FRESH TAXATION

Dominion, Volume 8, Issue 2551, 27 August 1915, Page 4

FRESH TAXATION

THE BURDEN TO BE BORNE CARE AND ECONOMY ENJOINED ; POSITION CALLS FOE VIGOROUS ; TREATMENT. 1 It is necessary, when estimating the ' amount which will have to be obtained J by fresh taxation, to consider, as well : as we are able, the ultimate annual 1 amount- to which the country will be ; committed in connection with war ex- , penditure and other special demands in ! order that suitable provision may be made to meet the burden. It is im--1 possible for. any one to say with any 1 degree of certainty what' amount the Dominion will have to find to cover war pensions, but tho best estimates which have been provided place the amount at approximately £1,000,000 per annum, on the assumption that the war will last another year. The annual interest and sinking fund payable on war loans of, say, £12,000,000 will amount to, roughly, £700,000. The whole of these amounts will not fall to this year's finance, but in addition t-o the deficiency shown for the current year of £827,941 we must provide for, ; say, £150,000 for supplementary esti- ' mates, £34,000 additional for Superan- ' nuation Fund, and a considerable pro--1 portion of tho pension aiid interest I ; havo referred to. | There must be neither delay nor un--1 certainty in the country doing its finan- ' cial duty to. those who have offered 1 their lives for the protection of every man, woman, and child in the Do--1 minion, and who have assisted in the 1 preservation of the- British' Empire. It ■ is next to impossible to forecast with ' any approach to exactness what the * position will be at the end of the war. ' • I have endeavoured to the best of my ability to keep on tho safe side, but > much depends on circumstances beyond ■ the control of the Government or tho • ■ pcoplo. . ( Proposed Increases of Revenue, . \ Though tho demands aro large it is : well within the capacity of the country ■ , to provide tho necessary ways, . and ] means to meet them, and it must not i be forgotten that every country en- i gaged in tho present war has to faco luigo deficits and to shoulder burdens ' of an unprecedented nature. In this respect New Zealand is in a, similar ] position to other parts of the British 1 Empire. With tho object of providing ; ' for the deficit, and for the interest and the sinking fund required for the final payment of all war expenditure, it is 1 necessary that some adjustments in taxation and in the rates for public services should bo authorised by Par--1 liament. Tlio financial position created by tho 1 -war is one calling for prudent and ' vigorous treatment, and must be faced ( by the Government and the people with ' inflexible courage. I cannot too strong- : ly impress upon every section of the J community the necessity for oare and i economy, especially in the matter of l luxuries, until the great war now rag- 1 ing is over. I do not wish to suggest s that there should be a diminution in f employment.' On the contrary, both i Government and private individuals ] can materially help the country in com- ; hie successfully through the present ( crisis by maintaining employment at i its normal maximum and at the samo I time doing everything possiblo to pre- c vont waste and extravagance. As a i producing country we possess enor- n mous advantages in comparison with c most other countries, but we must not f rely upon tho present high prices for t our principal products being maintain- I ed after the war is over. _ Tho huge c and unequalled war. .ospeiidituja of tho_Lc

