MORE TAXATION.

Auckland Star, Volume LX, Issue 181, 2 August 1929, Page 9

MORE TAXATION.

TO BALANCE BUDGET. SUPERTAX ON LAND. INCOME TAJC ON LARGE FARMING INCOMES. "ONLY JUST AND EQUITABLE." {By. Telegraph.— Reporter.) •WELLINGTON, this day. Faced with a deficit of £577,252 for the financial year which 'ended on March 31, the Minister of Finance, the Right ' Hon. Sir Joseph Ward, decided, as was revealed in his Budget.speech last night, that he had no practicable option but to increase taxation until the causes of New Zealand's economic difficulties can be dealt with. Analysing the State's expenditure, •which, was £18,420,666 last year, Sir Joseph found that 74 per cent of it consisted in payments of interest on war debts, war pensions and other debts, and payments on account of social, services, such as education, health and pensions. These charges, he remarked, were "either quite rigid or such that very little if any reduction is feasible." Why Economies are Difficult. For these reasons, Sir Joseph said, "the scope for administrative economy is very much smaller than is popularly supposed. Every effort will, be made to obtain the utmost economy in administration,, but I am satisfied that'enough cannot be saved in this way to offset the automatic increases in such items as interest, pensions, education, etc., let alone make good the deficit for last year. So far as interest is concerned, in addition to the inncreases arising out of loan expenditure for such purposes as schools, public buildings, and other items that are not interest-earning wholly or in part, we must expect increases from the renewal at higher rates of some of the old loans. For instance, by the time the operations are completed it is calculated that the conversion of the £29,000,000 4 per cent 1929 Consolidated Stock will increase interest costs by about. £220,000 a year.

"Thus it is clear that the deficit cannot be made good by administrative economy, and, as a matter of fact, the only alternative left is either to reduce the services rendered by the State (and :by services I mean not only work done by the Departmients, but financial assistance given, which is the larger item), or to obtain more revenue. That is the position in a nutshell. The services rendered by the State have been greatly •increased over the last decade, and, generally speaking, it would appear that we have reached a stage when it is advisable, aa far as posible, to stabilise the position for a year or two, to enable the increasing population and wealth of the dominion to lighten the relative burden on the taxpayer.

Increases "Only Temporary." "All will agree on the desirability of ■keeping rates of taxation as low as possible, but I am not at all sure that the reductions granted in recent years were not greater than were warranted in view of the progressive increases in expenditure on account of extended services. Anyway, the revenue from taxation last year proved insufficient to provide for the existing services, and the year closed with a deficit of £577,000. That is the position which the Government is called upon to deal with. Having once received all the existing services from the State, the people generally do not want to lose them, eo, as it is essential that the national accounts for the current year should be balanced, it appears that the Government .has no option now but to adjust the taxation to obtain more revenue. The increased rates of taxation will, I hope, only be temporary, as I am sure that when the Government has had time to deal with the seat of the trouble the resulting increase in prosperity will be permanently reflected in increased receipts, and reductions in the rates of taxation on a stable basis will be possible. In the meantime immediate action is necessary to rectify the position."

Incidence of the Supertax. Sir Joseph said he had endeavoured to place the. extra burden of taxation in such a way as to assist the Government's land settlement policy. "Attention was first given to the large farming incomes, which I consider have not borne their fair share of taxation in recent years. Accordingly, to adjust this inequity and assist in bringing about the cutting-up of ifrge estates, it is proposed, in the case of farming lands of an unimproved value in excess of £12,500, that the amount of land tax assessed on the present graduated scale shall be increased by a supertax calculated on a graduated percentage rising 1 per cent for each £50 of unimproved vajue^;above £12,500 on which such land "tax'is assessed,- until for an unimproved value of £15,000 the supertax will be 50 per cent of the land tax on the present basis. Thereafter the percentage rate of supertax will continue to increase 1 per cent for every £300 of unimproved value on which land tax is based, until for an unimproved value of £30,000 the supertax will be 100 per cent. Above an unimproved value of £30,000 the supertax will be at a flat rate of 100 per cent of the land tax as assessed under the present scale. ; "The following examples will show clearly the effect of these proposals:—

"In addition it is intended to amend the law to make all farmers, including farming partnerships, with holdings (whether owned or leased) of an un- | improved value of £12,500 and over at any time during the year ended March 31, 1929, assessable with income tax on their farming income, but subject to a set-off of the actual amount paid in land tax on' the land used for farming. In effect, this means the payment of landtax or income tax, whichever is the greater. In such cases, however, the 5 per cent of the capital value of land otherwise deductible from assessable income derived from such land will not be allowed, as normally this is intended to cover land tax paid. This proposal is intended to ensure that the large farming incomes will contribute to the national revenue in the same ratio as the incomes from other occupations, which is only just and equitable."

These taxation increases Sir Joseph anticipates will not produce enough revenue to balance the Budget this year, so he proposed last night, and it was •agreed, to increase the primage duty on imports from 1 per cent to 2 per cent. "As soon as the Budget balance is stabilised, this additional duty can be taken off without disturbing the tariff in any way." "Big Forward Movement" Hoped. The principal cause of the deficit last year, Sir Joseph said, was the overestimating of the revenue from taxation by his predecessor. The drop in taxation revenue was due to the slow recovery of the trading position of the Dominion. This recovery had since been achieved,, but the banking figures showed that most of the additional funds had been placed on fixed deposit, and a large part of the available banking resources was not being used to finance trade and industry. "This," said Sir Joseph, "is causing many of our troubles. There is for instance a close connection between idle capital and idle men. The march of science is bringing many changes into our everyday life, and the rapid developments in the post-war years have perhaps temporarily disturbed the economic equilibrium of the Dominion. Want- of confidence in rural investments, now happily passing, together with high interest rates, has also contributed in no small measure to the present economic situation. The Government is endeavouring to give the country a strong lead in meeting these difficulties, but of coures cannot carry the whole burden. Given a little enterprise on the part of the producers and the business community generally —and they have not been lackrn° r in this respect in the past—l feel assured that all obstacles will be overcome; unemployment will disappear, and all will be well in this Dominion. It has certainly been slow in coming, but signs are not wanting now that we arc on the eve of a big forward movement in business."

Unimproved With Per- • Value of Present proposed centage Land. Tax. Supertax. Inc'se. £ £ s. d. £ s. d. p.c. 12J550 78 7 5 79 3 1 1 14,000 91 8 9 118 17 4 30 15,000 100 18 9 151 8 1 50 .18,000 131 16 3 210 18 0 60 21,000 160 5 0 282 12 0 /70 30,000 290 18 9 581 17 6 100