TAX YIELD.

Auckland Star, Volume LXVII, Issue 184, 5 August 1936, Page 10

TAX YIELD.

INCOME AND LAND.

£1,800,000 INCREASE.

REQUIRED FOR PENSIONS.

HOW IT WILIi BE RAISED

(By Telegraph.'—Parliamentary Reporter.)

WELLINGTON, Tuesday

An explanation of how he proposed to obtain a "further £1,000,000 from income tax and slightly more than £800,000 additional from land tax was given by the Ministef of Finance, Mr. Nash, in dealing with estimated revenue for the year. The current year's revenue for the 'first four months, he said, indicated a irising tendency, and he was satisfied that no increase in the rates of tax would be necessary to provide for all the additional ordinary expenditure. However, to provide the £1,710,000 required for pensions, he proposed to obtain rather more than that sum in ■addition to income and land taxes. "The small increases in the rates of pensions, together with the wider field covered, will remove incalculable hardship and trials, while the raising of the necessary money will, on the closest reasoning, cause a minimum of inconvenience to those who have to pay,' said Mr. Nash. "While it is often invidious to make comparisons with other countries, I would like to quote some figures comparing the effective rate —being the amount of income tax payable on every pound of the total income —paid in Great Britain, with that proposed for New Zealand. The comparison is based on the tax payable by a man with a wife and two children, and the net income of the taxpayer after the tax has been paid is set out. I may add that owing to the recent increase of 3d in the standard rate, the amounts for United Kingdom are slightly higher in some cases than is shown: —

Effective Rate of Tax in the £ . Total Income. New Zealand. U. Kingdom. £ s. d. s. d. 300® Nil Nil 400 0 2.04 0 2.25 (500 0 8.96 0 10.8 800 1 1.42 1 6.9 1.000 1 4.50 1 11.76 5,500 5 6.72 5 6.42 10,000 7 10.47 7 2.9 The balance after paying the tax is shown in the following table: — New Zealand. U; Kingdom. £ £ s. d. £ s. d. 300 300 0 0 300 0 0 400 396 12 0 396 5 0 600 577 12 0 573 0 0 SOO 755 5 4 737 0 0 1,000 929 12 0 901 , 0 0 5,500 3970 17 0 3977 17 6 10,000 6063 13 4 6379 2 6

"The principle guiding the Government when making its decision is that a first charge on the national income should be the care of the aged and the ailing. The alterations in pensions and the taxation systems have been made accordingly.

Simplified Tax System. "Whilst increasing the yield from income tax, the Government intends to simplify the tax system and make it more equitable as between taxpayers. Since 1030 considerable alterations have been made in the rates of tax and of exemptions therefrom, but such alterations have generally been made on a 'patchwork' basis, with the result thatthe system to-day is very complicated and not as equitable as it might be. Accordingly it is intended to remodel the whole system. The general exemption of £210 will be retained, and this amount—being a minimum that should be available to everyone—it is proposed to deduct from all income before tax is levied. On this principle the general exemption and also the £50 exemption for a dependent husband or wife will be at a flat rate as for dependent .children at present. Thus a man with a wife and two children will pay tax on his income in excess of £360. Other existing exemptions for insurance premiums, etc., will be maintained, but henceforth no exemption will be allowed for employment tax paid.

"On the taxable balance—i.e., income less exemptions—tax will be payable this year at the following rates: For earned incomes of individuals (but not companies) a basic rate of 1/8 in the £ increased by 1-100 th of a penny for every pound of taxable balance up to £5500 and thereafter l-150th of a penny for every pound up. to a maximum of 8/2 in the £ reached at a taxable balance of £8050. The basic rate may seem high compared with the lowest rate charged last year, but, owing to the fact that exemptions arc to be allowed at a flat rate, the rates of tax on the taxable balance are not comparable with those imposed last year. What is comparable is the effective rate—i.e., the tax payable per pound of total income. For instance, a man with a wife and two dependent children and a total income of £400 paid 1 5-8 d in the £ in income tax last year and under the system proposed he will pay 2 T-25d in the £. The maximum effective rate in the pound will be 7/11$ on a total income of £0100 in the case of a single man without dependents, being the lowest income at which the maximum rate is reached compared with 5/11 3-5 last financial year.

