PROPRIETARY TAXATION

Press, Volume XCII, Issue 27795, 21 October 1955, Page 14

PROPRIETARY TAXATION

CHANGE SET OUT IN AMENDING BILL (New Zealand -Press ‘ Association) WELLINGTON, October 20. Proprietary taxation provisions in the existing law will not apply to shareholders who are individual taxpayers if the House of Representatives passes a clause in a Land and Income Tax Amendment Bill introduced this afternoon. If a proprietary shareholder is a company, however, the provisions will still apply. The existing rebate provisions in the proprietary taxation legislation are being retained for the benefit of individuals for one year. The Minister of Finance (Mr J. T. Watts) said in his Budget speech that the Government was not satisfied that proprietary tax was a fair method of taxing businesses that had been formed into companies. It was considering the removal of the tax so far as the individual shareholders was concerned, while strengthening the provisions of the existing law relating to multiple and interlocking companies. The bill exempts Geothermal Development, Ltd., a Government-owned company that is to be formed to make heavy water, from the payment of income tax. The Auckland, Wanganui, Timaru, and Invercargill Milk Treatment Corporations, the Veterinary Services Council, veterinary clubs, and herd-improvement associations are also exempted. Another clause enables the Commissioner of Inland Revenue to permit a land dealer whose land is taken by or sold to the Crown to spread the profits over the year of disposal and the three following years, subject to security for payment of the income tax and social security charge being required where the commissioner considers it necessary. The special depreciation allowance on buildings and plant is extended to the end of March, 1957, but the allowance will not be granted for buildings acquired, erected, or extended after July 21, 1955, unless they are farm buildings, or unless a binding contract for their acquisition, erection, or extension was entered into before that date. The initial depreciation allowance on farm equipment and accommodation for workers, and the initial depreciation allowance on accommodation for business workers are also extended. There is a clause designed to make it impossible for a company to avoid income tax on increments in the value of its trading stock by distributing the stock to its shareholders. The clause provides that such a distribution is to be treated as a sale at the market price, or, if there is no market price, then at a price fixed by the commissioner. The company is to be assessed for income tax as if it had received the price so fixed, and the shareholder is to be treated as having paid the same price for the purpose of calculating his assessable income If the price so fixed exceeds what in the opinion of the commissioner is a return of share capital, the excess will be treated as a dividend. The clause is to apply only to distributions made on or after today.