LAND AND INCOME

Auckland Star, Volume LXI, Issue 174, 25 July 1930, Page 8

LAND AND INCOME

TAXES ADJUSTED.

FARMERS BROUGHT INTO LINE

CONCESSIONS WITHDRAWN.

INCOME TAX UP 10 PBs CENT.

(By Telegraph.— Parliamentary Reporter.) WELLINGTON, Thursday. "It is proposed to obtain part of the additional revenue je s uired from land and income tax," said the Prime Min«ter "but-at the same time the opportunity is being taken to remove certain anomalies and place the taxes on a more equitable basis. , _ "The information obtained from lastyear's income tax returns of farming Incomes showed clearly that previously many large incomes had been escaping their fair share of taxation and that the amendments made last session were in the right directidn. Experience has shown, however, that the special land tax was too rigid in its incidence. and was inequitable in some instances. At the same time, information received by the Tax Department shows that the incomes derived from many farms of an unimproved value of considerably less than £14,000 (and thus not at present assessable for income tax) are not contributing a fair share towards the expenses of the State. '•'Accordingly, to overcome all these difficulties and inequities it is proposed to abandon the sp'etial land tax and make all farmers owning or occupying land of an unimproved value of £7500 or over liable to assessment for income tax on their farming as well as other income. The provision in last year's legislation whereby the land tax payable was deductible from the income tax on farming incomes will also be repealed, and farmers will henceforth be assessed for income tax on the same basis as other classes of the community. Serious Anomalies. "Further, it is found that the present general provision allowing a_ deductino for income tax purposes of 5 per cent on the capital value of property used in production of the income has given rise to serious anomalies and inequities. This allowance is intended as a set-off for land tax paid, and also to provide for depreciation of buildings, but the method is too rough and ready to be equitable. For instance, a taxpayer deriving income from rents is at present allowed as a deduction the' interest on his mortgage and also 5 per cent on the full capital value, in which' his equity may be relatively small. "In many such oases the taxpayers practically "escape income tax, and by reason of* the mortgage exemption may also escape land tax. Again, in the cities, owing to the erection in recent years of large and valuable buildings, the 5 per cent allowance has in some cases relieved the business man not only of the amount of his land tax, but. in addition, of a considerable part of his income' tax. Further, the taxpayer carrying on his business in a ste'el-frame "-structure with a life possibly exceeding one hundred years is allowed the same rate of 5 per cent as the taxpayer using a wooden building with a possible life, of, say, forty years. Even in the latter case 5 per cent on the capital value is an excessive allowance. Further depreciation is an actual ■expense and should be allowed as a deduction before arriving at the assessable income. At present it is a special exemption. Land and Buildings. "Accordingly, it is proposed to revert practically to the position obtaining prior to 1923, and reduce the aHowance to 5 per cent on the unimproved value or the taxable balance in cases where a mortgage exemption has been allowed in the land tax assessment, together with an approprite allowance for depreciation of buildings, varying with the different classes of building, at the discretion of the Commissioner of Taxes. The proposal really amounts to dividing the present allowance into its two parts —an. allowance of 5 per cent on the unimproved value as a set-off against land tax paid, and depreciation on buildings at appropriate rates as a deduction from profits. The change will apply to all assessable income derived from the u&e of land, whether in the course of farming or trading.

The Same Yield; "It is estimated that the yield from land and income tax, after these adjustments have been made, would be practically the same as under the. existing legislation, the only difference being that the burden would be more equitably distributed. In order to obtain part of the additional revenue required to balance the Budget, it is proposed to withdraw - the land tax concessions granted in 19-4, whereby a deduction of 5 per cent has been allowed on the amount of land tax otherwise payable. "In addition it is proposed to increase the income tax rates 10 per cent." 1 ' Taxation Review. In a review of direct taxation last year, the Prime Minister stated that land and income tax receipts for the vear totalled £5,040,675, as against £4,451,201 for the previous year, and exceeded the estimate by £147,675. The commission set up to consider special cases of hardship arising out of the amendment to the law last session had •ranted remissions amounting _to £118,000. After allowing for remissions the additional tax received amounted to £240.000. "Notwithstanding the large amount ol remissions by the commission," said ilr. Forbes, "the data obtained from the income tax returns of large farming incomes, also required by the legislation passed last session, clearly proved that the much-disputed contention contained in last year's Budget—that large farming incomes have not in recent years borne their fair share of taxation—was in accordance with the facts. This was proved by the fact that in 180 cases the income tax on farming incomes exceeded the ordinary land tax and special land tax added together. The excess income tax in these cases amounted to £47.500. This means that formerly some farming incomes were contributing less than half of their fair share of taxation, and clearly shows the equity of obtaining part of the additional revenue required for last year from this section of the community. The total increase in income tax revenue due to the assessment of farming incomes amounted to £94,000. including the aforementioned Jorn of £47,500/'