No Change In Trustee Bank Taxation

Press, Volume CVII, Issue 31520, 7 November 1967, Page 14

No Change In Trustee Bank Taxation

No change in the basis of 1 assessment for tax of trus- 1 tee savings banks is recom- j mended by the Taxation Re- , view Committee in its report < tabled in Parliament last . week. i The report says that while j the committee is not con- j vinced that a case exists for j special tax concessions for . trustee savings banks, it is , conscious of the very import- j ant role played by these banks , in the national economy. Any , variation in the basis of assess- ; ment should stem only from j direct Government action if i such intervention is consid- : ered desirable ' as part of , general monetary and fiscal . policy. According to the report, the trustee savings banks contend that because their activities are subject to a large measure of control by Government and purchase of Government stock to a required level is mandatory, they should not be assessed for profits arising from these investments. The committee does not accept this view and considers that profits arising from investments are legally and pro- < perly assessable. Losses from . investment are deductible for , j taxation purposes. In adverse j conditions this could be of ad- . I vantage to both the banks and ' ’their depositors. Unique Position The position of the trustee banks is unique in that they have no shareholders and are administered for the benefit of the people. On a local basis their donations assist many worth-while causes while, on j a national basis, the share of profits paid in taxes relieves the whole community of part of its tax burden. Thus the banks profits are fully devoted to the benefit of the general community. To permit them to deduct donations for tax purposes while denying a similar concession to other taxpayers would introduce an unwarranted distinction in treatment. In order to halt the downward trend in the percentage ■ of reserve funds to depositors’

balances, the trustee savings banks suggested that they be given relief from taxation until reserves reached a 10 per cent relationship to depositors’ balances, either by granting exemption from tax or by applying a reduced flat rate to savings banks’ profits. The report says that the present smaller ratio of reserves to depositors’ balances than existed many years ago is not necessarily indicative of a pressing need to improve the amount of reserves. Furthermore, trustee savings banks are guaranteed by the Government and the case for measures to permit greater accumulations of reserves should be considered against this background.