TAXATION.

Auckland Star, Volume LV, Issue 220, 16 September 1924, Page 8

TAXATION.

ITS INCIDENCE. THE NEW ZEALAND INCOME TAX. (By A CORRESPONDENT.) 11. The New Zealand income tax diffei in several important respects from th British income tax. It was first intn tluced by tlie Land and Income Ta Assessment Act of IS9I, and took th place of the property tax, which pract cally had been a capital levy upon a descriptions of property, irrespective < their earning capacity. The new ta was imposed upon all incomes, those c companies as well a s those of individual, with an exemption of £300 in the cas of individuals only. Companies wer charged a flat rate of 1/ in the pounc while individuals wero charged Od i the pound on the first taxable £100( and 1/ in the pound on taxable incom above £1000. The higher rate wa charged only on such part of the tax able income as exceeded £1000. Income derived from freehold farms paying lan* tax were not charged income "tax, bu incomes derived from pasrtoral leasehold were charged. Amendments in Peace Time. These rates remained unchanged til 1910. In that year the principle o graduation was applied for the firs time. In the ease of registered com panics taxable incomes of _12S0 paii 1/ in the pound; of £1250 to £200 C 1/1; and of £2000 and over, 1/2. Ii the case of firms and individuals, tax able incomes of £400 paid Od in th pound: of £400 to £000, 7d; of £600 t. £700, 8(1; of £700 to £800, 0d; of £801 to £000, lOd: of £000 to £1000, lid: o £1000 to £1250. 1/; of £1250 to £2000 1/1; and of £2000 and over, 1/2. Deben tureiholders in companies were chargei at the rate of 1/ in the pound, the com panics paying the amount as agents fo: the debenture holders. These rateremained in force for the next two years tbat is. for the financial years. 1011-1: and 1012-13; but were revised in tin following year, when a new and mon equitable system of graduation wai applied to tbe higher incomes. In th< case of registered companies, taxabli incomes of £1200 paid 1/ in the pound of £1200 to £1600, 1/ plus l-200th o a penny upon cacli pound above tin lower amount; of £1000 to £2400, 1/; plus l-400th of a penny; and of £240( and over, 1/4. In the case of firms aw individuals, taxable incomes of £40( paid Cd in the pound; of £400 to £1403 6d plus 3-400 th of a penny; of £140( to £2400, 1/1J plus l-400th of a penny; and of £2400 and over. 1/4. The rat< paid by debenture holders remained un changed at 1/ in the pound, and some comparatively trifling concessions wen made which need not be taken intc account here. Though this revisior recognised the principle of graduation companies continued to pay income ta> on what practically was a flat rate. Th< maximum (if 1/4 in the pound wai reached with an income of £2400, while even the smallest income paid 1/ ir the pound. The difference was so slighl that it seems to have been regardec scarcely as an essential part of th< system. Burdens of the War. The war brought many drastic change! in the taxation system of the Dominion New sources of revenue had to be found and the existing sources had to In strained to their utmost capacity. Tin income tax became the chief mainstay of the country. The steeply graduated rate was of necessity introduced, and notwithstanding tbe wholly changed cir cumstances, companies continued to hi treated as individuals. The maximum income from debentures was taxed at a much lower rate than income from othei sources, and a difference was made be tween income obtained from company de bentures and public body debentures Government loans were issued tax free. Freehold farmers, who paid land tax only in pre-war days, were required to pay income tax. The maximum rate \vas reached at 8/9 3-5 in the pound on a taxable income of £10,000. It was later reduced to 7/4 in the pound, and last year was brought down to 5/10 2-5 in the pound of the same income. The Prime Minister has announced that this year it is to be further reduced by 13 1-3 per cent. Rebatements and Concessions. The income tax pursues its relentless way by many paths, in all cases regarding companies as individuals, and treating them worse than individuals by denying, them non-taxable rebatements and other concessions the individual taxpayer enjoys. It may seem a little like putting the cart before the horse, but for the present we may defer further consideration of tlia graduated income tax on ordinary income, and recount briefly some of its subsidiary excursions. Income from tax free war loan stock bears no tax, and is not assessed with other income for tbe purpose of determining the graduated rate on the other income. Income from farming operations pays no income tax, and, like the income derived from tax free stock, is not assessed in determining the graduated rate on other income. Income from Crown leaseholds bears no tax, but this exemption appears to have come about by an oversight, and probably will be withdrawn. Income from public body debentures issued prior to last year's' Finance Act is taxed at a maximum graduated rate of 2/6 in the pound, is_ not added to the income received from other sources for the purpose of fixing the graduated rate. Income from company debentures issued prior to the Finance Act of last year is taxed at the maximum graduated rate of 3/ in the pound, and enjoys the same exemption from graduation as does income derived from public body debentures. Income derived from public body or company debentures issued subsequent to the Finance Act of last year is taxed at a maximum graduated rate of 4/6 in the pound, and is not added to the income obtained from other sources for the purpose of graduation. Where companies have agreed to pay interest on their debentures free of income tax. they are charged the maximum graduated rate for debentures and the debenture-holders are not allowed any rebate. Dividends received by shareholders from a company, the profits having been taxed in the hands of the company, are not taxable in the hands of the shareholders and are not included in the income from other sources for the purpose of graduation. Some 1 State trading departments pay a small amount of income tax, but much less than would be paid by similar soncerns in private hands. Other State trading departments pay no tax. Public body trading and public utility concerns pay no income tax. Particulars that now have been given >f the character and operation of the income tax systems of Britain and New Zealand will enable an intelligible, comparison between the two systems to be nade.