WAR FINANCE.

Auckland Star, Volume XLVII, Issue 168, 15 July 1916, Page 10

WAR FINANCE.

BIG INCREASE OF NET REVENUE. IMPERIAL BOND INVESTMENTS IN PAYMENT OP WAR T,OAN. OUR NEW TAXES BIIX. LOCAL MONEY AND INTEREST RATES. THIRD READING DEBATES. (By Telegraph.—Parliamentary Reporter.) WELLINGTON. Friday. In moving the third reading of the Finance Bill to-day Sir Joseph Ward, after expressing appreciation at the rapid work done 'by the House on the previous day. explained the country's present financial position. For the three months ended June 30 of this year permanent charges amounted to £1.383,128, an increase of £34,032 on the corresponding period of last year, while under annual appropriations expenditure was €1.584,707, a decrease of £2(5,541, the total being £2,907,925, as against £ 2,960,434. "an increase of £7401 for the quarterly period. The revenue of the period ended Juno '30 last was £3.0f11.210, as compared with £2.747,751 for the corresponding quarter last year, a net increase of £343,430. Among Departmental returns the following sliowed increases: Customs, £41,553; stamp death duties. £81,075; Post ami Telegraph, £70,081; income tax, £0144; beer duty, £12,174; railways, £154,G75; miscellaneous, £1.0,224; Territorial. £728.

The following showed decreases: Land tax, £21,500; registration and other fees, £3.032; marine, £1103; national endowment, <Eb"GS4: other receipts, £8206.

Taking into consideration the balance at April 1 with the June quarterly receipts, this makes a total of £5,257.287, which, after allowing for expenditure of £2.967.925. leaves a net credit of £2.25!),0G2, which has been transferred to war expenditure accAuntf Tlie Finance Minister proceeded to say: "I take, the opportunity of saying that these figures are exceedingly satis- j factory, and it is a very fine thing for the country to think they will continue to be so. It is quite impossible at the present time for anyone to give any indication of what lac balance over the above expenditure may be out of Consolidated Revenue this year: it will be contingent on circumstances particularly difficult to estimate at present, but there is even - reason to hope there will | lie a considerable balance 6n the right side, although it cannot bo anything like as large as last year. v At present there is £2.600,000 of our money invested in liquid securities in London in Imperial Treasury bills, entirely for purposes connected with the war. I hope amount will be increased from time to time, and I am looking forward, as the outcome of the taxation we arc putting on for war purposes, to having available at the end of the year in round figures £0,500,000. If we' have that amount ■when the war is over, practically all of it will be used for the purpose of reducing the war loan. (Hear, hear.) We ehall then be in a strong position to prepare for a reduction of the war loans by way of sinking fund, while the financial position of the country will be greatly strengthened." Sir Joseph Ward went on to say that, so long as and members worked together towards the common good, the consensus of opinion in the country would, ho thought, be that temporary exigencies were in the direction of placing the country in a strong and sound way for a future period of prosperity after the present terrible war was behind. (Hear, hear.) HOW THE TAX WORKS. Sir Joseph Ward gave two illustrations of the operation of the income excess tax proposals. Asuming income to be £10.000 and excess profit? fS.OOO, first the 45 per cent excess profits tax was taken, totalling £3,600, and leaving £4,400 taxable income. If income was £5,600 and excess profits £2,000, thY; excess profits tax would be £000. leaving .£4,700 taxable income. He quotel details of the "private and public wealth indebtedness of New Zealand. Private wealth equalled £200 per head; State indebtedness, £98 18/4 per head: local bodies' indebtedness. £17 13/0 per head; taxation by the general Government. £5 7/5; taxation by local bodies, £2 2/0 per head. New Zealand's assets were enormously on the right side from the point of view of the investor, who could regard ttoe Dominion as the best possible field for investment. The. clause relating to the issue of 5 per cent debentures in payment for land would be until twelve months after I the end of the war. No remission of inJ come tax on debentures was contained in the bill, while payment for the war must come first. The country could not allow social life, especially that connected with; the settlement of soldiers, to be jeopardised through not having means to acquire land. LOCAL WAR LOAN. l>r. Newman: Will there be a local war loan? Sir Joseph Ward: " Yes ; it will be necessary to raise a portion of tli" money for war purposes in New Zealand." As for the amount, he preI ferred to wait until a prospectus now 1 being prepared was issued. It would be for a considerable sum, but no more than the country could provide. > T ew Zealand must still rely on a portion of the money required being obtained from tlim Old Country. If the Government attempted to go for the full amount of its requirements, ho was quite sure it would have an injurious effect on trading and business people, and tho3e on the land. Mr. Wilford: Will it be free of income tax? Sir Joseph Ward: Yes. Mr. Wilford: It is very wrong. Sir Joseph Ward: It would commence to lead us on the road to tight money and commercial trouble. COUNTERBALANCING LOST REVENUE. The Minister remarked upon some members .protesting against income tax in to subscribers to the loan. I Mr. Wilford: It is not fair. Sir Joseph Ward contended' that it was much the best thing to do in the interests of the country. He went on to say that the legislation last year, to produce two millions extra taxation', made provision for this loss of taxation. The benefit to the country by the Government's local loan at 4J per cent much more than counterbalanced Joes of | 1 income tax. In giving up income taxj

