INVESTMENT AND TAXES.

Auckland Star, Volume LIV, Issue 105, 4 May 1923, Page 9

INVESTMENT AND TAXES.

THE IMPOST ON COMPANIES. MR. MASBKY'S DEFENCE. CBy Tclegrapb.—rress Association.) { WELLINGTON. Thursday. In reply to the remarke made by Mr. W. D. Hunt on the question of taxation in the course of a discussion at the meeting of the Dominion executive of the New Zealand Farmers' Union, the Prime Minister made the following: statement: Mr. Hunt, wlipn referring to company taxation, has not fairly stated the case in several respects. New Zealand is not the only country that taxes companies. nearly nil other countries a company is taxed through the corporation tax. nnd the individual shareholder is also taxed on his dividends. Mr. Hunt states that one could not borrow money and lend it to farmers at less than £8 1-2/0 per cent. The reply to this is that many purely investment companies are doing so. and paying wood dividends to their shareholders, but these companies did not themselves raise money and guarantee their lenders 7J per cent free of income tax. nor did they enter-

tain advancing money on speculative land values. The suggestion by 31 r. Hunt that the remission of taxation consequent on the relief of companies could be met. l>3 - economy in the fSovernment is quite wrong. Mr. Hunt knows quite well tluit the revenue required would have to be made up by the imposition of at least ii minimum of :S/ in the £ income tax. and that tin- burden of finding revenue would be shifted from the shoulders of large corporations on to the backs ot individual traders, farmer*, and other taxpayers, whose whole earning power is generally the result of their own personal exertion, and not greatly dependent on the capital they employ. In fact, put shortly. Mr. Hunt's scheme of taxation is to bolster up the. strong combines with large capitul at their command and make them still stronger. The natural result would be the shut-tine-out of the individual trader com- | pletely, and. in the end. the exploitation of both producers and consumer. His reference to £."..000,000 raised by the company tux last year, which had nil been passed on to the farmer, is Another instance of exaggeration. In the first place, the tax paid by the companies last year was approximately £2,200.000 and not £0,000.000. Of this amount, companies doing business exclusively ] with the farming community contributed only a very small moiety. The real reason why farmers are finding it difficult to get credit is not to be found in the incidence of company taxation, but in various causes, chief of which is that money invested in local body loinis and other forms of debentures offer a greater attraction by reason, mainly, of the Letter security they offer and the investors knowledge that his interest payments are not affected by the inI stability of market values tor produce, etc. Mr. Hunt quoted the cost of running the Dominion as £5.900.000 in the year before war: £11.357.000 in WIS-IOW: and £18.300.0110 in W'.> 1-1022. The above figures represent the expenditure, less interest and sinking fund charges and war pensions. The increase from the year before the war up to 1019 is not above the normal, and the increase from 1H1!) to 1022 of £7.000.000 has been frequently explained by mc in my Budgeta anil public statements as due to inflated values, which affected wages, material, and all commodities paid for by the Oov. eminent during the post-war year". Those high prices were not only a burden on the Government durine that time, but affected all financial institutions, as Mr. Hunt must know, as well as anyone else. 11l the. course of his evidence before the committee appointed to inquire into the taxation of the Dominion, the commissioner of taxes stated that the proposed change in the incidence of company taxation would mean that the rate of income tax on all taxable incomes ot individuals between £300 ami £200f would have to be at least doubled. I have already indicated that 1 expect tc be able to"~ask Parliament to reduce taxation during the coming session b> at least £2.000.000 per annum, and thai afterward Ihe question of doing awaj with anomalies would be taken into con eideration.