P.A.Y.E. or Hidden Capital Levy?

Press, Volume XCV, Issue 28231, 20 March 1957, Page 12

P.A.Y.E. or Hidden Capital Levy?

The Leader of the Opposition (Mr Nash) and the Minister of Finance (Mr Watts) between them must by now have confused taxpayers about what P.A.Y.E. means. All this talk of rebates, concessions, and M forgiveness ” of taxation makes an essentially simple principle sound complicated. As the ordinary man understands P-A.Y.E. (and he is right), he should pay his income tax in a lump sum one financial year and begin to pay his income tax in instalments at the beginning of the next financial year. Any other arrangement would not make sense. The Government balances its accounts each year, budgets for its expenditure, and then fixes taxation (of all kinds) to meet its outgoings. The amount it collects in any one year is related to its expenditure in that year, not to the collective income of citizens in any preceding year. The State, let it be emphasised, has no moral right to a fixed share of everyone’s income, only a right to levy such taxes as are necessary to meet the year’s outgoings. The basis of the previous year’s income in the assessment of income tax was adopted because of its obvious convenience. There is no other reason why tax should not have been levied

on estimated incomes, with adjustments when actual in-r comes were known. Considered in this reasonable way, no-one would gain anything, except in personal convenience, and noone would lose anything from P.A.Y.E.

The complication arises from ■ Mr Nash’s curious delusion that ; the State should base its de- ; mands not on what it needs i but on what the taxpayer can do without. Whatever the reason for this obsession, if Mr Nash is ever in a position to give effect to it he will collect two years’ ta* less a £ 100 rebate, to meet the expenditure of a single year. In a sense this would be a capital levy, no longer such a favourite socialist project since so many working men would have to pay it. It is open to all the objections to a capital levy, plus the gravest objection of all—that it is hidden behind such enticing terms as rebate. It would be inequitable, it would provide the Treasury with money beyond the current needs of the Government, and it would be a “ once-for-all ” tax. To describe this as a concession is either humbug or political dishonesty. The taxpayers of New Zealand would be very simple if they ’could be bamboozled in this way from now till the end of the year.