TAX ON BUILDING SOCIETIES.

Press, Volume LXIX, Issue 20860, 20 May 1933, Page 3

TAX ON BUILDING SOCIETIES.

$ | PROPOSAL CRITICISED, j GOVERNMENT'S SEARCH FOR REVENUE. I The Government's proposal, to make building societies liable to income tax, introduced in Parliament during the last session, was commented on by Mr E. H. S. Hamilton, chairman of directors of the United Building Society, at the annual meeting of the society last evening. Mr Hamilton said any such action would seriously hamper the work of the societies, which were essentially co-operative bodies, and performed a valuable function. He added that the Government might have some difficulty in putting its proposals into effect because of the English law against the taxation of co-operative societies. "From time to time proposals are made in political circles to interfere with the legitimate functions of building societies, and it is natural in times such as the present that such interference should have for its object further taxation revenue for Government," he said. "The latest attempt by the Government to hamper the work of building societies was made towards the end of the last session of Parliament, when it was proposed to make the societies subject to the payment of income tax. "No notice was given to the Building Societies' Association of the intention to introduce the legislation, but as soon as the proposal became known publicly, a protest was made by the association, and by each individual society. As a result the proposal was withdrawn for further consideration. Co-operative Bodies. "The fundamental basis of a building society is co-operation, the funds contributed by members being lent to members. If anyone wishes to borrow from our society, he must be or must become a shareholder before he can have an advance. As evidence that the capital of this society is built up of the comparatively small amounts of capital belonging to a number of persons 1 would mention that the average holding of each shareholder is 129 "It is probably correct to say that without exception the building societies in New Zealand are working on very small margins of profit on the capital employed, and any interference with their legitimate operations must result in a reduction of the amount of rponey available for investment in mortgages reducible by instalments. I say 'must result in a reduction' because the State Advances Department has shown itself unable to cope with the present demand, and therefore is incapable of filling any gap caused by a ; withdrawal by building societies-

Prospects of Legislation. Mr Denys Hoare asked whether there was any chance of the Government making building societies liable to income tax in spite of the association. Mr Hamilton said he thought the legislation would have gone through last session but for the pressure brought to bear and the representations made to the Minister and to the Treasury by the association. The bill had been withdrawn, but only to Siy e Government time to consider it during the recess, before it was reintroduced at the next session. . , "Only a day or two ago we received a letter asking that we should send to Welliington our' views and our 1 reasons why income tax should not be levied on building societies, he continued. "As I said before., a building society is a co-operative business working on a small margin, and income tax would seriously affect our business and our shareholders, many of whom fire persons with small incomes. "Shareholders can rest assured that the proposal will be fought by the societies. Should it become law. I should like to draw the attention of members to the provision in the act for an appeal by shareholders for a refund m proportion to their income. If any suggestion is again made by the Government, I hope, for the protection of the societies generally, that individual shareholders will use their mfluenc© where they can to prevent the proposal being put into effect." Mr Hamilton concluded on a note ox encouragement. "It is going to be difficult to get this legislation through, because of the English law which prevents the taxation of co-operative societies." he said.