CITY REACTIONS.

Auckland Star, Volume LXXI, Issue 152, 28 June 1940, Page 8

CITY REACTIONS.

N.Z.'S WAR LEVY.

ECONOMIST'S CRITICISM.

BUSINESS LEADERS' VIEWS.

Comments on the Budget ii\ the city to-day revealed agreement on the need of a maximum war effort, but in some quarters there were criticisms of the distribution of the burden.

Professor H. Belshaw, dean of Commerce at the Auckland University College:

"The Government is to be commended for., attempting to rely on additional taxation to the fullest extent, in preference to borrowing, and still more in preference to credit creation. A reduction in standards of consumption is inevitable if the war effort is large, and seriously undertaken. Taxation leads to more equitable distribution of the burden than loans, which also make the future distribution of income more uneven. Credit creation would spread the burden without any reference to social justice and would press heavily on people with small and fixed incomes.

"Compulsory loans free of interest will avoid future injurious effects on the distribution of income, and can be related to capacity to contribute.

"Some aspects of the Budget proposals, however, give grave cause for concern, especially the failure to relate public works expenditure fully to the war effort. The reduction in public works is totally inadequate in view of the burdens the community as a whole, and not any one class, is expected to bear. It seems entirely inconsistent with an all-in war policy that public works expenditure is not further substantially reduced. The taxpayer has, I think, justifiable cause for complaint that such a scheme as that for instance for a new commercial radio building in Auckland is being proceeded with at a time when he is called upon to make such heavy additional sacrifices.

''The main criticism of the income tax increases is that the existing exemptions for dependents are ° totally inadequate and distribute the burden of taxation unfairly against those with families. It is a matter for profound regret that the Government did not display greater imagination in this respect when the taxation law was recently revised. I hope that, even now, it is not too late to redistribute income taxation with more regard to family responsibilities.

"The national security tax of 1/ in the pound could be, with advantage, replaced hv a compulsory loan of the same amount, to be repaid within a specified post-war period at the Government's option, the proceeds to be found by some form of capital levy. This is in line with the proposals of J. M. Keynes, the British economist, and would ensure that the fall in consumption would not be permanent. It would provide purchasing power which might be. strategically directed to sustaining consumption during the post-war period of Beadju&tment."

Mr. J. W. Frater, Chairman of the Auckland Stock Exchange: "The Budget is drastic, but not unreasonably harsh for a nation at war. While withholding final comment on the forced loan, my comment is that it may fall severely on the business man who needs money for his business. To find the money necessary for the loan, a business man may have to realise some of his assets, and he will then be presented with a stock which is nvt marketable. Had it been possible, I would have liked to see a loan bearing a small rate of interest, which, being saleable, then could have been realised if further capital was at any time needed. I would have favoured a voluntary, low-interest loan, with a com pulsion clause held in reserve." Mr. W. J. Cuthbert, President, Auckland Labour Representation Committee: "Taking into consideration the seriousness of the international situation the Government's taxation proposals should be acceptable to all sections of the community. From the wage-earners' point of view, I should say that this year's Budget will be regarded as being more equitable than any Budget brought down previously. There is no doubt that the calls on the community will impose some hardship, but when one adopts the philosophical view that the extra taxation imposed is a war measure there can be no quibble. In the main, the increased demand on workers' wages will be offset by any adjustment in the cost of living which will be made in the future by a pronouncement of the Arbitration Court." Mr. A. E. Robinson, provincial secretary of New Zealand Farmers' Union. "That millions are needed to win the war, farmers will not deny, and they will not grudge their contribution. But the war has to be won on two fronts, and the production efforc requires money, as well as the war effort. Deduction of an extra 1/ in the .€ and a general levy on larger incomes from production, will necessarily affect the ability to increaM: output. More important still will be the doubled sales tax. Business people pa.-s on this tax. That further increases in costs will injure capacity to produce is inescapable. However willing farmers may be, their efforts -will be hindered. General criticism by farmers of the Budget is likely to be on the old lines of: 'What is the Government itself doiii" to decrease the burden on the community ?' AH sorts of unnecessary departments, with unnecessary staffs, are making life a burden with increased demands on farmers' time and on their purses. When the Great War commenced, the Consolidated Fund received £6,000,000 from all sources, and the receipts at the end of that war were £8,500,000. Half the State's present expenditure could be devoted to the war without anyone being any worse off." Mr. N. B. Spencer, president of the Auckland Chamber of Commerce: "The taxation imposed by the Budget will be a staggering burden on the commercial community as well as on the private individual. Before the war it would have seemed impossible for the community to carry on under such a burden, but I feel sure that there would be no complaints regarding this taxation if the community were Certain that it was necessary for New Zealand's war effort and the protection of the Empire. "From the contents of the Budget it appears that this is not so, and that a large amount is needed for extravagant Government expenditure apart from war purposes. The Government is forcing the business community and the pri\ate individual to cut down expenditure in every way very drastically, while carrying on with its own extravagant expenditure. I feel that the Government should show an example to the private individual and should be the first one to cut down normal expenditure.

"Generally speaking, from a brief survey of the budget, it appears that the burden has been evenly distributed over the whole community. One or two items, however call for comment. The effect of the increase in the sales tax will be to increase the cost of living generally because, under Section 62 of the Sale's Tax Act, 1932-33, any increases in the rates of sales tax are automaticallr passed on to the prices of all goods and also to those of materials involved in building contracts affected. Presumably, the effects of the sales tax would override the regulations constituting the Price Tribunal, which was made under the Board of 'Trade Amendment Act, 1923, and the Public Safety Conservation Act, 1932.

The portion dealing with compulsorv loans seems rather vague and indefinite at present, and the whole success of a compulsory loan will lie in the method adopted in imposing it. The scheme adopted should not be too rigid as the circumstances of different undertakings and individuals vary very much. Some have free cash and others with fairlv substantial incomes have little cash and might be placed in very difficult circumstances if forced to take up a considerable amount of a compulsory interestfree loan. This last consideration applies particularly to many manufacturing concerns which have expanded production to meet the country's needs under present conditions of import restriction, and dre in the position of having ali their funds locked up in productive assets and in many cases are working on a substantial bank overdraft. If some method could be devised of obtaining all free moneys at a low rate of interest, this would reduce the amount to be raised by a compulsory loan." Dr. H. A. Cunningham, authority or taxation. "The method of graduating the income tax is an improvement on the old scale, under which the increase, a; certain points, took more than 20/ or each additional £1 of income. The limit of 17/6 is a further and necessary step towards avoiding injustices. The effects of the excess profits tax cannot be fully gauged until the basis for computing the tax is known. In Britain a choice of three years is allowed. The doubling of the wages tax is justifiable on the grounds that this taps a lar-e source of revenue. Compulsorv, interestfree loans also appear to be a reason able way of meeting the war emergency.'