TUESDAY, JULY 4, 1916. THE FINANCE BILL.

Auckland Star, Volume XLVII, Issue 158, 4 July 1916, Page 4

TUESDAY, JULY 4, 1916. THE FINANCE BILL.

The Finance Bill introduced by .Sir Joseph Ward yesterday, gives effect to the proposals in the Budget for loans and extra taxation. The most interesting part of the Bill is the detailed scheme for imposing a tax on war profits. It is very much easier to talk generally of taxing war profits than to devise a scheme that will at onec be just and bring in a large sum, and on the wisdom with which the details of such taxation are devised, will mainly depend its success. Everybody knows that in Britain 60 per cent of excess war profits arc taken by the State, but it is by no means generally known that there is a carefully compiled body of exemptions- to prevent injustice being done. In the main the provisions of Sir Joseph Ward's Bill follow the Eritish Act. He defines "excess profits" as meaning the amount by which the assessable income of the taxpayer for the year exceeded tiis "standard income." This "standard income" is defined as meaning, in the discretion of the taxpayer, one of four things—the average yearly assessable income for the three years ended March 31. 1014; the 6aid income for any two or for any one of these three years; a sum equal to six prr cent of the capital employed by the taxpayer in April. 1915. If in the opinion of the Commissioner of Taxes the standard in come cannot be ascertained in either of the first three ways, the six per cent basis shall be used. In the British Bill as introduced, the pre-war standard ot profits was to be the average of any two of the last three pre-war trade years, the taxpayer to make the selection, and if the standard profit was le-s than six per cent, then that amount was! to be the basis for assessing excess profits. An amendment was inserted providing that if the last three pre-war years wore years of depression, the subject of the tax might base his standard on any four of the six pre-war years. In Britain most of the war profits arc industrial, and most taxpayers who have benefited by the war have no difficulty in furnishing accurate returns of their pre-war and war incomes. In New Zealand most of the war profits are derived from the land, and farmers up to last year, which was a war year, A»cre upon to make returns •of their incomes. Farmers are notoriously lax in keeping accounts. " A man who makes a profit of thousands may have nothing beyond his bank book to Show his position. We may expect, therefore, that a large number of incomes will have to be taxed on the

six per cent basis.

It would be better if Sir Joseph Ward used an export tax to tap the excess war profits from the land. In a tew cases it might operate unjustly, such as that of a small farmer who, before the war, had been working at a loss, and is now making no more than a fair profit. He would pay on his few- sheep or bale or two of wool at the same rate as a big farmer who has had years of prosper-

ity. But this disadvantage is small compared with the advantages. The average prices of exports and the increases in the war period can easily be ascertained. It is admitted that for the. most part these increases have been due to the war. and it is therefore fair that the State should have a large share of them. The collecting of the tax would be far easier than the assessment of a man's excess profits under the complex provisions of this Bill. Under the Bill a good deal of incorrect information will be given unknowingly, and there is bound to be some evasion.

There are provisions in the Bill for preventing injustice in what may be ronghly described as exceptional cases, such as the introduction of fresh- capital since the war. and the incurring of loss in the

pre-war years. The Commissioner of Taxes is given important powers, too important, we think, to be vested in one man. There is no mention in the Bill of an appeal. The British Act set up a Board of Referees, to whom the taxpayer might appeal from the Comm:sioner, and some such provisions should be inserted in our Bill.

We hope an. attempt will be made in committee to induce Sir Joseph Ward to graduate his special income tax of five per cent. This flat rate is most unfair, for it makes no distinction between the man with £350 a year and the man with £5,000. It violates one of the fundamental rules of taxation, that it should be levied according to ability to pay. The man with a moderate income has good grounds for complaint when he sees the Government putting the same special tax on all incomes, and at the same time setting aside £400,000 for bonuses to Civil Servants with incomes up to £315. With regard to the taxation of mortgages, Sir Joseph Ward has wisely returned to his proposal in the Budget, to abolish the mortgage tax on capital,-and tax the income instead. After introducing the Budget the Minister changed Ins mind, and said he would continue the existing tax. The effect cr" this provision will be that people with | incomes from mortgage will he on the same footing as people with incomes derived from other sources. The present system has pressed hardly on those who have, an income of- less than £300 a year from, mortgage, for they ihayg-Md

to pay mortgage tax, while the person with the same income derived from other sources has been exempt from income tax. —