The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News and the Echo. FRIDAY, JULY 18, 1924. TAXATION REFORM.

Auckland Star, Volume LV, Issue 169, 18 July 1924, Page 4

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

FRIDAY, JULY 18, 1924. TAXATION REFORM.

For the eotue that leeJfct aatittanf. For the wrong that need* reaiitame, For the future in the dittanct, And ike food that tee can do.

The report of the Commission on Taxation is a document well thought out and well constructed, and all Uie better for being signed by all members. The chief feature of it ie its movement towards simplification of a system of taxation that lias become needlessly involved. The Commission would treat income from all sources as taxable income, which is the only just method. Exemptions now enjoyed by debentures, dividends, and income from land would disappear, and every man would pay, according to his ability, on what came to him from any source. This would involve the abolition of taxation of campanies , profits on the eamo scale as individual incomes, and to this end the commission recommends collection of data for reconsideration of policy. It realises that it may not be possible to make a complete change of this kind at once, and it recommends in this event combination of taxation of individuals' dividends with a moderate flat rate on company profits. Since income tax returns for tho current year have been sent in, the data required could not bo obtained until : next year, and as the new information collected would need a good deal of consideration, it would be the end of 1925 or ' the beginning of 1026 before the Department would be in a position to make recommendations. The report may be divided into recommendations that could be adopted immediately, such as that for the abolition of the unjustified special treatment of debentures, and recommendations for future development of policy. The exact form that company taxation will take, at least for the next few years, will depend upon the state of the national finances and the data furnished by the proposed inquiry into sources of income. Ultimately it may be possible to reduce > such, taxation to a levy on undivided ' profits. The divided profits would go to the shareholder, who would pay according to his total income. The public • would get the benefit of lower prices consequent upon companies being relieved of a heavy item in their annual ; expenses, an item which they now pas? on whenever they can. We with interest that our contention about tlu< : taxation of public utilities is endorsed by the Commission. Already the justice of State concerns being required to pay income tax is admitted in practice, and there is no reason why there should be one rule for sucb businesses and another for municipal enterprises. Unfortunately for the prospects for reform, municipal influence is Tery strong in Wellington. In assuming to dictate to the Government

on a question which involves a basic principle of national finance, the representatives of municipalities exceed their prerogatives and the mandate they hold from their constituents. Then there are extremely important recommendations about land tax. The Commission considers that land tax is not necessary, and on two main grounds. First, it wishes to simplify the whole system of taxation, and to that end would make farmers liable for income tax. Further, it considers that the graduated land tax is no longer required to break up large estates, but on the contrary is preventing the development of land which requires. considerable capital expenditure, and when applied to business premises is a serious handicap to enterprise. We feel sure that Parliament will need much convincing before it abolishes a tax that has been one of the cardinal features of Liberal policy since the time of Grey. We arc not convinced that tho graduated tax does not still help to break up estates, and there is evidence of re-aggregation, which might justly be cited as proof of the need for higher taxation in the upper grades. Moreover, the Commission doea not Beem to have considered this, that land values are increased by the expenditure of the State, and the land tax represents a claim by the State for some of the unearned increment, the justice of which claim was upheld by the high- I est exponents of tho principles of political economy long before Henry George was heard of. It is true that town sections are taxed at the same rate as farms, and that you cannot subdivide the land on which a factory stands, but the value of this city land rises, and the State is entitled to tax that value. It belongs to the whole community. Further, income tax by itself would not be as efficient a method of taxing the farmer as would land tax (with, of course, exemptions and graduation) combined with taxation of income. ! Also, taxation of land acts as some sort of a brake on increased land values, ' and consequently upon speculation, which in this country has been a curse. The Commission recommends that loss of revenue caused by the abolition of i land tax should be made up by a flat rate of a halfpenny below £2000 (with present exemptions) and throe farthings above that figure, which would mean that an estate worth £100,000 would pay at the same rate ac one worth £5000. The Commission realises that something must be done to prevent men from keeping land idle, for it recommends special taxation on the capital value of such land. The difficulty about such a scheme is that "idle," and "reasonable" produc- i tion, are indefinite terms. A squatter might be working the whole of a run,' yet, divided, that run might support several families. These land tax proposals must be carefully watched by Parliament.