"On unearned income the rates as for earned income will be increased by 33 1-3 per cent as at present.

Company Taxation. "The considerations that warrant giving a general exemption of £210 to individuals do not apply to companies; consequently no such exemption will be allowed in assessing companies, but this is compensated for by fixing the basic rate for companies at 1/, as against 1/8 for individuals. The graduations for companies will be the same as for individuals, but the maximum rate for companies will be 7/0 in the £ reached at £8950. To illustrate how the rates for individuals and for companies compare, I may mention that a single man without dependents with a total income of £1000 will pay £01 16/9 in tax, while a company with the same income will pay £91 13/4. "Business and economic conditions generally were better last year than in the previous one. Accordingly, apart from higher rates of tax. there would have been an increase in revenue. Allowing fou this and the additional taxation imposed. I have estimated the yield from income tax at £6,000.000. a total increase of £1,419,000 over last year's receipts.

"Concerning land tax. it is proposed to reintroduce the graduated tax. from which an estimated revenue of £1,300.000 is expected, or approximately three times the present revenue. The tax removed by the Coalition Government in 1931 bad, for 15 years previously, yielded revenue between £1,000,000 and £1,500.000 per annum, and sometimes slightly in excess of the latter sum. To ensure taxation in some measure according to ability to pay, the existing flat

tax will be continued at a penny in the £ of taxable balance of unim value up to £5000, after the ordinary exemption or mortgage deductions been made, which means that tne farmer owning land of an iniimprm w value of £5000, with mortgages of trfOW. S be assessed on £2000, the tax payable being £3 6/8, as at present working farmer should be the first to bo helped, after which the ability to pay should be considered. When the u»improved value readies lug the tax will be increased accordingly on all land, whether it be city, subuiban ° "The existing ordinary and mortgage exemptions will be continued. Rates of Land Tax. The rates of tax to be paid on the restored procedure of graduated tax will be as follows: Taxable up to ■c.-iOOO—one penny in £1, increasing _y l-8000th of a penny for every £1 in excess of £. r )000, reaching a rate of two pence in the pound at fl3 ' 0( ? 0 ' pence at £21,000, fourpence at £2J,000, livepence at £37.000, and sixpence at £45,000, from which point the tax continues at the flat rate of sixpence to the maximum value owned by any intlivi dual, trust, estate or company. Summed up, the procedure will mean the minimum taxation on the woiking farmer and home owner, with increasing rates on abnormally large holdings and other areas held in many cases for speculative profit instead of for use in production. Concerning the Customs revenue, that, said Mr. Nash, was dependent upon imports, and New Zealand's ability to buy goods from other countries was, of course, governed by her exports. For the export year ended on June 30 last the value of exports in New Zealand currency was £53,000,000, compared with £42,954,000 for the previous year. Thus there was scope for a considerable expansion of imports, and the figures for recent months indicate that it was taking place. After a careful review of the position he had placed' the estimate for Customs revenue for the year at £9,100,000, which was £939,000 in excess of the amount received last year.

"The increasing turnover in goods will proportionately increase the yield from the sales tax, the estimate for which shows a comparative increase of £437,000. Then the general improvement in economic conditions will, it is anticipated, be reflected in an increase of £55,000 in beer duty and £388,000 in highways revenue. The latter consists mainly of the proceeds from the petrol tax and motor license fees, and, as the people generally will have more leisure and more earnings, both these items are expected to show a substantial increase. The . remaining large item of taxation, stamp and death duties, is expected to yield £308,000 more than was received last year. The estimate for receipts from interest is £200,000 below the amount received last year, mainly due to the fact that an anticipated increase in railway revenue will be more than offset by the cost of restoring the salaries and to the 1931 level and reducing the working hours of the staff."

"Other receipts" for the year were expected to be £035,000 in excess of the amount received under that heading last year. That was mostly due to the fact that the estimates allowed for the transfer to the Consolidated Fund of £575,000 profits on the change over to New Zealand's own silver coin.