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1918

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N.B.-Each of the above headings can of course be very largely subdivided.

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NOTE

I ARRIVE at the estimated cross-over point of 20 per cent. ad valorem by calculating the manufacturers' profit at an average of 25 per cent. on cost. Therefore the moment that import duties exceed 20 per cent. ad valorem they become a restraint upon trade.

The cost of manufactures is made up of material + labour + standing charges + profit. In those industries which are fortunate enough to be able to indulge in, and are capable of, large-scale production and distribution, there is a certain point, generally described as the cross-over point, at which the item of standing charges automatically becomes profit. The manufacturer distributes his standing charges over a given amount of production, but the moment his sales exceed the production provided for, the allowance made for standing charges naturally becomes profit; and this is technically known as the cross-over point.

If, therefore, import duties are confined within the limit of 20 per cent. ad valorem, they are not likely to act as a restraint upon trade. And manufacturers would be well advised not to press for import duties beyond this limit, for a reaction from one extreme (restraint of trade) to the other (Laissez-faire) would inevitably occur. It should be their care to guard against a violent change, particularly if it is technically unsound.

It is by the taxation of profits only that a Government can secure the cost of its services and meet the interest charges of the National Debt. And no system of taxation could conceivably exceed the profits which manufacturers usually provide for on cost of manufacture. The construction of the National System I develop has regard to this fact.

vii

J. T. P.

DEDICATED TO

OUR GLORIOUS ARMY AND NAVY

AND MERCHANT SEAMEN

TO WHOSE VALOUR WE OWE THE PRIVILEGE OF

BEING ABLE TO CONSIDER

RECONSTRUCTION PROPOSALS

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