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SPECIAL TAX RELIEF APPROVAL AND CRITICISM Qualified approval of the Government's proposed concession to assist in establishing new industrial activities in New Zealand was expressed in business circles in Auckland to-day. There was no doubt about the need of special aid of this kind, it was stated, but it should be made to apply more widely, and should date back to 1942. Costs of plant and buildings are at such a high level to-day that it is thought the concession may prove inadequate if enterprises launched in the immediate future are to hold their place successfully against those established later when costs have come down. Companies which have been developing their activities during the war years are left lamenting as they see the Government making the path easier for possible competitors. Having embarked upon heavy expenditure to assist the nation's war effort in many and various ways they consider they are entitled to share fully in any concession made now to assist in coping with the burden of inflated costs. "The special depreciation allowance of 20 per cent spread over five years is an acknowledgement by the Government that taxation has been bearing heavily on industry," said Mr. D. H. Steen, president of the New Zealand Society of Accountants, He added that it was encouraging that the Government now realised the need of giving some relief, but the Minister's statement required clarification. What Are "New Industries?" "What is meant by new industrial activities?" asked Mr. Steen. "Does the term mean all industries, or does it cover only new industries? We should be entitled to presume that the concession will apply not only to new organisations but also to development work by existing industries. The point, however, is one that must be made clear." There was general agreement among company leaders that the depreciation allowance should be extended to cover any plant purchase or replacements because all industrial equipment acquired, or buildings erected, at the present high costs would be over-valued in a few s'ears' time, when the real test would have to be faced. Everyone who shouldered commitments in these directions should therefore participate in the relief. "The proposed 20 per cent depreciation allowance is satisfactory so far as it goes, but why should not the same rule apply to existing industries if they extend their plant and put up new buildings?" asked Mr. William Goodfellow, managing director of the Challenge Phosphate Company. "Further, to be fair, the new rates should include capital expenditure since 1942 when costs in New Zealand were stabilised." Some measure of relief should be given to those who in the past three years had been spending capital on plant and buildings, and the concessions should, therefore, be retrospective, said another prominent business executive. The Government's schedule covering depreciation of plant appeared to be fairly comprehensive, said this authority. In five years the value would be written down by half, compared with a writing down of only 32 per cent if the present depreciation allowance of 7l per cent on the diminishing value operated. But as far as buildings were concerned, it seemed that 20 per cent would be far short of requirements, because, adding the present annual one per cent to the 20 per cent promised for five years, only 25 per cent would be written off the costs of buildings. Among industries which it was considered would be adversely affected were some engaged in the manufacture of building materials , and pottery. A particularly heavy burden was stated to have been placed upon these companies by the sales tax of 20 per cent, as bricks and cement were large items in their outlay. "Why is 1946 made the deadline?" asked a company director with wide interests. "Are we going to be penalised because we showed enterprise and took risks when things were difficult? We acted not so much from motives of immediate profit as to assist the economy of the country. We are, therefore, entitled to expect equal consideration with those who venture now when the outlook is clearer." To-day's Inflated Costs "The Minister has made a valuable concession in regard to depreciation on buildings, but it is not quite sufficient in view of to-day's greatly inflated costs," was one city man's comment. "The whole concession is belated," was the more critical view of another man. "There has been heavy expenditure on various industries during the war, often to meet urgent demands when supplies of essentials could not be obtained from overseas. Are the companies concerned to be left to suffer now? The scheme of relief is unbalanced and badly conceived in relation to existing industries. All questions of depreciation should be related back to their origin in high costs." "It is a means of further implementing the Government's policy of encouraging local manufactures," said the general manager of a large warehouse. "To what extent we can do that economically it is not easy to say. It is wise to assist industries which can become economic, and probably the Government has shrewdly chosen its time of action, i because we do not know to what extent the new British Labour Government is going to demand a substantial share in our markets in years to come in return for giving us a prominent place in theirs. But for a few years Britain will have no difficulty in selling whatever she can produce. Therefore, the real trial may not come until industries set up here with special assistance are in a position to say that they are established and should be allowed to remain.

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Bibliographic details

NEW INDUSTRIES, Auckland Star, Volume LXXVI, Issue 188, 10 August 1945

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NEW INDUSTRIES Auckland Star, Volume LXXVI, Issue 188, 10 August 1945