commodities, materials, supplies or stores of any kind, as arc. "in the opinion of the GovernorGeneral, necessary for the purposes of defence.

I direct particular attention to -the words " in the opinion of the GovernorGenera] ". This is a very wide provision. It enables the Government to bring under the act everything grown upon ' or derived from the earth, and everything manufactured. If we are to limit profits in accordance with that definition, it will be necessary to control profits generally in all industries. I should say that "profits", as contemplated in paragraph

a.   would be the profits of an industry, taking into consideration each year's operations, and would not refer to the loading of costs in order to give a profit per unit. I also believe that the amendment submitted by the honorable member for Martin (Mr. McCall) refers to profit per unit, lt would not be possible to police, or even to devise, a scheme that would limit profits in the manner proposed, because the profits of any company are determined, not by the loading of the costs per unit, but by the number, of units manufactured. The loading of any particular unit might be 2 per cent., 3 per cent., or only i per cent. But at the end of the year the profit of the company may be from 20 per cent, to 30 per cent. It is not so much a matter of the profit loaded to the unit as it is the num!ber of units involved. The profit on a motor car body may not be excessive, but on the turnover for the year the profit might be up to SO peacent. The amendment before the committee does not touch the real problem, and it will be impossible to devise any reliable means by which profits can be checked, -unless based on the turnover for the year. The proposed new paragraph which I have foreshadowed is limited to the industries engaged only in the manufacture of what had been termed weapons of death. By a system of policing it should be possible to control profits up to a certain point, and thus go a long way towards meeting what a majority of the committee desires. Every honorable member wishes some limitation to be placed upon profits. T do not believe that a means can be devised to attack profits at the source in Australian industry generally, as was suggested by the Minister for Supply and Development in his second-reading speech. The Minister, in his speech this afternoon admitted that he has not a definite formula to place before the committee. The proposed procedure has not been explained satisfactorily. The Minister mentioned various means by which companies can water their stock and thus make it almost impossible to ascertain the actual profit. It is more difficult to check profits at the source than it is to assess them after a year's transactions are known. Although it may be said that under that system we would be locking the stable after the horse had gone, the excessive profit could be recovered and brought into the treasury in the following year. The threat toforfeit excess profits will always be a deterrent to unscrupulous manufacturers. Germany has attacked this problem by taxing excess profits, and I believe that , that is the only way it can be clone effectively in a general way. But definite orders placed with a firm or annexes is a. different matter, and a reasonable profit can be determined. The Minister has not yet given any clear indication as to the conditions under which these annexes are to be conducted. I understand that sixteen of the eighteen have been built and equipped at the expense of the Government, and that in most instances the land has been made available by factory owners. Those controlling these undertakings may amass profits amounting to thousands of pounds a year, particularly if the percentage of profit is on a unit basis. In the majority of instances the companies have not provided capital for the purchase of plant and equipment; it has been provided by the Government. If they were guaranteed a return of 4 per cent, a unit it is easy to imagine the colossal fortunes that could be made, particularly when their plants were working to full capacity in time of war. The proposed new paragraph which I have forecast departs from the 6 per cent, profit on the unit and provides for a profit of 4 per cent, on the year's turnover. Moreover it defines " munitions " as relating only to what are known as weapons of death and so limits the scope. In regard to the bigger issue, the advisory accountancy panel should be able to arrive at a sound basis and to check excess profits, as is done in Germany. It is practically impossible to arrive at a reliable rate of profit until the turnover for the year is known.

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