The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News and The Echo. TUESDAY, JULY 5, 1921. THE PRESSING PROBLEM.

Auckland Star, Volume LII, Issue 158, 5 July 1921, Page 4

The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News and The Echo.

TUESDAY, JULY 5, 1921. THE PRESSING PROBLEM.

For ihe cause that lacks assistance. For the wrong that needs resistance, ■st For the future in the distance, an And the good that we can do.

There are few members on either side of the House of Representatives with le either the ability or the inclination to ii- grapple with the financial problems that "< beset this country. Finance is not a' ;il popular subject. One of the exceptions is ; the Hon. A. M. Myers, and the criticism \ from him of the financial policy of the ] Government that we published last eveni ing shows that the Opposition will be strengthened when he resumes his seat.' Mr. Myers charges the Government with reckless finance —with having failed to make tbe best use of the seventeen millions of accumulated surpluses, with ~ baring continued to impose heavy taxation, and with having failed to check Departmental expenditure. Official J figures just issued show that the taxation por head of mean population rose from £14 2/9 in 1910-20 to £18 11/1 last year. In 1913 it was £5 7/21 Not- - withstanding this enormous increase after the war, the taxpayer has yet to > pay the highest rate. Then take the figures just published of the national accounts "or the first two months of tho current financial year. Revenue totalled j £3,012,307, an increase of £57,264; j expenditure £3,817,080, an increase of £1,070,595. Not a very promising start, is it? Reduction of expenditure is one side of tlie great problem of financial reform; '• reduction of taxation another. Mr. Myers emphasises the disproportionate growth of taxation when he says that ) since 1016 population has increased by ' 6 per cent, exports by 30 per cent, area of occupied lands by 5 per cent, and taxa- , tion by 209 per cent. It is clear that ! this last proportion must be reduced, j How wide a fiel,d for reform our system j ! of income tax provides may be judged j > by a valuable pamphlet that the principal co-operative companies of New Zealand and other firms connected with the | land have compiled. This shows how i' • much New Zealand has to learn from ! other countries in the matter of a just j income tax. In New Zealand a company's income is considered as one Income, and i taxed on the full graduated rate; shareholders are not taxed on their devidends. ' In Great Britain there is a direct tax, 5 not exceeding a shilling in the pound, on j" companies. In addition to this companies | pay a tax of 6/ in the pound, but only c .I as agents of shareholders. When the shareholder receives his dividend he has " to adjust his taxation with the Department. If his income is below the ' exemption limit, the Department rebates s him the whole of the 6/ in the pound ) that the company paid on his account. | c If he comes under the 3/ rate, the I s

Department returns him 3/ In the pound, md so on. "This means that the income ;hat the shareholders derive from companies is treated in just the same way as income that they derive from any other source, and shareholders are taxed according to their means, the small man paying little or nothing, and the wealthy man the full graduated rate." There is a great difference between such a system and that in force here, under which a direct charge is imposed on companies up to 7/6 in the pound, now raised to S/9, regardless of circumstances. One company may make a profit of £10,000 on a capital of £50,000. Another may make the same profit on a capital of a million. Roth pay the same tax. Tn Australia taxation of companies is much lower than in New Zealand. The State taxation ranges from a shilling in ""•ictoria to a possible maximum of 3/ in Queensland. The Federal tax is 2/8 in the pound on undivided profits only, shareholders being taxed on their dividends in proportion to their means. No ■ Labour Government in Australia has ] dared to propose such income tax rates as have been levied in New Zealand. j We need not re-state here all the objec- ! tions to the local method and scale of I

perhaps insufficient attention has been ' given, is that the very ease with which i the taxation is levied and collected i makes for extravagance by the State. Is j more money needed? That is not difu- | cult; clap another shilling In the pound j on the income tax. The main trouble I about the Government's financial record j is that it has nearly always taken the line of least resistance, not realising, or not caring, that the wages of drift may be disaster. It is noticeable also that while they have piled taxation on to the business world they have been comparatively kind to landed interests. Reductions in the land tax were actually introduced last year, and everybody who has studied the valuation figures knows that the Dominion has lost a very large sum in taxation through delays In revaluing. While the income tax increases by nearly two millions in one year, the land tax increases by only £130,090. We. think that the Government has not explored anything like fully the possibilities of the land as a source of taxation. It might have made an income out of the rise _i land values, and at the same time done something to check inflation, if it had had imagination and courage. The prosperity of the country in any direction leads to a rise in land values, and the readjustme— t of taxation between land and "business" should be one of tbe things considered when the whole policy of taxation is reviewed.