INTEREST CUTS.

Auckland Star, Volume LXIV, Issue 113, 16 May 1933, Page 8

INTEREST CUTS.

OBSCURE WORDING. AUDIT INTERPRETATION. LEGISIJVnON NEXT SESSION. Legislation will be introduced by the Government next session to express more clearly Tarl'iameiife intention that the 20 per cent reduction in interest imposed under the Local Authorities Interest Reduction and Loans Conversion Act is in substitution for, and not in addition to, the 10 per cent stamp duty levied under the authority of the National Expenditure Adjustment Bill.

Auckland local bodies, it was gathered this morning, arc giving effect to the spirit and intention of the legislation, and no attempt is being made to take advantage of a possible interpretation of an inaptly-worded section, which, it is held, would enable a 30 per cent, instead of a 20 per cent, cut in debenture interest to be made.

Recognising the difficulty created" by the literal wording of the Act, Mr. C. F. Garratt, treasurer of the Auckland Harbour Board, applied to the Treasury for elucidation. He pointed out that section 5 (1) provided- for a reduction, of 20 per cent, without reference to date, which was referred to elsewhere, and that section 5 (2) made the reduction of 20 per cent applicable as from April I, 1933, to interest on securities the New Zealand domicile of which had been fixed. Section 5 (3), however, referring to other securities, the holder of which received payment of interest in New Zealand after January 1, 1933, provided that the reduction should bo effective on interest accrued on and after the first day of the period covered by tho first instalment paid after January 1, 1933. "The effect of this," said Mr. Garratt, in discussing the cpiestion this afternoon, "is that a eix months' interest coupon payable on January 10, 1033, would be subject to the 20 per cent deduction and the 10 per cent stamp duty as from July 11, 1932. Similarly, a payment on July 10, 1933, would be subject, as from January 11, 1033, to 10 per cent stamp duty until March 31, and 20 per cent reduction over tho whole term, January to July.

"It has seemed to be quite clear that the intention of the Legislature was to make the reduction of 20 per cent on tho respective classes of securities apply only aa from April 1, k>33, at which date the 10 per cent stamp duty on thosf securities would cease to be collectable."

Following his communications with the Treasury, Mr. Garratt received advice from Col. G. F. C. Campbell, Auditor and Controller-General, that the intention of the statute was to deduct 20 per cent from interest accruing only on and after April 1, and that legislation would be introduced next session to give effect to that intention.

Two illustrations of how the Act, as interpreted in accordance with the intention of Parliament, will operate with respect to harbour board loans were given by Mr. Garratt. These were as under: — July 10, 1933.—5 per cent, reducible to 4£ per cent; face value of coupon, £2 10/; accrued interest to March 31, £1 2/5; accrued interest, April 1 to July 10, reduced to 4J per cent, £1 3/5 — total, £2 5/10; stamp duty on £1 2/5, 2/3; net amount realised by holder, £2 3/7. July 10, 1033. —5 J per cent, reducible by full 20 per cent ("net £4 8/ per cent); face value of coupon, £2 15/; accrued interest to March 31, £1 4/7; accrued interest, April 1 to July 10, £1 10/5, less 20 per cent, £1 4/4—total, £2 8/11; stamp duty on £1 4/7, 2/C; net amount realised by holder, £2 6/5. "There was no question about Parliament's intention," said Mr. M. J. Savage, deputy-leader of the Labour party. "The 20 per cent reduction was to be in substitution for the 10 per cent stamp duty. It would be absurd to interpret the Act otherwise. If anyone- were to pay both, I wonld say he has more money than sense."