on two millions the Government at most gjrve £20,000 a year. 'Supposing, on the other 'hand, they had come out with a loan at 5 per cent.. The Tesnlt would have been that every man and local body that wanted money would have had to pay at least 1 per cent more for money than they would now. The Government had, in fact, only (lone what the powerful British Government did. Before they went for high rates (hey borrowed their money free of income tax. ' The New Zealand Government, they could depend upon it, was guided to a large extent by similar motives. Speaking of the last local loan and the effort to get small investors in, Sir Joseph Ward explained that the response was so poor that only 120 applications were received for ilii bonds from the whole country. He put it down to the Jaet that people with from £.) to £2.0 to invest looked for a better return than 4A per cent for their money. He thought, therefore, in eon? lieetion with the next loan they issued, that it would be worth while to make provision for these email bonds, which entailed a tremendous amount of extra work, and evidently did not appeal to small investors. Jn reply to a question from Mr. Young, who asked if the Government's decision to prevent money from leaving the country would be effective, the Minister declared it could be made effective under different lawe they had on the .Statute Book. "I think," he added, "there is a genuine tendency on the part of responsible men outside the Government to keep money in thie country for investment, and in preventing depletion of money from this country. 1 think, therefore, the provision made will prove very effective." HELPING THE BIG MAX. Mr. Wilford said it was absolutely cheaper to pay 5 per cent, than issue war loan debentures at 4* per cent, free of income tax. because freedom from graduated tax meant a huge saving to the individual. ■Sir Joseph Ward: Where would you get the money? Mr. Wilford said the Finance Minister had shown that the money wae in the country. There was millions of pounds lying idle in the banks. If people -with that idle money would not lend it for war purposes at 5 per cent, the Minister would take the money and pay them 5 per cent. A Member: Highway robbcrv. Mr. Wilford said lie didn't care what they called it; they could call it anything they liked, but he didn't believe the men in the Dominion who had got ; money to burn had the right to take down the country, or anybody using the war to bleed the country by exacting high rates of interest. The bill gave an advantage to the man who had made large profits, who could even invest his excess profite in such debentures, and so escape the excess profits tax in large part next year.

Subsequent speakers congratulated Sir Joseph Ward on meeting most of the objections which had been raised against the original proposals, Mr. Walker, as a Labour member, declaring the Minister was entitled to great credit for the way in which his big task had been handled, and Dr. Newman assuring him that he had given more consideration than was usually given by Ministers to suggestions from the House. LABOUR DISSATISFIED. Mr. Payne declared that the power of levying taxation was really the ' one vital question ruling the policy of the country. He was not going to congratulate the Finance Minister on hie bill. When the Labour party attained Ministerial benches they would endeavour to make taxation equitable, and not, as the Minister of Finance had endeavoured to do in the bilf , , make it so as to shelter the big man, to the detriment of the little man. (Laughter and ironical applause.) Messrs. McCombs and Webb also criticised the bill vigorously, both taking opportunity to denounce the National Government for what they declared liad been its failure to make any effective effort to deal with the increasing cost of living. .AX KXPLOSIVE PROTEST. Mr. Isitt, stung by references made by Labour , members, protested, in florid terms; against what lie dubbed as "arrogant, ignorant, vain-glorious statements. — that all members except those belonging to the Labour group were in Parliament to.sacrifice the interests of the many in order to protect the wealth of the few." Mr. Isitt contended that other members were just s$ earnest to champion the interests of the many as were those who posed as the people's only true representatives. Mr. Isitt resumed his seat amid applause, laughter, and cries of "What about the bill?" FINANCE MINISTER IN REPLY. Sir Joseph Ward, in "reply, reminded Labour members that the National Government could not deal.with highly controversial questions. Mr. ■ McCombs: You are supposed .to have a cost of living policy.

Sir Joseph Ward: And you are supposed to have a little political common sense. ( Laughter.) He never gets up without telling people they know nothing, that they are very foolish, and he's tho great "I am." People are to judge by results. He forgets we are in a position which does not give members of the Ministry scope for dealing with party questions. He refers to questions upon which struggles may come in the future. If the Government tried to issue debentures, as Mr. Wilford suggested, it was doubtful if the money would be raised. The course taken was the strong course adopted by I the English Government.

Replying to Mr. Pcaree's contention in the second reading debate that if the income tax exemption were reduced to £150, a million could be obtained in income tax. Sir Joseph Ward repeated his statement that not more than an additional £97,000 would be so obtained. He liad based his calculations on a tax rising from 2/G ut £150 up to 30/- at £300. The member for Patea's contention that £1 7/(3 per head could be obtained by reducing the exemption was wrong.

Mr. Pearce: I said that by reducing the income tax exemption to £150 you could get over a million in income tax, and I contend that is correct.

Sir Joseph Ward read a statement from the Taxation Department showing that, including women workers, and making allowance for members of the Expeditionary Force and others, it was estimated, that the returns would be received from 150,000 persons, of whom 130,000 would become additional taxpayers, who would pay an average of 15/- per head, making a total of £97,500 from that source.

Mr. Witty: What would it cost to collect?

Sir Joseph Ward: A very large sum, and no man of any responsibility in the Government would dream of extracting over a million from people whose incomes run from £150 to £300. (Hear,

hear.) The bill was read a third time, and passed, and the House adjourned at 11 p.m. v