oldor countries must, enormously limit : the purchasing power of their peoples ■until sufficient timo lias elapsed to enable the nations to take stock of the altered conditions and to adjust their taxation and' finance to meet the requirements of the now order of tilings. Wo shall require to do likewise, and it is our duty to tako all- reasonable precautions now to prepare for the exacting task that lies before us. If we aro to recover quickly tlio losses we are suffering in the struggle in which wo are engaged, there must be cordial co-operation and ready self-sacrifice from every, one. A Time for Self-sacrifice. The future calls for self-sacrificei from every one in the Dominion, and I confidently appeal to those affected bv the proposals I am now submitting to face the position with broad-minded and undaunted determination. In all probability on the conclusion of the war it will be practicable to make very considerable reductions in taxation, and it is merely necessary to say that tho Government will have very great pleasure in doing so. £2,000,000 Per Year Additional. It would not, in my opinion, be prudent at present to base the extra amount required at a lowor sum than £2,000,000 per annum, and it will depend entirely upon the duration of the war Whether even this large sum will not in the future require to bo increased. I am hopeful that it will not, but this cannot be definitely determined at present. Wo may hope that in a, year from now the war will be over, and that the circumstances then will enable ns to . make a considerable reduction in taxation. In any event, though the burden is heavy the people can be trusted to bear with equanimity whatever is necessary as New. sllare in maintaining the high traditions and priceless freedom of the British Empire. As it is- essential to distribute the incidence of the increased taxation over tlie widest possible area, in order that its direct effect may be least oooressive, I will submit' a number of ■ important alterations to the.House which I hope will commend themselves to honourable members. The increased taxation is proposed chiefly on account of tho war, and partly owing to the general expenditure increasing out of proportion to tho increase of revenue. Land and Inoome Tax. I estimate the receipts for 1915-16 as follow: Land tax, £886,340; income tax, £1,090,660. It is proposed to increase the land tax by the addition of 50 per cent, to i the present rates of graduated tax on ' country lands. Tho increase in the incomo tax will bo obtained by an extension of tlie existing schedule ol : graduated rates from Is. 4d. to 25., which rate will bo reached at £5600, and tho imposition of a super tax •of 33 1-3 per cent, to the ' schedule rates. This will-give a Tate varying from Bd. on tlie lower taxable 'incomes to 2s. Bd. on the higher ones, 1 In view of tlie fact' tliat many busi- ' ness people whose incomes aro taxed are ■ also paying land tax, and in many cases graduated land tax, this is considered to bo liigh enough rate "to impose, as ■ iu many instances tip combined taxes will he equivalent to a tas of over ss. ! in the £1 of incomo.' ' It is not considered advisable to at- . tempt to obtain any increased revenue ' by lowering the exemption, as the extra 1 expenditure that would be incurred 3 would not be warranted by the result, 5 and the class that would be affected by J such a change is already.paying its tax- , ation through tlie Customs, and is suffi- , ciently burdened by that anifby the in--2 creased cost of living It is not Pfo- ; posed to increase the tax on mortgages; ■'

War Profits. . It is generally recognised that thoße who have been making largo profits due to the war should give an additional amount towards the financial requirements of the country. I shall not be contradicted when I say that large profits have been derived from the sale of wool, meat, and dairy produce. . To provide for a reasonable contribution, to defray a portion of the cost of the war I propose that the income tax shall apply to income derived from land. Five per cent, of the capital value of the land will be deducted from the assessment of the incomo, and the exemption of £800 will also be allowed. I estimate that £250,000 will be obtained by this alteration, and considering the high prices that have been realised for sheep, wool, meat, and dairy produce, it is not a large contribution from thoso affected. The total increase of Jncorae tax proposed will amount to £001,6G0, and will reach tlioss wliose additional profits havo been due largely to the war. Additions to Post and Telegraph Charges. I propose to make some small additions to the charges leviable for postages and telegrams;-and, although it is anticipated that the amount realisable will amount to £380,000, yet, owing to | the vast number of pieces of mail matter and telegrams handled, it is estimated a very small increase in the minimum charges to which they are subject will yield the sum indicated. I propose that the initial rate on telegrams be increased by 2d., that 2d. be added to tho, inland charges for cablegrams, that the initial charge for bureau communications within a radius of twenty-fivo miles bo 6d. for both subscribers and non-subscribers, instead of as present 3d. for subscribers and 6d. for non-subscribers, and that a special war tax of id. be levied on all articles posted except newspapers. The amount realisable under each heading is- estimated as follows £ Telegram and cable messages: Increase of initial rate of 2d. 50,000 Bureau messages: Initial rate made'6d.; to all 20,000 Postage war tax of Id. on all articles posted except newspapers 310,000 £380,000 Railway Increases, - The railway passenger and goods rates will be increased to the extent of £360,000 per annum. This becomes a necessity from causes duo chiefly to the war, and it is .impossible for the Railway Department to provide sufficient ways 1 and means under conditions now exist- ! ing. Prices of materials required for the maintenance and- extension of the services havo risen enormously. I may givo a fexv instances: The oost of canvas has increased 100 por cent.; rails, 12 per cent.; fastenings, 9 por cent; steamer freight on rails, 102 por cent. Girders, ironwork, and genoral materials have also increased greatly in price. In the locomotive branch an average increase of 40 por cent, has taken place in respeot to matorials used in building and repairing engines, cars, and wagons. In view of the foregoing and the fact that indications point to still further advances, it is evident that the Department cannot satisfactorily carry on its operations and provide 3J per cent, on the oapital invested unless tlio

