GRADUATED AND MORTGAGE TAXES

Otago Daily Times, Issue 14507, 26 April 1909, Page 2 (Supplement)

GRADUATED AND MORTGAGE TAXES

THE FINANCIAL STRINGENCY, AN IMPORTANT DISCUSSION. WELLINGTON, April 13. An interesting discussion on the graduated tax and tlio mortgage tax took place at the conference of delegates representing the New Zealand Chambers of Commerce to-day. The subject was introduced by Mr Kettle (Nu >ier), who said the stringency in the money market, was due to tha amount, of money that had been withdrawn from circulation in the country, and oil top of that, the mortgage tax, which now amounted to'6s 3d in the £. Jll Hawke's Hay a great deal of money had been taken out and not returned, and the internal borrowing of the Government also helped to accentuate the stringency. To give delegates an idea of the position, ho stated that the banks from 1902 to 1906 had a surplus of deposits over advances of from two to three millions, but at the end of 1907 that hud been reduced to £800,000, and, at the end of December, 1908, the surplus hail been exhausted and tlw banks bad advanced two millions over deposits. In tlio years he had quoted the position had fluctuated to the extent of live millions. That was the position ut' the banking institutions. Was'it any wonder that tliey were calling in money ? 'they had to fall back on their own capital. Ho repeated that tlio internal borrowing of the Government was largely responsible, lie could not ascertain the exact amount which the Government raised locally, but he knew that up to ike end of 1907 the local bodies had borrowed 6ix millions in New Zealand, and at the end of 1904the amount was three millions. The amount of borrowing done by the local bodies last year be had been unable to ascertain. It- was a fact that no money could be obtained from any financial institution in New Zealand, not even from the Government departments. A delegate: What about the advances to settler.* ? ilr Kettle replied that his remarks applied to that department. It- bad no money to lend. Ho know of settles in Hawkcs Jiay who had endeavoured-to get- money from the Advances to Settlers Ollice, and failed. It was time for the conference to Hit its voice and ask for the recision of the mortgage tax. No doubt some of the papers would say tlvat lie M as advocating the cause of the wealthy men. Ho was doing nothing of the kind When in Australia recently lie ascertained that there was money 'there awaiting investment at 4j per cent. He told on* man that some was required in New Zealand. "You can't get it," was the reply, not with your mortgage tax." Australian investors preferred 4.} per cent, in their own country to 6 per cent, in New Zealand. Mr Kettle also complained of tlio operation of the graduated tax in respect of capital invested in building's. Ike tax was introduced to prevent people from holding very large estates. Ho also complained that shareholders in public companies were taxed on their interests, lie moved— *'That whereas the mortgage tax has been found to be the cans© of a large amount of capital baing withdrawn from New Zealand and to restrict the inllux of capital for investment ;uid to create stringency in obtaining loans required for the legitimate development of the country's resources, the attention of the Government be raited to the position, and it. is suggested that the mortgage tax be abolished ; further, that in lieu thereof all income derived from the investment of capital in mortgages ba made subject to the income tax; that the graduated tax on capital vested in shares of public companies be levied on tlio paid-up value of such shares only, instead of as at present oil the proportion of -such shares to the total value of land owned by public companies, irrespective of their liabilities." Mr 1). J. Nathan seconded the motion. He said that the law as passed last session was never understood by the bulk of the members of Parliament.' They did not appreciate the disastrous cffect that was following the operation of the act. Ho had been repeatedly told that the act was never intended to refer to town properties and shareholders in public coinpauies. 'there was, lie submitted, no guarantee that tho exemptions and penal clauses would not be further amended and made more drastic. From facts that had come under his notice, ho could say that-_ firms in this town, with investments outside their particular business, were pa\ ing 5s to 6s 3d per cent, income tax. Ite declared that two largo estates in Wellington had recently .been realised and instructions given that tlio money was to be taken Home or invested ill Canada, the Argentine, or somewhere else. In tile case of another large estate of a deceased pel .-on, inst ructions had been given to the trustees to realise with a view to taking the money out of the country. New Zealand had the business ability, energy and labour she required, but'what was wanted was more, capital. Anyone who invested anything beyond £40.000 in New Zealand would be a fit subject for a lunatic asylum. Money was being sent out of the country. .He was not'aware whether the Government knew what was going on, but he would not be surprised to see an alteration in the law next session. At the same time, they were not likely to get an alteration -unless tliev as commercial men, got rid of that apathy winch characterised them in Wellington at all events. H« concluded bv qootin, the ease of a man who has a'property worth over £40,000 in the North Island fti,n« * Tlf J or , cllltin « np i,ltH <sn,!lJ » ■inns yet Mr \, it than .slid the man would >e .1 iliged to go. "It. is quite a- mistake," lie concluded, '• t (l he forcing capital, e'i<ig\, and brains out of this conntrv." (Applause.) J- Maitlsnd Jones (Oamaru) approved oi (lie motion. The operation "■ the act was detrimental to the investment of capital. The. British and foreign capitalists were being scared -way Irmn tins country. Not only that, j V . TOO withdrawing that which they had invested. If e suggested that the 1 ibhc trustee should be empowered to .nhortise that lie would be prepared to leccive sums for investment, and guarantee a return of 4 per cent, to British capital. iM*. 1 lontv ot money would be forthcoming, and this would fie one way of gettin back 601TK3 of the monev. * r I" reply, Mr Kettle admitted that there would be great, difficulty in enticing back tho investors who had left. What was leijiiiTCd was something to prevent further sums ot money being withdrawn. He S ' lie " tI,CT day that £220,000 or was sent away from Otago for investment, m the Argentine. Up to the end of 1908 the local bodies in New Zealand nadi burrowed about 13 millions, and of that sum £V,m6.000 had been T.n.-.ed locally. In the last live years the local boues had borrowed four millions in ftew Zealand. Mr O. r. Eraser (Timaru) quoted figures showing what the Government had borrowed from the Post Ollice Saving Bank, tho rate of interest was from 3 to 3$ per cent., and yet the Government paid depositors 3J- per cent., exclusive, oi the charges that had to be made /or running ttie business. Ultimately the motion was passed, nftor n. latter portion of it had been amended to read as tollows:—"That the incidence "I tho graduated tax uu Lnd generally, and specially as affecting the interests "of private individuals in companies, be csrenlly I'wonsidurcd, with a view to such tax being wholly or partially abolished."