DOMINION FINANCE.

Auckland Star, Volume LIV, Issue 148, 23 June 1923, Page 12

DOMINION FINANCE.

IN PARLOUS PLIGHT. COMPANY TAXATION. EXCESSIVE KATES CONDEMNED. Sill J. G. WARD INTERVIEWED. RESIGNATION , FROM THE NATIONAL GOVERNMENT. (Special to "Star.") WELLINGTON, June 21. Tie Eight Hon. Sir Joseph Ward. inter ■viewed by an "Auckland Star" repre sentative, returned to his criticism oi Dominion finance. "The question is," sai( •Sir Joseph—"can this country, now foui years and seven months after the war continue to stand the burden, even witl a further two millions of taxation taker off, which, of course, everyone will admit is in the right direction'/ 1 say unhesitat ingly we cannot go on as we are doing "An examination into company taxa lion, as between our system and that ir operation in England, Australia, anc America, is entirely against us. Thej [have all gone through the war and the slump period. This system will, if con tinued here, compel numbers of our besl industrial companies to go into liquida tion. I have before mc a public state ment issued by authority of eighteen oi our farm, stock, and station companies whose main business is trading with far Biers. They are all New Zealand com panics, and they say publicly—'This wil bring up the question with purely New Zealand companies of whether business should be continued, or whether, as a reasonable return cannot be earned or the shareholders' capital, the businesses should not be liquidated and the capital returned to tire shareholders.' They give a typical case of an investment of £100 C between two farmers if made in a company, and show, which I have never seer contradicted or disputed, that 24 pei cent would require to be earned by the company to pay a dividend of S pei cent on the £1000, and it all comes out of the farmers. A number of those eighteen companies have, speaking gener. ally, been friends of and supporters oi Mr. Massey's party. ''Surely it is enough to make sane men anxious as to the future. Even with the dropping of the extra 1/3 income tax, which was put on since the war ended, a reduction of a sixth would only reduce the figure above-named to 20 per cent; and this would still be a crusher, So it would be even if the income tax is reduced to 5/. '"The whole system unquestionably requires drastically altering , . It operates similarly to all companies as well as to those I refer to. 28.8 PER CENT TAXATION. "Let mc give a further illustration of the damaging effect excessive taxation in peace time is having upon the whole country. If anyone interested will look up the 'Australian Banking Record' of May, 1923, they will, on page 353, find the report of the National Bank of Australasia. Its gross profits are shown as £1,114,392, and its rates and taxes are £58,254. This is equal to 5.22 per cent taxation. If you take the last •balance-ehee't of the Bank of New Zealand, March, 1923, the gross profits arc £1,546,041, and its rates and taxsr arc £445,671, equal to 28.8 per cent fixation! The gross profits of the Ba: I: oi New Zealand are only about 59 pc bent more than those of the AustmlUs ..hnk, yet tfee Bank of New Zealand pays nearly eight times more in taxatj-ra. The last published balance-sheet of the National Bant of New Zealar J is up to Ma eh, 1922.- Their gross profits are eho .-n aa £595,904, and rate* and taxes £2v6,080. That is equal to- 34.7 per cent taxation. If you exclude their British' taxation, their New Zealand taxation amounted to £143,967, or 24.1 per cent on their gross profits. They did about half the business in New Zealand the Australian bank did; yet their taxation, excluding their British taxation, was nearly two and a-half times more than that of the Australian bank. "If anyone takes the trouble to analyse these results they will find that in taxation the two New Zealand banks aTe handicapped to the extent of between three-quarters and one per cent on the rates they charge to their clients for advances, as compared with what is payable *y the Australian bank cited. I have given the case of two New Zealand tanks. I will add to it the position of one of the Australian banks Oneeighth of its total business is done in Aew Zealand; but, of its total taxation 52 per cent is paid to the New Zealand Government. In other words, 12J pei cent of that bank's whole business i> done in this country, yet 52 per ceni of its whole taxation is payable in thii country. THE FLOATING DEBT. "Referring to the floating debt, Mi Massey says: 'The statement made b Sir Joseph "Ward to the effect that h lad made provision for meeting the wa advances received from the Imperia Government by including them in th loans falling due in future years is fa from being correct. A reference to m ißudget of 1920 clearly reveals the posi tion. The sum of £4,131,313 had beei provided for by the issue of debentures ibut £22,208,931 was covered by a mem oraridum of agreement. This, in effect left that large sum as a "floating debt,' ■with no fixed date of maturity; and, a; euch, it remained until 1021, when, a: the request of the Imperial Government the memorandum was replaced by deben tures which were included in my funding agreement concluded last year, whereb3 definite arrangements were then made for the annual reduction of the debt, No action was taken in connection with funding this debt until March, 1921, when I received a report from the secretary io the Treasury, and I then instructed Jiim to take the initial steps. There is no previous reference on the official files which would indicate that such a course was contemplated prior to the date mentioned.' "This," declared Sir Joseph Ward, "ie one of the most remarkable and absolutely extraordinary statements that ha« probably ever been made by any man molding the responsible position of Minister of Finance. It is contrary to fact Tor proof we have Mr. Massey's own Budget of 1922, under the "heading Tunding Imperial Government Tanees.' "It shows 1 put all the debts dne tc the British. Government into war loans when I was in England. This Mr. Mas" sey clearly shows in his own 1922 Budget They were not left 'as a floating debt ■with no lixed term of maturity.' Th« first (for £1,000,000 at 3A per cent) was <lue in 3928 or earlier (with each" loar at our option). The second, £7,414,14] sit. 4J per cent, in 1945: the third,'foi £11,1-00.000 at .1 per cent, in 1947; anc the fourth, for £9.900,000 at 5g per cent in, 102S; a-total of £29,414.141, Then

