TAX-FREE LOANS

Press, Volume LXXIV, Issue 22435, 23 June 1938, Page 13

TAX-FREE LOANS

END OF PERIOD IS APPROACHING LARGE TURNOVER ON MARKETS A large turnover in tax-free 3J per cent, loans has been a feature of recent dealing in Government securities on the New Zealand Stock Exchanges. These loans are now approaching the end of their tax-free period and for that reason substantial readjustments in holdings are likely to take place.

Under the scheme for the conversion of practically the whole of the New Zealand-domiciled debt bearing interest higher than 4 per cent., which was successfully carried out in 1933. free-of-income-tax securities were converted to 3h per cent., free of income tax, until the maturity date of the original securities. Thereafter, they became 4 per cent, loans and the income taxable.

The securities which come into this class are the 1938-52, 1939-43, 1939-52, and 1941-43 3 h per cent, loans. In each case the tax-free period ends in the first year named. The first loan to become 4 per cent, and taxable is the 1938-52, the last interest payment on which at 3.1 oer cent., tax-free, is on November 15. The tax-free period for the 1939-43 loan ends in March and September next year and for the 193952 in May. Records do not show how the amounts of loans are apportioned among he various dates but War Loan issued between 1916 and 1918, maturing originally on November 15. 19C8. amounted to more than £20,000.000, two compulsory issues in September. 1917, and April. 1918, amounting to £9.900,000 and £0,200,000 respectively. The original 1939 loan issued in 1919 as a compulsory Victory Los.n’ amounted to £ 10,000,000. Large financial institutions throu, - out the Dominion are the chief holders of the tax-free loans. The addition to their income which will result from the higher interest rate will be only a mixed blessing. When a company is taxed on the highest scale the effi t will be to reduce the net return from the loan to £2 10s per cent. In consequence. there is a tendency for holdings of the present tax-frees to be reduced in certain cases, while from the point of view of others more favourably placed seeking an investment they offer good buying. The current market for the 1938-52 3J per cent, loan is around £lOl 10s.

The right is held by the Government to redeem any of the loans on or after a date which is three years before the maturity date, on giving three months notice. COLOMBO TEA AUCTION KEEN DEMAND FOR QUALITY LINES DUNEDIN. June 22. ir r k- M. Wright has received the following cabled report on the Colombo tea auction of June 21:—At yesterday’s auction of 2,750,0001 b inferior grades declined about id. Medium teas remained steady, while teas showing quality were in keen demand and were firm to dearer. Supplies are decreasing, and at next week's sale 2,250,0001 b will be offered for auction. PRICE OF GOLD LONDON, June 21. Gold is quoted at £7 0s 9d a fine ounce. BRITISH WAR LOAN LONDON, June 21. War Loan 3J jer cent, is quoted at £lOl 16s 3d.