TAXES COMPARED

Press, Volume LXXIV, Issue 22491, 27 August 1938, Page 23

TAXES COMPARED

NEW ZEALAND AND AUSTRALIA

CHAMBERS OF COMMERCE

STATEMENT

"The further investigations are carried, the more numerous are the proofs that' rates of taxation in New Zealand compare unfavourably with those in Australia." says a statement by the Associated Chambers of Commerce of New Zealand. . "We have already given tables showing the heavier tax rates in NewZealand, as compared with the different States of Australia, on companies and on the earned incomes of individuals. There are then the rates of tax on 'unearned' income (rents* interest etc.). Below are given comparatives tables showing the amounts of income and wages taxes payable in 1937-38 in New Zealand and Australia on the wholly unearned income of a taxpayer with a dependent ■*££&• Commonwealth tax has been added m each case: —

"Penalty on Shareholders'*

"The feet that in certain cases the above rates apply to shareholders" dividends from companies, while in other cases they do not, raises the subject of the penal rates of taxation on company operations in New Zealand. These rates rise to a maximum of 7s 6d in the £l.

"Dividends from companies are not taxable in the hands of recipients in New Zealand, but this is poor compensation for the fact that the shareholder does not receive his dividend until it has been reduced by the amount of taxation which the com* pany has been compelled to pay, as already stated, up to 7s 6d in the £l. If his income had been 'earned* he could have had up to £260 (which includes £SO allowance for dependent wife) before he would start to pay income tax, and his commencing rate of tax at £261 would be Is 8-Old. At £SOO his rate would be Is 10.4 d (with an increase in each case of one-third for 'unearned' income). ,-,.„ "But because he is a shareholder in a company, that part of his income which is composed of dividends has already borne the rate of company tax of up to 7s 6d in the £. even th*»tgh his total income may be below the statutory exemption allowed for individual income tax purposes. . ' - "By comparison, the company shareholder in New South Wales is taxed on his dividends, and this is after the company has alreay paid tax on its net assessable income. On. the other hand, the maximum rate of tax paid by the company will have been 3s 3d (including Commonwealth tax) in the £, and the shareholder himctOf will then pay taxation only if bis income is above exemption levels, and. only then at his own graduated rate as an individual. This carries with it the right (which applies in every Australian state) to a rebate of Commonwealth tax on the part of the dividends included in his taxable income, calculated at his own rate or the company rate, whichever is ♦*«■ lesser. - "In Victoria, dividends are taxed in the hands of the shareholders, but the maximum rate at tax. tiie company will have paid will have been 2s I«d m the £. In South Australia, dividends are laxed in the hands of the shareholders, the maximum rate of company tax being 3s in the £. In Western Australia and Tasmania dividends are excluded from shaTghplflrrtf' assessments, and the maximum rales of company tax in these'states are Ss 6Jd and 3s 6d respectively. "Out of Proportion" "From these comparative figures it will readily be seen how shareholders in companies in New Zealand are penalised through their dividends being heavily reduced before they get them. due to the heavy rates of taxation on companies. Numerous people of moderate total incomes, partly or wholly derived from participation in a company, are virtually charged rates of tax in New Zealand which are out of all proportion to their incomes and their true capacity to pay. "The only state in Australia that can compare with New Zealand in rates of taxation generally is Queensland, where the maximum rate of tax on companies is 8s 2.6 d in the £ (dividends, as in New Zealand, not being taxed in the hands of recipients). "The Taxpayers* Association of Queensland, however, has some pertinent comments to make on the position in that state. It says, in a recent publication: The recent Hoyal Commission on taxation was an independent and unbiased body. It reported that the only advantage it could see in the Queensland system of company taxation was that it "facilitated the fine art of plucking the goose 'with as little squealing as possible.** Affr»r a full investigation, the commission's conclusions were that the Queensland system is capricious, and, at times, unfair in its incidence: that it violates all the equities of taxation, and is a penalty on efficiency. Under these conditions how can private enterprise be expected to establish new businesses, or expand existing ones, and thereby create the employment and prosperity that this state is capable of providing?* •This question applies with equal, if not greater, force to New 7^^l a nd Ttw higher maximum rate of tax on companies in Queensland, as compared with New Zealand, only applies to companies with profits exceeding 19 per cent. A company in New Zealand with profits of 7 per cent., for instance, actually pays a larger amount of taxation than a simitar- company in Queensland, as we have previously shown in detail."

Assessable Income N.S.W. Victoria N.Z. £ £ s. d. £ s. d. £ s. d. 150 0 13 4 14 8 6 0 0 200 3 5 10 1 12 11 7 13 4 250 5 14 2 3 6 6 9 6 t 300 8 18 6 13 6 15 10 8 350 13 10 2 11 3 4 23 2 4 400 18 19 0 16 1 11 30 19 6 450 24 18 11 21 11 1 39 2 4 500 31 10 10 27 9 0 47 10 8 Q'land. S. Aus. NJ5. £ £ s. d. £ s. d. £ s. d. 150 3 2 6 2 0 4 6 0 0 200 4 3 4 7 12 7 13 4 250 9 14 11 12 3 10 9 6 8 300 14 0 0 17 4 8 15 10 8 350 19 15 5 23 8 5 23 2 4 400 26 7 2 30 0 7 30 19 6 450 35 1 11 36 19 5 39 2 4 500 49 17 8 44 8 6 47 10 I W.Aust. Tas. Ki £ £ s. d. £ s. d. £ s. d. 150 0 18 9 2 10 0 6 0 0 200 15 0 3 6 8 7 13 « 250 6 18 1 6 19 9 6 8 3G0 11 10 6 8 8 5 15 10 0 350 16 7 4 12 4 6 23 2 4 400 20 9 11 16 15 2 30 10 C 450 27 0 10 21 19 6 39 2 4 500 34 10 10 27 17 5 47 10 1