TAXATION AND CAPITAL.

Auckland Star, Volume XXXV, Issue 88, 13 April 1904, Page 6

TAXATION AND CAPITAL.

The Appeal Court has just decided a question of considerable interest to ail concerned in colonial investments and commercial enterprises. The Kauri I Timber Company was called upon to ■ pay incom°-tax on all its earnings, in- | eluding profits made from sale of NewZealand timber beyond the limits of New Zealand. The case was duly argued, and the Court has come to the conclusion that the company is liable to the Commissioner of Taxes only for profits earned in this colony. This decision, we fancy, will commend itself to the sense of equity of all business men, and it is well that the question should be definitely settled once and for all. It certainly appears unjust lo demand the payment of income-tax on earnings which represent the investI ment of capital in some other country; and any ill advised attempt to persist in this course would assuredly react unfavourably upon the reputation of the colony, while it could hardly fail to have the undesirable effect of frightening capital from our shores. It seems, however, that our Government has acted upon this same objectionable principle in relation to other aspects of investment. We refer to the regulation which compels all com ] panics carrying on business in New I Zealand, with certain excejrtions, wheI ther incorporated or not. to take out an annual license at a certain rate per cent, on the whole amount of capital embarked in them. This provision occasionally lends to curious re.-nlt.s. and I the Birmingham Cha-mber of Commerce ha-s lately considered a case in point. A British Company, with a capital of i , 400.000. employs £5000 of this capi- , tul in Now Zealand, and the balance in other countries. Instead of paying fees on £5000 only, it is taxed on the ! whole £ 400.000. This would mean a license fee of A. - 200. or 4 per cent, of ! the total capital it has invested in the colnnv. Therefore, until its New Zea- • lnnd earnings exceed 4 ppr cent., the i >ihnrelu>lilers can pet no dividends on ,! their New Zealand business. Besides, the income-tax on companies incorporated eNcwhere is double that imposed on individuals' ami local companies' i earnings. The Birmingham Chamber of i 'iimmerce lately received a communication from n firm of merchants representing an English £100.000 company. Ii of which less than £3000 is employed in this colony. The .trading tax is le- ■ vied on the " firm's total capital. and comes to £50. The New Zealand e:irn- , i ings of the firm are less than £250 a I ye°ar. The license fee is thus equiva1 j lent to 20 per cent, on the income, and I 1 there is a 5 per cent, income-tax as , well. This certainly does not seem an equitable arrangement, and we fear 'i that it is not calculated to attract BriMtish investors to this colony. Now that the principle of taxation on locaii Iγ earned incomes only has been estallished, it should be possible to modify ' the law so as to exact a license fee only from locally employed capital. England places no such burden on colonial trade and it has already been propos!ed at Home that negotiations should ! lbe commenced with the colonies for the I purpose of arranging a unitorm prui- ! ciple of treatment for British capital ; throughout the Empire.