LEVEL OF N.Z. TAXATION

Press, Volume LXXXIX, Issue 27132, 31 August 1953, Page 10

LEVEL OF N.Z. TAXATION

NO GREAT CHANGE ADVOCATED

Without coming to a confident conclusion, Professor C. G. F. Simkin, at the conference on capital development on Saturday, expressed the opinion that taxes in New Zealand ought to be left at about their present level—although adjustments in particular taxes could well be made—if saving was to be encouraged. "It is often argued that saving would be encouraged if taxes were reduced,” said Professor Simkin. "But although a reduction of direct taxes would lead to more private saving, because individuals and businesses would have larger disposable incomes, they would spend most of the tax remission. For this reason public saving would be reduced to a much greater extent by tax reductions than private saving would be increased. "There would, it is true, be a net gain’ to total saving from tax reductions if there were no public saving and if current public expenditures were cut, along with taxes. But then the gain would be much greater simply by cutting public expenditure and leaving taxes as they were. I cannot see, therefore, that tax reductions are a good method of raising total savings if any saving is being done by government. “Is the conclusion, then, that savings would be increased by raising taxes?” asked Professor Simkin. “Here, too, I am doubtful. They” wojjld, of course, increase collective saying more than they would reduce private saving if, but only if, there was no corresponding increase of current public expenditure. But they might have bad effects in indirect ways.

"Taxes are already very high, and to put them higher might well discourage enterprise and work so much that real income would suffer, and with it real savings. More than that, high taxes encourage wasteful expenditure by business, if this can be treated as a deduction for purposes of income tax. and waste is the enemy of saving,” said Professor Simkin.