298
SIR ERNEST OPPENHEIMER
the mining profits of the producers, that
is to say the difference between the cost of production and the price
at which diamonds are handed over to the pool, liable for this tax. It
is a question which will have to be settled by our legal advisers, but
it seems probable that the proposals put forward in the draft are not
satisfactory. We have given the matter further thought and certain
other suggestions will be submitted. . . .
The
solution which was ultimately adopted—it appears to have been first put
forward by the eminent British legal expert briefed by the Diamond
Corporation and De Beers—was the creation of a separate sales company.
On 30 May, Sir Frank Meyer was cabling that 'regarding income tax
there is nothing to add to previous cable, except to emphasize that
counsel consider formation of sales company best method to deal with
situation. Reference to method of raising capital for sales company,
Frank Oppenheimer and I are carefully considering proposal contained in
your letter to him.' It must have been a source of great satisfaction
to Ernest Oppenheimer that a second generation, in the shape of his own
two sons, was now beginning to take an active part in the conduct of
affairs. (Harry Oppenheimer, the present head both of De Beers and the
Anglo American Corporation, became a director of De Beers on 27
December 1934.) The solution proposed by Ernest Oppenheimer, as he
cabled Sir Frank Meyer next day, was for a subsidiary company with a
capital of £1 million, the whole capital to be subscribed for
and held by the Diamond Corporation, though the corporation was to
finance itself for this purpose partly by an addition to its
debentures, which were to be taken up by the conference producers. The
sales company would 'at once use the money so subscribed to buy
diamonds from producers and the Diamond Corporation, so that
practically the whole sum will return direct to the subscribers in the
form of payment for diamonds'.
It
was, of course, one thing for the legal experts to arrive at a solution
which they hoped would meet the circumstances of the case: it was
altogether another matter to get the Union authorities to agree to
these proposals. The Minister of Mines was himself an eminent advocate
and an ex-revenue official, and, naturally, was fully aware of the
absolute necessity of clearing up the legal position and of avoiding,
if it were at all possible, the rigours of the British income tax law.
Nevertheless, he was for a time not convinced of the necessity of the
creation of a separate sales company, and, to the consternation of the
De Beers group, at one moment toyed with the idea that, to avoid all
danger, the selling activities of the Diamond Corporation should be
removed from
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