THE WAR LOAN

Ashburton Guardian, Volume 60, Issue 301, 27 September 1940, Page 3

THE WAR LOAN

STOCK EXCHANGE VIEWS. “TAXPAYER UNDER C0M- ...... PULSION.” (Per Press Association). WELLINGTON, September 26. “There is no misnomer in the term ‘ compulsory ’ as applied to the loan announced to-day, said Mr Andrew Hamilton, president of the Stock Exchange Association of New Zealand. “A particular class of taxpayer has again been singled out, and is compelled to make application. Admittedly he may apply voluntarily for more, but he is under compulsion for a certain amount, if there is any practical meaning to the statements in the prospectus.

“An unnecessary amount of difficult calculation has been passed on to the taxpayers, in that they are obliged to add to their taxable income certain other forms of tax-fyee income, and then endeavour to calculate the amount of tax that would have been payable on this total. Many people, will have difficulty in deciding what higher rate of tax they would fall under in this increased amount.

“Compulsory subscription has been based on income tax for the year ended March 31, 1939, a year when many traders and business concerns would show profits they have not been able to make since the war began, and since further import restrictions have increasingly reduced their earning capacity. It is more than likely that many will not have the available cash, and may have to sacrifice some other form of asset, or appeal to their bankers. How banks will be able to assist is difficult to conjecture, as the loan is almost certain to be at a heavy discount and will not be easily valued, because of the first three years carrying no interest. “Negligible Saving.” “One obvious result--of', the compulsory subscription, with no return, must be a tendency toward further private unemployment, through reduced income. The amount to be saved in annual interest on the anticipated amount to be subscribed, £8,000,000, is only £200,000, a sum negligible in comparison with the hardship and other results to be produced. With an internal State expenditure of about £20,000,000 annually on public works, .many of which could have waited till after the war, this saving is very small and could have been achieved by an almost unnoticeable economy in such expenditure. “The people of this country, as a whole, are-well imbued with the Empire spirit, and unless this form of loan is a political Beau Geste to certain elements in the country, it is hard to understand why a voluntary appeal was not made first. In no other part of the Empire has such a loan been brought forward. At this stage of the war the 'country might have been given the opportunity of responding to a wellhandled financial appeal, and the pressure pump withheld until the voluntary well was running low. “Another question being asked by many is what provision has been made for cases of hardship, and finally what is the position of soldiers overseas whose incomes, before they left the country, were such as to bring them within the terms of the prospectus. Are they obliged to contributed to this loan as well as to offer their lives?” COMMENT IN AUCKLAND. TERMS CONSIDERED “TOO DRASTIC.”

AUCKLAND., September 26. '"The war loan terms were condemned as too drastic by the chairman of the Auckland Stock Exchange (Mr J. W. Fratsr)> who said that compulsion would have an adverse psychological effect and result in considerable hardship on business and industry. Compulsion had not been tried in any othei part of the Empire so far, and was equally unnecessary here. The terms were a blow at the patriotic incentive which was strong m New Zealanders’ hearts. The restriction ori the death duty clause would have the effect of weakening the market for scrip, thus compelling holders who had to sell to accept a loss. He considered a straight-out loan at 2| per cent., involving £200,000 yearly interest would have met with a splendid response and have obviated a great deal of hardship. “What has been done is, in effect .to levy a special income tax on those who in February, 1940, paid more than £SO of income tax,” said Dr. H. A. Cunningham, an authority on taxation. It was not merely a loan, because the stock received in exchange, being free of interest for the first three years and afterwards carrying a low rate, was probably worth little more than hair its face value. That represented a serious added burden in the case of many taxpayers, particularly business people who had been recently assessed under new provisions relating to valuation o stock-in-trade. . , He pointed out that in the case o previous loans, taxpayers could appeal to a specially-constituted boaid o appeal, and afterwards to a judge of the Supreme Court. It was now left to the Minister for Finance (the Hon. W Nash) to decide whether a person had subscribed in due proportion to his means. ATTITUDE OF BANKS. WELLINGTON, September 26. From inquiries locally it is oainec that the banks have not, at the moment, considered what measures of assistance they will bo P ie P offer those subscribers who full - compelled to take up war bonds, hut it Ts understood that the banking system will afford all reasonable assist ance and facilities to customers to en able them to subscribe.