Note. This total does not include the foreign currencies at present in Germany which, according to the estimate made by the Second Committee of Experts, would amount to 1,200 million gold marks, a figure which has been confirmed by a German authoritative source.

Annex No. 8 to the Report of the First Committee of Experts.
PROVISIONAL SURVEY OF THE REICH'S BUDGET FOR 1924.

Provisional* Survey of the Budget for 1924.
I.-General Administration of the Reich.

*The figures of this table can only serve as a preliminary estimate and are given with all reserve. This estimate of the revenues assumes complete restoration of economic unity between occupied and unoccupied territory, renewed administrative and fiscal supremacy in occupied territory on the part of the Reich and the component States, that the taxes to be levied according to the general laws of the Reich and the States are once more directed into their Treasuries.

II.-Execution of the Treaty of Versailles.

Annex No. 9 to the Report of the First Committee of Experts. COMPARATIVE POSITION OF DIFFERENT INCOMES DRAWN FROM DIVIDENDS IN THE YEARS 1920-21, 1923-24 AND 1924-25. Question submitted to the German Government by the First Committee of Experts.

Assume four men with incomes in G.M.

15,000.

100,000.

500,000.

1,000,000.

(a.) Wholly from dividends of German industrial companies.

(b.) One-half from German and one-half from foreign companies.

What amount of income tax (or its substitutes), plus capital tax, will be payable on the scales for

1920-21,
1923-24,

1924-25 respectively?

Reply of the German Government.

For the following reasons it is impossible to make reliable estimates of the kind desired:

(1.) Because the fiscal burden for 1920-21 cannot be calculated owing to the influence of the depreciation of the currency.

(2. Because no assessment exists for 1923 based on sliding-scale rates for that year; indeed, for 1923 prepayments and payments of balance were collected which were regularly calculated on a coefficient of the 1922 taxes and were therefore not entirely immune from the influence of the depreciation of the currency.

(3.) Because no income tax levied on a sliding scale exists so far for 1924; the prepayments for 1924 are collected more according to external standards; the actual income for 1924 will not be assessed until 1925, when it will be based upon a tariff which will be determined by law in the course of the year 1924.

Particulars concerning the form of the taxes will be found in the memorandum transmitted (see for 1920-21, the English text, pages 81, 96, the French text, pages 81, 97; for 1923-24, English text, pages 83-84, 96, French text, pages 84, 97). Reference should be made to the statement concerning the budget estimates of the wages tax and the prepayments on the income and corporation taxes for 1924 transmitted as V a II 1480, of the 16th February, 1924.

It should further be pointed out that income from dividends to the amount mentioned existed in Germany before the war to a limited extent only and is unlikely to be found after 1922, owing to economic developments during the period of depreciation of the currency.

As early as 1920, there were only six taxpayers in Germany who had an income from investments of from 3 to 10 million paper marks, that is, from 200,000 to 667,000 gold marks and 66 with an income from investments of from 1 to 3 million paper marks, that is about 67,000 to 200,000 gold marks. From about the middle of 1922 income from investments had practically disappeared.

In view of the circumstances mentioned above, any estimates are attended with exceptional difficulties. An attempt is made below to employ available bases for valuation as required in the Questionnaire.

The estimates given in the enclosed table showing the charge on incomes from dividends of 50,000, 100,000, 500,000 and 1 million gold marks fulfil the conditions set forth in the Questionnaire:

(a.) That the whole income is drawn from dividends of German industrial companies.

(b.) That half the income is drawn from German and half from foreign industrial companies.

It was necessary in drawing up this table to include in the calculation of the charges on income derived from dividends of German industrial companies the taxes which had to be paid by the German companies if they distributed dividends. to the amounts in question; it must not be forgotten that this tax is deducted before the distribution of the dividends. In converting the income in gold into paper marks and the taxes in paper marks into gold marks, the rate of the dollar has been used as the basis. This was possible because the income is indicated in gold and therefore the calculation of the tax at the dollar rate affords a basis for comparison.