are only two comparatively small items, amounting to £208.032, under 'meinorancluni nf security,' and these, in all probability, are for amounts that have arisen after 1 left the Government. I do not recollect any such items; but I think it will be agreed that it is immaterial as it does not materially affect the point at issue. 1 contemplated, when money again became cheap, converting the whole of these loan* into 4 or 4-} per cent Inscribed .Stock. "The loans above mentioned were all arranged by mc in London, as I have already stated. lor a period of years to cover our whole indebtedness (incurred by the British Government on behalf of New Zealand 1 for wur purposes; and m> portion of the indebtedness to the British Government was loft as a lloat- ■ jug liability by New Zealand to lie paid ;to the British Government. Therefore Ino form of embarrassment or difficulty 'in connection with our indebtedness to j the J'ritish Government for war pur- • ! puses was left, by mc while Minister of Finance in the National Government. Instead of curpihg and inaccurate criticism over four years afterwards, Mr. Massey should have been big enough to ; acknowledge that it was a good piece i of work. J REDUCTION OK TAXATION. I "Doc* Mr. llassey seriously ask any ! intelligent person to swallow the statement that taxation per head of the . European population has during the past three years been reduced from £1S !•/ to £12 7/9 per capita? Does he ' not know that the people's ability to , pay income tax alone has notoriously j fallen by some millions more than the •I 1/3 reduction accounts fort Accordi ing to Mr. Massey's view the fall in income tax represents a reduction or i taxation. It won't stand examination. If it were possible for no income tax to be collected, then, according to such . a theory, the taxation per capita would further fall. "It is no use arguing on such a basis. 1 The figures per capita cited by Mr. Massey have little or no bearing on the point. It would be just as ludicrous to say that if the total revenue of the railways fell by loss of trade, that it represented a saving of so much per head to railway-users. But that only has to jhe mentioned to be flouted. CREATION OF LAND BOOM. ' "While I "was in favour of doing all possible to settle soldiers on the land, 1 was positive the policy followed would establish a land boom, with all the dreadful consequences of inflated land values, and I told the House so. A large operator in land within a year Ito spend such an' enormoue sum as j £ 14,f>00,000 would send values up to J prices that made their profitable work- ' ing to settlers impossible, and were ceri tain, as I publicly predicted, 'to prove disastrous to soldiers and to civilians who go upon the land.' Could it have been avoided? In my opinion it could. It was a positive calamity to take the accumulated surpluses for land haiying. '"In my speech in the House on September 30 1 urged the Government not ■to do so, but without avail, and quote from 'Hansard' of that date: " 'Here let mc say that the surplus ; the hon. gentleman proposes to take of £15,000,000 sterling will bring this coun- ; try each year at least £750,000 sterling; and if fortuitous circumstances bad enabled mc with the gentleman with J whom I was associated in the National Cabinet to have got—and I would have pressed it—another £5,000.000, £20.000,- ---; 000 would have brought in £1,000,000 a year or so. ... 1 propose that ; the total amount of interest from the I sinking fund should be used for advances to soldiers, to settlers, to workers, and to local public bodies. Every penny piece of it. Let it be earmarked for that purpose, and that purpose only. If I had my way I would have earmarked , that money as I did the ordinary sinking fund, so that no Government could j touch it.' I "My intention was to purchase all j lands required for soldiers by Government stock bearing 5 per cent, interest — j taxpaying stock—and all the land rej quired could have been acquired, and it I would have prevented a land boom. ! "However, the policy for purchasing j land for cash had actually started on ! a large scale before I returned to New ! Zealand on the last occasion, and as I believed it would result disastrously 1 ' called the Liberal Ministers together j and told them that, in my opinion, it i would result in a land boom and finan- ; eial difficulties, and that 1 would not accept the responsibility for it, and that the only course was for mc to resign. ! Every one of my Liberal colleagues know that this was so, and. whether I was right or wrong, I acted upon my judgment at the time, and I took the" course indicated. ; "I have spoken recently about the 1 financial position, and I do so now solely • because J am more than anxious about ' j the future. I have, and have always had, I the greatest confidence in the country, j but with the present population and tlie j extraordinarily heavy taxation, burdens f bearing upon the industrial world now, c I four years and seven months after the r • war, is having a far-reaohinp pfl'cct upon 1 the whole country. 'Expediency,' and D 'assertions' that all is well is not going r to prevent further difficulties presenting p. themselves within the next few years." "