Taxation of Municipal Enterprises

Press, Volume LVI, Issue 16946, 22 September 1920, Page 6

Taxation of Municipal Enterprises

The fact that the Christchurch Tramway Board does not make large profits on its operations has nothing whatever to do with tho question raised by the Government's proposals in tho new Land and Income Tax Amendment Bill, whether it should be made to pay income-tax or not. It is as woll to mako this quite clear, as tlw* remarks by fionk> of the Speakers at Monday's meeting of the Board suggest that they Lelievo tho Government is solely inspired by the hope cf securing considerable revenue from the taxation of municipal trading concerns. A much greater principle is involved in the Government's proposal than the addition of a few thousands of pounds to the Consolidated Fund, namely, the elimination from municipal trading of the unfair advantage accruing to it from its freedom from taxation, as compared with the position of private enterprises or businesses of the same kind, which enjoy no such privilege. If a private company owned and operated the Christchurch tramways, as was fonnerly the case, it would have to pay incometax just as any other private trading company does, and tho position is not altered by the fact that tho public owns the trams. It is, of course, easier to arguo the case for taxation of municipal business concerns in regard to enterprises in which both a municipality and private persons are engaged in the same business. Such an instance is supplied by the Christchurch Gas Company and the City Council's electrical supply department. Both supply lighting and heat, yet the former has to pay taxation on its income, and the latter, which competes with it at every turn, does not. A committee of the City Council is at present engaged in considering the question of establishing a municipal bakery and a muiScipnl brickworks. The yhance of the Council engaging in either or both of these enterprises is tolerably remote; but if it did decide to do so. it would be manifestly unfair to the private persons already engaged in these businesses that the Council should be able to start in the same lines with the advantage of having no taxation to pay, in addition to th'e original advanj tage of having the whole body of rateI pajers to fall back upon in the probable event of neither business proving profitable, or even paying "its way. For the Government to permit a municipality to carry on business in competi- ; tion with private traders, without imposing tho same measure of taxation

upon each, is to subsidise the former at the oxpense of ttie latter, "and, as we said before, that is no part of the duty of any Government.