In making the calculation the following assumptions have been made:

I. For 1920-21.-The dividend has been paid to the taxpayer in 1920. The tax paid by the company has first been deducted from the profits which the company made in 1919 and on which it paid the tax in 1920. A further prior charge consists of the 10 per cent. tax on revenue from capital which was deducted from the German dividends of the taxpayer at the time of their receipt in 1920 and which he paid in 1921 for his foreign dividends. From the remaining revenue, after deduction of the tax on revenue from capital, the taxpayer has paid his income tax for 1920 according to schedule. In estimating the actual fiscal burden, account has been taken of the fact that the income was obtained in the year 1920, that the corporation tax and the tax on revenue from capital were paid at the time of receiving the dividends, that is also in 1920, and that on the other hand the tax on revenue from capital in respect of foreign dividends and the income tax were not paid until 1921, and were therefore paid in a depreciated currency. On the basis of the average dollar rate, one gold mark was in 1920 equivalent to 15 paper marks, and in 1921 to 24.9 paper marks.

Example 1.-Let us assume the income from dividends in German companies in 1920 to be 50,000 gold marks=750,000 paper marks. Before distributing 750,000 paper marks, a company in 1920 had to pay an average tax of 127,500 paper marks. The 750,000 paper marks due to the person receiving dividend. were, upon receipt, reduced by 10 per cent., that is by 75,000 paper marks. In 1920, therefore, 202,500 paper marks were paid in taxes=13,500 gold marks. From the

remaining 675,000 paper marks he had to pay the sum of 356,600 paper marks in income tax = 14,321 gold marks in The total charge was therefore 27,821 gold marks. Example 2.-Let us assume the income from dividends in German companies in 1920 to be 25,000 gold marks = 375,000 paper marks and from foreign companies 25,000 gold marks, making a total of 50,000 gold marks = 750,000 paper marks. Before distributing 375,000 paper marks, German companies had in 1920 to pay an average tax of 63,750 paper marks = 4,250 gold marks. The 375,000 paper marks in German dividends due to the recipient were, upon receipt, reduced by 10 per cent., that is, by 37,500 paper marks =2,500 gold marks.

In 1920, therefore, 6,750 gold marks were paid in taxes. In 1921 the person drawing dividends had in the first place to pay a 10 per cent. tax on revenue from capital on the 375,000 paper marks, that is, 37,500 paper marks=1,506 gold marks. Furthermore, after deduction of the tax on revenue from capital, he had to pay on the remaining 675,000 paper marks an income tax of 356,600 paper marks = 14,321 gold marks. In this case the 1921 taxes thus amount to 15,827 gold marks. Including the 1920 taxes the total charge is therefore 22,577 gold marks.

II. For 1923-24.-It is assumed that the dividends for 1923 have been distributed to the shareholders. In the total prior charge the tax on fortunes has not been taken into Only the corporation tax which, under the Law of the 20th March, 1923, on the Depreciation of Currency, was paid by the company for the business year 1922, which year was taken as the basis for the distribution of dividends, has been indicated as the prior charge. On the basis of the tariff the prior charge amounted to 45 per cent. Owing however to the great depreciation of currency in 1923, the gold value on the date of payment was insignificant. The prior charge has been indicated therefore at only 3 per cent., since the dollar rate at the time of the payment of the tax, that is, on the 25th April, amounted to 29,200, namely, about fifteen times the average dollar rate for 1922 (1885-78). In many cases, owing to delay in closing the balance sheet and to the consequent delay in paying the taxes the prior charge was, as a result of the rapid depreciation of currency, much less than 3 per cent. In the case of the person receiving dividends the tax indicated is that which he had to pay as increased prepayments and payment of balance for 1923.

Since there was no proper assessment for income tax on a sliding scale for 1923, the payments of balance for 1923 have been determined according to the taxpayer's capacity to pay on the basis of his gold mark payments in 1923, and in certain cases on the basis of a lavish expenditure.