rates are raised to meet the emergent conditions arising out of the war, and' after carefully looking into .tho whole.. position it is proposed that passenger. rates be raised by 8 1-3 per cent., and ' goods (excepting timber) by 10 per cent. Assuming that effect is given to this proposal, the rates, operating ' fop . conveyance of dairy and other farmf produce and live stock will be less than . those ruling in 1891, when the industries were ether languishing or in their in-; • fancy, while the proposed advance is «o! ' • infinitesimal as to be negligible as far as the increase of prices over the coun< ' tor are concerned. The effect of tho proposed increase hff rates would be as follows: — Butter, SJd. per £100 of value, ; Cheese, Is. per £100 in value. V Wool, Ib. Bd. per £100 of value.' £ Frozen meat, 2s. Bd. per £100 ofjj value. " - 1 Sheep, 4a. Bd. per. £100 of value. I Cattle, 3s. 9d. per £100 of value. // ■ I omit timber for the reason that thd - ■ '. increase would be on white pine £1 14Bk sd. per £100 of value, and on red pin<J £1 ss. 3d. per £100 of value. Timber . is used moro or loss by 01 1 classes of the community, and the general increase proposed to be put oil other goods if applied to timber would injure the ins dustry, which is at tlie jnoment »i>rM , ( judicially affected by thei war. • DisorinW ination ln't'his article is consequently qf necessity. • • - In regard to passenger fares,: the 8 1-3 per cent, proposed works out at ft penny in the shilling, and thi6 would be applied in all oases excepting work* ors' tickets. An adjustment of cxcum • sion rates also will be submitted, I estimate these ohanges will produce : £360,000 per annum. My colleague the . Minister of Railways will furnish fulj. . details later on. Tlie alternative to the increase ol j rates would be a drastic curtailment ol the train mileago run. . Necessarily ' this would involve greatly diminished train services and the dismissal of a very large number of employees.-- Such an : undesirable course can be avoided bj; , the adjustment I have suggested. Customs Duties. . To make up ilie shortage of revenues > due to war conditions, *uk! to strengthen: our finanoes, it will he necessary to imj ; xx>se duties upon some articles commoj- | ly regarded as luxuries. An all-Tounq, i duty of. 10 per cent, ad valorem on ; motor-cars, and 50 per cent, additional on cars made in countries which 'are ' now or may be enemy countries. Bicycles which have hitherto born| • ' a duty of 20 per cent, if British, and"1 1 3(). per cent: if foreign; will he to the same rate as motor-cars, witq I' tho same conditions a? regards eriemjl:1 countries. > : - 1 A duty of 4d. per gallon will of placed-on motor-spirits and kerosene. . ' Ido not think any exception can bi. ■ ■ taken to the proposal for increasing - , 1 the duty on petrol, etc., for. motor*, " cars. Kerosene, which formerly had v;, i duty ;of 6d. a gallon, is also inoludedj - 3 Petrol cannot be taxed to produce v 3 revenue necessary unless this is done, 5 Tyres are to remain free_from British' . and neutral countries, with a 50 pet. - cent. ad valorem tax on tyres fro.nj'. 3 enemy, countries. ' . 3 ■ . V:. 1 Beer Duty. 5 Excise beer, which ha 6 hitherto paif s 3d. per gallon by means of stamps' aw •. tached to the casks upon delivory from - the brewery, will be taxed by an eip ; r tirely new method. The Government's- - 0 proposal in regard to tho_ beer-tax iar--1 one that should commend itself to the - 1 House. It alters tho system chiefly, '■ to ensuro that lighter ales—that is, - V ales with less aloonol In them—should: - bo manufactured in this country. lam - satisfied as the result of close inveej: - tigation by the Customs Department: * that the full revenue I indicate undef these alterations will be obtained. Tlicj _. ■ J

