The Effects of Inflation Accounting

As you can see, these proposals will change the rules of business quite substantially. These changes mean that prices will go up annually by a higher amount than they would have under the existing method. The system builds inflation into the price structure, to the exclusive advantage of the companies.

Profits on the revised basis will appear to fall as a proportion of national income. In fact, the owners of capital will benefit substantially. The committee of enquiry into inflation accounting assesses that if the adjustments are made which they recommend then the share of wage and salary earners will fall by about eight percent.

Decisions on what "current costs", "essential assets" etc. are, will be made by the companies themselves, and it will be almost impossible for taxation pricing authorities to effectively check or control the prices that should be allowed, and the taxes that should be paid by companies.

Inflation accounting is meant to help businessmen overcome the problems of inflation, while you and I have to rely on delayed cost of living adjustments (in the case of bursaries we do not even get adjustments) and these are inadequate with the spiraling cost of living.