THE INCOME TAX.

Auckland Star, Volume LII, Issue 61, 12 March 1921, Page 11

THE INCOME TAX.

EFFECT ON COMPANIES. FAK.MKR- Ml I'll L'OXCKRXKI). |B.v Telegraph. -Press Association.) HAMILTON, this day. A conference called hy Mr. J. A. Young, member i.v- Waikato, to discuss the position regarding the new income | tax proposals, with particular reference : to their effect upon co-operative concerns, was held al the offices ol" the farmers' Co-operative Co., yesterday,' when the acting-secretary of the company analysed the position in a lengthy ' address. Mr. .1. Harugh (chairman of directors | presided. Among those pre- j sent were Messrs..l. A. Young, M.1., F. j I-'. Hoeklv, M.1.. \V. (.*. Park, \V. fair; Kolleit, 11. Hawkins. W Seavill, \V. 11. Hume, and the eompanv's secretary j (.Mr. A. C. Bushelli. " |

Mr. Rarugh said that the proposals were so drastic that companies like the Farmers' Auctioneering Company wenlikely to be crippled unless the proposals were modified. Willi present luxation their motley was cos-ting them practically nn additional seven per cent to tho average payment of seven per cent to their shareholders, making iv all 14 per cent. The best prices that could be obtained from the freezing work* for the various classes of sheep were very low and may yet fall lower, and the farmers were going to he brought to their knees completely unless the (iovcrnment revised its taxation. If the (iovcrnment insisted on taxing on the present basis this and many similar concerns would he forced into liquidation.

Mr. C. A. Riishel! (secretary to the company) pointed out that all large companies under the legislation of last session would trove to pay* income tax on the maximum graduated rate of S/0 :j-f> in the pound. As this rate was only a nominal one, there being many charges which a. well-managed business must place to the credit of its profit and loss account which are not allowed as deductions for incon c tax purposes, he ventured to say that with most companies the rate would work out nearer ten shillings in the pound. He then proceeded to give some facts and figures dealing with the company's balance-sheet at January .'il, 1921. showing that the Government would take by- far the larger part of their net profits by way of land and income tax. He suggested that they should tell the shareholders frankly the reason for their failure. This would bring up the (iuestion of whether they should continue in business, or simply go into liquidation, and return shareholders their capitul. He thought it unnecessary to stress the effect this would have upon the Waikato and the district wherein the company operated. After making a comparison of taxation in this country as compared witli other countries, Mr. liushell appealed to members individually and collectively to use their influence with the Minister of Finance to modify the taxation proposals and thus give companies the "square deal" which had been the Reform slogan. If the basis rate of 8/0 3-5 in the pound could not be re-, duecd, companies should get relief 'by more liberal exemptions, such as land tax', brokerage charges (on which the Government collected a double tax), subsidies to staff superannuation funds, and a more reasonable allowance made for depreciation, as the __ per cent allowed had never been sufficient. Further, failing the tax being levied on the individual shareholder, an exemption of three per cent on the paid up capital should be allowed.

Mr. H. S. Hawkins said that the taxation was a most drastic blow to the business community, and was hitting every company in exactly the same way. The total taxation for 1914 amounted to f0.D00.000. while in 191!) it had ri*en to £1.1,800,000. Of this amount the companies were contributing about half. He took exception to the extraordinary powers allowed the Commissioner.

Mr. Hockly thought that the Minister of Finance had looked at the position from every standpoint and hud a thorough grasp of the situation. X'ew —ealan<l had incurred a relativelygreater debt than either Australia or Canada. He would certainly do what he could along with Mr. Young to bring into effect any better and more equitable system of taxation that might be suggested.

• Mr. Young, M.P., said that there were three phases of the question that struck him—firstly, the incidence of taxation; secondly, the effect of the application of the taxation; and thirdly, the immense powers of the Commissioner. He thought there should be some tribunal of appeal in eases were there was reason to believe that the Commissioner's interpretation was unfair. He declared that the effect of the present heavy income tax was that it would destroy many of the sources of revenue. In order to secure relief, he urged the representatives of shareholders in large companies to keep hammering away, and once Ministers and members of Parliament were alive to the seriousness of the situation there was hope that something would be done. While companies should certainly pay taxation on their undivided profits they s?iould not have to pay on their distributed profits, but taxation should be levied on the individuals who received tho dividends in proportion to their total income. Mr. Bushell was thanked for his elucidation of the position, wbich was put in a very understandable and clear way.