How the Capitalists Conceal Their Profits

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CONCERNING THE ISSUE OF CONTROL

How much they talk about control! And how little it all means. How they dodge the issue by resorting to general phrases, grandiloquent turns of speech, and solemn “projects” doomed for ever to remain projects only.

Now the issue is that unless commercial and bank secrecy is abolished, and unless a law is immediately passed making the books of commercial firms open to the trade unions, all phrases on control and all projects for it will be so much meaningless verbiage.

Here is a small but instructive illustration. A comrade who is a bank employee has sent us the following information showing how profits are concealed in official reports.

On May 7, 1917, Vestnik Finansov No. 18 published a report of the Petrograd Loan and Discount Bank. The report gives the bank’s net profit as 13,000,000 rubles (the exact figure is 12,960,000; we shall use round numbers in the text and give exact figures in parentheses).

On closer scrutiny, a well-informed person will see at once that that is not the whole profit at all and that a consider able part of the profit is cleverly concealed under other items, so that no “tax”, “compulsory loan” and, in general, no financial measure will ever bring it out unless commercial and bank secrecy is completely abolished. Indeed, the amount of 5,500,000 rubles is given as reserve capital. Profits are quite often entered for concealment as so-called reserves, or reserve capital. If I am a millionaire who has made a profit of 17,000,000 rubles and wants to reserve 5,000,000, I only have to enter this 5,000,000 as “reserve capital” to do the trick! In this way I dodge all the various laws on “state control”, “state taxation of profits” and so on.

Again, the report indicates slightly less than 1,000,000 rubles (825,000) as money made in interest and commissions. “The question is,” writes the bank employee, “what are the sums that generally constitute the bank’s profit, since the money made in interest is not listed under profits??”

Moreover, the sum of 300,000 rubles, listed as remaining profit made in previous years, is not included in the total profits! Together, then, with the foregoing item, we have more than another sweet million in profit hidden away. Similarly, the sum of 224,000 rubles of “unpaid dividends to shareholders” is missing in the total profit, although everyone knows that dividends are paid out of net profits.

Furthermore, the report lists the sum of 3,800,000 rubles as “carry-overs”. “Whoever has not taken a direct part in the business will find it hard to establish what these carry overs are,” the comrade writes. “One thing is certain: in preparing a report, one can easily conceal a part of the profit by listing it under ’carry-overs’ and then transferring It to ’where it belongs’.”

To sum up. The profit has been listed as 13,000,000 rubles, but, in point of fact, it must be somewhere between 19 and 24 million, or almost 80 per cent profit on a basic capital of 30 million.

Isn’t it obvious that the government’s threats to the capitalists, the government’s promises to the workers, the government’s Bills and laws aimed at taking 90 per cent of the profits of the big capitalists are useless, absolutely use less, as long as there is commercial and bank secrecy?