INCOME TAXES

Ashburton Guardian, Volume 60, Issue 223, 28 June 1940, Page 3

INCOME TAXES

INDIVIDUAL AND COMPANY. THE INCREASES EXPLAINED ('Special to the “Guardian.’ ) WELLINGTON, June 27. The income-tax proposals were thus explained by the Minister: For war expenses, we are faced this year with expenditure estimated at £37,500,000. Following the principles outlined in my opening observations, as much as possible of this should be found from taxation. The special items of war taxation imposed last year would this year, if left undisturbed, produce approximately £8,500,000 Having regard to the destructive nature of the expenditure it is imperative that much more than this should be provided from revenue. In fact, it seems clearly in the best interest of the Dominion that we should aim to provide from taxation the greater part, il we cannot manage the whole, of the £17,750,000 required for expenditure in New Zealand.

Income-tax Adjustments. For this purpose and to bridge the gap of £1,150,000 in the Consolidated Fund, consideration was first given to an upward revision of the rates of in-come-tax. In order to obviate certain anomalies which would have been accentuated by increasing the rate undei the graduated system used during the last few years, it has been decided in the case of individuals that the new rates will be on a “step” basis under which each pound of taxable income will be taxed at a rate determined by reference to the particular incomegroup into which it falls. The starting rate will be 2s 6d in the pound upon the first £IOO of taxable balance; 2s 9d in the pound will be/ payable on the second £IOO of taxable balance; and 3s in the pound upon the third £IOO of taxable balance; and, so on, by increase of 3d for each £IOO of taxable balance up to maximum rate of 12s in the pound, which will be payable upon all taxable income in excess of £3BOO. The advantage of this system lies in the fact that every taxpayer, no matter what his income, pays the same rate of tax upon each succeeding pound of taxable income; it is the logical counterpart to the grant of a personal exemption of £2OO to every taxpayer, regardless of the size oi that taxpayer’s income. It is not proposed to alter the personal exemption of £2OO or the exemption for wife and children, or the provision relative to adding a percentage to the tax on unearned income.

'Graduation on Companies. In the case of companies the graduation method to be applied will bo similar to that used last year, but the rate will be 2s fid in the pound rising by graduations of l/100th of a penny to 8s in the pound at £6600, and rising thereafter by graduations of 1/ioOtli of a penny to a maximum rate of 8s 9d in the pound on all income over £7950. A further change proposed is the increase to the maximum company rate of the tax payable upon interest receivable in terms of debentures issued free of tax by companies. This change abolishes the advantage hitherto secured by companies in respect of this class of debenture interest. As was the case last year the rates of tax for both companies aiid individuals will be increased by 15 per cent., this addition being credited to the War Expenses Account. Comparison of Income Taxation. As an indication of the effect on personal assessments of these new rates I would quote the following examples of the amount of tax payable last-year and this year respectively upon representative taxable balances, by which is meant the taxpayer’s income less the standard exemptions allowed.

This means that a single man with an income of £3OO will pay £l4 7s 6 income-tax. A married man without children with an income of £350 would pay a like amount, and a married man with a wife and one child 'would pay a similar sum on an income of £4OO. State Trading Activities Liable for income-tax It is also proposed to bring all State trading activities into line as regards income-tax. At present the Government’s electric-supply undertaking, the Internal Marketing and State Coal mines Departments, and the Commercial Broadcasting Service are exempt from such taxation. It is proposed to introduce legislation to make these activities liable for income-tax.

At a later stage there will be placed before the House proposals for the establishment of the procedure necessary to transfer to the State the whole of any excess profit made during the war. With these additions to the field oi taxation at the new rates, the incometax will, it is estimated, yield '£15,450,01)0, an increase of '£2,400,000 above what would have been received on last year’s basis of tax.. Approximately £2,100,000 of this increase will go to the Consolidated Fund and the balance of £300,000 to the War Expenses Account. The benefit of practically the whole of this additional revenue from income-tax will indirectly go to war expenses through the transfer to that account of £1,950,000 death duties hitherto paid to the Consolidated Fund. In addition there is available for the Consolidated Fund £1,000,000 profits from the issue of our own silver coin. Reference was made to this item in last year’s Budget but as it was not required then, it is still available.

Income-tax Taxable b’lnce. Last year New Pro’sis £ £ s. d. £ s. d. 100 11 19 7 14 7 6 500 69 9 7 86 5 0 1000 162 18 4 208 8 9 2000 421 13 4 560 12 6 5000 •1772 18 4 2384 16 3