The Press TUESDAY, OCTOBER 17, 1967. Rewards For Ability

Press, Volume CVII, Issue 31502, 17 October 1967, Page 16

The Press TUESDAY, OCTOBER 17, 1967. Rewards For Ability

The lament by professional men and businessmen that the New Zealand tax system is “ loaded ” against them is a familiar one; and it is likely to be heard less sympathetically in official quarters this year than in more prosperous times. Yet the theme of the presidential address to the Engineering Society of the University of Canterbury recently was that New Zealand’s present economic plight is attributable at least partly to the lack of sufficient incentive to make use of talent and ability. The burden of Professor F. M. Henderson’s address was not merely that engineers should get higher salaries, taxed at lower rates than at present He did say these things—and with feeling—an argument that must have had a special appeal to an audience of engineers. But this was not the real point of his address. He was concerned not so much with the status of his own profession as with that of the “ professional middle “ class ” —typically, salaried workers, including business executives. This class of taxpayer, he asserted, was discriminated against by the New Zealand tax system. Although earned income was taxed more heavily in New Zealand, said Professor Henderson, the maximum rate of tax on unearned income—3s per cent —is lower than in Britain, America, or Australia. The inference prompted by this 35 per cent tax rate is that it is not the acquisition of a large income that runs counter to the New Zealand ethos: it is the earning of it that must be offensive . . I could suggest .. . that the New Zealander does not resent anyone’s becoming rich by good fortune —by inheritance, by a lottery win, or by some dramatic capital gain such as a large appreciation in value of some asset like land or company shares This is because the good fortune does not imply any assertion of personal superiority: it is something that could happen to anyone. But if a man becomes rich by his own efforts, he immediately invites criticism.

There is little doubt that the twin barriers of salary structure and tax structure in New Zealand prevent the salaried man from becoming rich, at least by overseas standards, “by his own efforts”. This may be inevitable in the sort of egalitarian society that New Zealand has deliberately fashioned for 30 years or more; but its disadvantages should not be lost sight of. In that period New Zealand has lost thousands of scientists, engineers, business executives, and other professional workers to countries which reward talent more adequately. Business decisions are no longer taken on the criterion of profitability, but increasingly on the criterion of security; a study by the Institute of Economic Research has shown that the “safest” investment is usually preferred by New Zealand firms.

This is, of course, an over-simplified picture of the New Zealand economy and society. Many talented people, some recruited from abroad, have continued to make their living in New Zealand, and there are still venturesome businessmen here. Yet the criticism remains valid: the New Zealand economy does not provide enough incentives for bold innovation; and if ever bold innovation was needed here it is needed today. A country’s economy reflects its social values, and a change in New Zealand’s social values will be needed before the country’s economic problems get the attention they deserve. A shipping company which refused to engage pilots on the ground that their fees were too high would soon find that salvage fees were even more expensive.