TAXATION REDUCTIONS

Evening Post, Volume CVIII, Issue 83, 4 October 1924, Page 13

TAXATION REDUCTIONS

THE AMENDING BILL

MORTGAGE EXEMPTION

INCREASES

MEASURE PASSES HQUSE,

The Land and Income Tax Amendment Bill, .which provides principally for giving relief to payers of land tax, was considered in Committee by the House of Representatives last night. On clause 2, which provides ,for increasing the ' mortgage, exemption, the Leader of the Labour Party (Mr. H. E. . Holland) said that the Labour Party would oppose the proposal,, as indicated previously. If ,the clause was" defeated it would mean that the exemption at v present allowed would stand.

The Leader of the Opposition (Mr. T. 51. Wilford) said that the Liberal Party felt that exemptions, so far as land and income tax were concerned, should be made on the lower • incomes and on the lower unimproved values. There should be no.exemption on land of more than £10,000 unimproved value. In regard to the mortgage tax they felt that the man who was in debt should be given relief. He would prefer to see-the remission "peter out" at £10,000. The present position was that the exemption began at £4000 for land of less unimproved value than £6000 and "petered out" at £8000. The Bill proposed that the exemption . should run to £10,000 ,and "peter out" at £15,000. His party oonsidered it would be better for the relief to end at £10,000, but he did not want to imperil the relief of those owning property up to £10,000 in value, and he wouldj therefore, support tho clause. Mr. .-Hollarid said that if- there was a case to be made in favour of raising the'minimum of.exemption there was a case to be made for lifting the tax from all mortgaged properties, without regard to their value. It was a bad principle to affirm that there should be no deduction' oii mortgaged land up to £10,000. The Labour Party contended that the effect of* the Bill would be to lift the relief beyond the small' man and carry it on to the large landed proprietor. VALUE OF DAIRY EARMS .'..

The Prime Minister (the Right Hon. W. F. Massey) said it was- not correct to suppose that the -whole of the small •'. farmers were included in the relief now provided,' which ended at £8000. It was not so in the case of the people who produced the bulk of our exports, apart from wool—the dairy farmers who had from 50 to SCO acres of land, which were generally subject to mortgages. .Very few of these farms were valued at less than £50 per acre, and it did not require a very great area to reach a value of £10,000. Mr. 0. J. Hawken (Egmont) said the proposal would be very beneficial to a great many dairy farmers with mortgages. Mr. Wilford said that if Standing Orders would permit, he would divide the House on the question of making the exemption end at £10,000, but- he could , not do so in view of Mr. Speaker's recent ruling in a similar case, and he had to accept the extra £5000, because he -^ had no power to move for the change he desired. Mr. M. J. Savage (Auckland West) asked what difference there was between two men,' one with property worth £BCOO and the other worth £30,000, each having the same equity, and each - working the land to the same degree. The tendency of the Bill wa3 to exempt all land from.paying taxation. ,: Mr. W. D. Lysnar (Gisborne) urged; that the tax on debentures should bo increased. It was not too late to do it. He suggested' the tax should be increased by 6d; it would give more revenue. There was too much money going into debentures, which should be made less attractive so as to make the money available for mortgage purposes. The Prime Minister said there \were difficulties in the way, but before the session ended he would have to meet them if he could. ' Mr. F. Langstone (Waimarino) said that the increase in the exemption would mean that the small man would pay no land tax. The Reform Party was under an illusion when its members said that a man paid two taxes. The proposal would assist the "merchant princes" in the cities, where the high land values wero. There was uo need to protect tho fanners, as they wero sufficiently protected already. . The present exemption, was sufficient for the small farmer. Owners of city properties wero getting a good return in the form of rent.

"LABOUR PARTY ILLOGICAL"

The Minister of Lands (the Hon. A. D. M'Leod) said the Labour Party was never more illogical than when" it discussed land. The - Labour Party had time and again said that the freeholders who were mortgaged did not own the land. Now, the Government was taking stops to relieve a man from taxation ou land, which he did not own, and in resisting the Bill the Labour Party was showing how illogical it was. Men on the land paid heavy local taxes, but he did not want to stress that point as it was not in dispute, but the concession in the Bill was going to include a large number of bona fide working farmers who in the past, had not had relief from land tax.

