INCIDENCE OF TAXATION.

Auckland Star, Volume LXVII, Issue 184, 5 August 1936, Page 6

INCIDENCE OF TAXATION.

As the present revision of taxation is only the first step taken by the Government some anomalies were to be expected, but it is unfortunate that the aim of relieving the burden on people of small incomes has been only partially attained. The company taxation has the effect of taking a considerable sum from the small investor, and. this will be particularly noticeable under the new scale. Although the rate for companies begins Sd below that for individuals and is 8d lower throughout the the land tax bears more heavily on companies and really constitutes a disguised addition to the income tax. A fairer method than that operating would have been to place a larger share of the increase on the shoulders of individuals and reduce the heavy imposts on industry. Industry is much in need of assistance, quite apart from the fact that those who have invested in companies are largely people of small means.

In England a much more equitable system is operative, whereby the person who invests a small sum in a commercial or industrial enterprise is protected against unduly heavy tax deductions. Mr. Nash will doubtless look into the details of the English scale during his coming visit Home. The graduated land tax has its former weakness, that it is a direct charge on the earnings of companies. It is not a business charge, but has to be deducted from income, so that it is subject to income tax. As an illustration, we take a company that shows £10,000 taxable profit, and in its city business uses land valued jit £50,000. The tax on the land would be £1250, and the income tax 011 the £10,000, over £4000, so that the total deduction in taxation would exceed 50 per cent.

Originally the land tax was intended to bring about the bursting up of large estates and to prevent land aggregation. It should be possible to restore that effect without at the same time placing a burdensome impost upon business. Another weakness in the new tax scale is the removal of the exemption on sums taken &S unemployment tax. These should be deducted, as in the past, before the assessable income is computed. The effect of the proposals in the present form would be to tax a proportion of income twice over. This should be remedied in the passage of the taxation schedule through the House.