Former Commissioner On Company Tax

Press, Volume CII, Issue 30233, 11 September 1963, Page 17

Former Commissioner On Company Tax

When taxation was loaded on to indirect sources, care must be taken to see tihait the shifting of the burden did not press too heavily on the lower income group, a former Wellington district commissioner of taxes, Mr K. W. Bauckham, said yesterday. As the present taxation research officer to the Associated Chambers of Commerce, Mr Bauckham was discussing taxation problems and policy with members of the Canterbury Chamber of Commerce. The only way to reduce tax. he said, was by reducing expenditure. If direct tax were reduced and expenditure remained the same, the load must be placed elsewhere. “At present, because of exemptions, the family man pays less direct taxation than others,” said Mr Bauckham. “But if the costs of goods was increased, he would bear perhaps more in relation to others without families.”

Companies would benefit immediately, he said, if indirect taxes were increased. This was because they did not pay indirect taxes. Mr Bauckham had been asked by Mr P. J. Byrne if the Associated Chambers taxation committee could carefully consider pressing for the removal of direct taxation.

When asked by Mr H. G. Hay if rates could become deductible for taxation purposes, Mr Bauckham said that unless the property on which the rates were payable was producing income, no deduction could be claimed for rates. The reason for this was that the property was of a personal nature and had no connexion with earning income.

' “If the act was amended to allow lais one personal item, there are many others which would probably also have an equal claim,” said Mr Bauckham.

On the question of staff imports from overseas. Mr Bauckham said that with the stress on incentives to encourage new industry it was felt that if the costs of bringing key staff to New Zealand to help in the establishment of such industry were allowed, it would be an encouragement. “If an established business brings staff to New Zealand the costs are deductible,” he said. But with a new concern importing staff was looked on as a capital expenditure. No Amendment Mr Bauckham said that Associated Chambers had made representations to the Minister in charge of the Inland Revenue Department on this question, but he was not prepared to amend the act for the purpose. On the subject of payment in shareholders and relatives in business, Mr Bauckham said that the commissioner might limit the salary or remuneration to a figure which,

in his opinion, Was reasonable for the service rendered. In general he thought the feeling was that the commissioner, because it involved a saving in tax, looked at all oases rather criticalaly and limited the amount without having full knowledge of the services rendered. The section was enacted to cover cases of tax evasion, through nominated relatives who were not working, he said. The Associated Chambers was still taking the matter up with the Minister. On retiring allowances, Mr Bauckham said that at present lump sum retiring allowances were not allowed as a deduction, but only 5 per cent was assessable tn the recipient. The Associated Chambers felt that it was a proper business expenditure and should be allowed. The attitude of the Minister, said Mr Bauckham, wan that superannuation fund provision, which was more easily controlled, should suffice, and he would not concede to the submissions. For the time being the Associated Chambers was keeping the matter in view. About excess retention tax. Mr Bauckham said that a company was required to pay at least 40 per cent of its taxpaid profits by way of dividend to avoid this provision. If it failed this, 7s in the £ was payable on the insufficient distribution. This bad the effect of retarding a company seeking to build up its capital out of profits. “Representations have been made to have the provisions liberalised,” said Mr Bauckham.

On the subject of obsolescence, Mr Bauckham said that the commissioner had power tn allow such a rate as he thought fit to cover (for depreciation) fair wear and

obsolescence which could not be made good by way of repairs. Under that section of the Land and Income Tax Act. 1954, the commissioner fixed 1 per cent on the cost price, as related to reinforced concrete buildings. ‘•While a building of that nature will doubtless stand for 100 years, and the rate covers fair wear and tear, the matter of obsolescence is quite different today with modernisation, and high costs of property building must be an economical proposition. “Many owners are demolishing older buildings to replace them with new types," he said. "Because of this the taxpayer does not have the full cost of the old building written off during its use." The Associated Chambers was gleaning facts and details to enable representation to be made to the commissioner to have the rate increased, he said.

About 400 spectrograms of Mars have been obtained this year by the Astrophysics Institute of the Kazakh Academy of Sciences,