-, •, Forbes (Hurunui) said that he Had always maintained it to be unfair to tax a man on-his debts. When they tried -to run two taxation systems side by side they got into a mess. To tax a man with a mortgage was unduly burdening him. The principle at the bottom of the land tax 'was to secure to the community a certain amount of the added value, but a man did not get the increased value of his land until he sold it. He thought that the State should take,its share of the added value when a man was selling his land; The'fairest system of taxation was the income tax, which should supplant the land tax But the whole system of.taxation wanted reorganising so that the present anomalies might be removed. If the mortgagee owned the land it was not a fair thing to tax the occupier. Mr J. M'Combs (Lyttelton) characterised it-as -being all 'nonsense to say a man was taxed on his debts, because the owner had the right to the increment from the land. A man might have almost £1000 a year, escape land tax, because of the mortgage, . and almost escape income tax. Such a principle could not be applied to rating. The man who had land values that warranted a £10,000 mortgage had a pretty considerable landed estate. They should allow the present exemption to remain. The Hon. .J; A. Hanan (Invercargill) said that if the population increased by 10,000 to-morrow they would havo a big increase in land values. There was a handful of people owning the land to-day, and they should pay a fair return for their trusteeship. Why was the principle of rating on unimproved value being adopted? It was because it was recognised that tho principle of land taxation was sound. The laud was

the source of all wealth, and should not be allowed to be idle or useless. Land value taxation was being increasingly adopted throughout the world, because it was seen that as -population increased land,values were enhanced. He would like to see this country become a land of small holders.' If people were encouraged to' mortgage their properties it tended towards . aggregation, because a man would be tempted to acquire more laud if he could get a mortgage. New Zealand was practically in pawn, owing to so many people having mortgages on their land._ Fictitious land values were heing maintained by the moratorium. Mr. Lysnar wanted more money made available for mortgage puiposes, but there would be plenty of money for mortgages if it were not for the speculation and land gambling created by high values.

Mr. D. G. Sullivan (Avon) said he would like to know how many land-tax payers there would be after the mortgage exemption was increased. The proposal was a step towards abolishing the land tax. Why should-a man on land of a capital value of £14,000 and an income of £1400 a year be permitted to escape taxation, while another man' earning £1400 in some other direction had to pay a tax of about 30s to tho State? The principle was wrong in that it discriminated between two sections of the community. "WHY STOP AT £10,000?" " If it is wrong to pay taxation on your debts, why stop at £10.000?'' asked Mr. Langstone. "It would be wrong on any number of thousands'." If the exemption was going to, be increased, the land would get into the hands of a few, and no land tax would be roceived at all.' The Labour Party did not believe in, charging a man on his debts, but the land tax was imposed -because of the fact that the owner would receive an accretion in value when ho sold his land. . The Minister of Education (the Hon. C. J. Parr) said he had never seen the justice of double taxation, and that was what the Bill proposed to remedy. Under the present system a man was taxed on his mortgage and on values which he did not, possess. Most mortgagees' paid heavy taxation, the tax coming oiit of the land which was mortgaged, and which already paid land tax. ■-. He had never been able to see that the principle of the flat tax would meet the land settlement problems of New Zealand. The exemption would help the small man, and \the values of £14,000 and £15,000—apparently high, but due to inflation—covered 90 per cent, of the small hard-working farmers of the Dominion. He appealed to Mr. Holland to vote for the " poor cockatoo " on this occasion. ■

Mr. 1. W. Rhodes (Thames! considered the proposal the finest. piece of legislation submitted to this 'Parliament. Even if the mortgage was higher than the unimproved value.'the mortgagor had to pay. interest on it. and that was a heavy enough burden to carry.

Mr. Holland said that the city property holders who happened to be mortgaged were going "to get the same benefit from taxation as the working farmer. Hie small farmer would obtain very little benefit from the legislation, despite attempts to show that he would. While ■ they were taking up time with that kind of proposed legislation, they were losing the opportunity to deal with the general situation regarding mortgages, out of which it was- said that tho need for this legislation arose.

EXEMPTION CLAUSE' RETAINED

_ Just before th_ supper adjournment there was a division on clause 2, which Ees the mortgage exemption from £4000 to £10,000, and providing that it should disappear at £15,000. The clause was retained by 45 votes to. 18. Messrs. F. 'J. Rolleston, J. A Hanan. and H. Poland voted against the clause.

Mr. Wilford asked for an explanation in -regard to clause. 8, which provides that where-, any bonus, gratuity, or retiring allowance is paid in a lump sum to a retiring employeo only 5 per cent, of that lump sum should be deemed to be income. Was the clause intended to meet certain special cases? he asked. In some cases in the Public Service retirin" servants were granted six months' salary. ■;.

Mr. J. S. Dickson tParnell) said cases had come to his notice in which employers gave retiring employees the choice between a pension or a lump sum. In one case a man elected to take a sum of £1200, and he had to pay income tax upon his salary and / the £1200. Mr. Massey said he was assured by rthe Department that the clause was not intended to apply to any particular case. Ihe.clause was copied from the provision ill tho Imperial law. .Two new clauses were brought down by Governor-General's Message. One was a redrafted clause (11) to ensure that unpaid land tax should constitute a chargo on the land. This was not made clear in the original clause as drafted. Ihe other clause reworded clause 9 to provide that pastoral leaseholders should have to pay not land tax and income tax but only income tax. As originally drafted, there .wis a possibility of the holders of, small grazing leases and pastoral licenses being charged double tax, .which' was not intended by the Government. ,

The Bill was reported' nvith amendments, read a third time, and passed.