v . ———1' - duty will bo assessed on .the , quantity , j and with respect to the specifio gravitjj j of the .worts pitched for fermentations. I The_ worts of low gravity will pay a- . minimum duty, which will increase'witlj j each_ unit ;of rise in gravity. j s Spirits will be increased from 16s. pel > P r ®°f gallon to 17s. per proof gallon, i Tho total increased revenue from thrf foregoing adjustments 13 estimated ai . £340,800, of which sum £55,000 is rel | presented by increased beer revenue*4 * s Non-Alcoholic Beverages. As all classes of the community wilt" ; I am sure, desire to join in the nocesj sary sacrifices to help tho country at | this juncture, I would ask those who ; use non-alcoholic beverages to join iri providing a part of the extra' rovoinitj necessary. 1 propose that an exciss duty of Id. per gallon he put on all' non-alcoholic beverages to be defined* It. is difficult to estimate what thg revenue from this will be, but I putf it dowu, in round figures, at £20,000 i ■\Vo shall, however, not be able to a&J oc-rtain definitely what is to be expected from this until it ha© bad a full year's trial. • The full benefit to the revenue of thei increased duties on spirits will not-.acf cruo for many months, as. mercharitgy anticipating changes in tho tariff, hanj ' cleared from bond all available stocks of these articles. The amount of inflaJ tion of revenue during the last tw<J months due-to this cause has been aboul £130,000. / ■ It should also be remembered thiii} the new ditties"will be. in force f<w: seven months of the year only,' thai) there .aro large stocks of motor-spirit^ ; ' and kerosene at present stored in tliei ; Dominion, and that the consumption oft most articles will be reduced on account of.war conditions, the absence of'manV of our-men on active service,, and. other causes. _ . y \ Taking all these facts into considers}tion, I do not think the increases ,fofl : tho present financial year duo to thd : new duties can bo safely estimated af?, more than £120,000. In these I havo elected to touch a "few special: articles, and uot to increase the dirities on the necessaries of life. 1 Stamp Department Increases. I propose an increase on tho dutieij on conveyances, transfers, leases, seW I tlements, common deeds, and other as-t • sessable instruments mentioned in th<! second schedule of tho Stamp Duties Act, 1908, by 25 per cent, 'l'lio amountl of duty realised from this source dun , ing. tho last year was £175,0C0. Afteij. ' making allowanco for a shrinkage ill land' transactions, it is estimated that the increased tax will'yield £40,000 pofl ■ aniium. ; Bank Notes' Duty. The duty at present is 15s. per and realises £00,000 annually. I pro* • 1 poso to increase this tax to £1 per cent/I estimate that this increase will pi\H duce £20,000 per annum. Baiik Cheques. : Tho duty is at present Id. I pro-t. ■ pose to increase the duty to 2d. This increase is estimated to produce £50,000 annually. There are large numbers ofl blank chequcs stamped with Id. iu cir« culation. and these may be used with' an additional adhesive stamp for ai period of one year. After the expira-i .tion of that period all unused cheques stamped with Id. will be called in, . • an allowance made for them. Receipts. The dutj r at present is Id. on ever^

receipt for £2 and-.,'upwards. It is proposed tci increase this duty to. 2d. it is difficult to estimate the amount that 'will- be realised from this source, .-but.after a careful consideration of all ; available data I have put it down at £40,000. . Death Duties. , - There is not. much room for increase in these duties, nor is.it' desirable to increase the duty» on small estates, although they receive liberal treatment under the present law., There is one class of bneficiaries, however, which escapes very lightly ill the matter of succession duty. I refer to the children of wealthy persons. : At', present, such children do not. pay-, -succession duty .on a less sum than £20,000 each, which,for all practical purposes exempts them from'duty. "■ It is proposed to reduce .this exemption to £5000: for; each child, and to impose! a. duty of 2 ; per cent, oil successions over this amount.' .. I; estimate that this duty willrealise ' ■ £30,000 por annum. , ,: J : Mortgages of Land or Any ■ Interest .■ Therein. . It is proposed to impose a stamp duty of 55. ; per cent, on mortgages. . This tax is estimated to ' produce £40.000.' On release, reconveyance, or (discharge of mortgage a fixed duty; of ids.' This tax is estimated to produce £8000;, In the. 'United Kingdom an ad valorem duty has been imposed on mortgages for many years. " This duty is not a recurring one, and should not cause any hardship in its incidence. : • Sub-Sales of Property: ; . ■ A new stamp duty is'to'be imposed on all sub-sales of property at the same rate as' : if the purchaser took a transfer or conveyance of the property. This : dutv is estimated to produce £10,000 tier annum. It will'.fall almost entirely on the land ■ speculator. . , ■ Totalisator Dividends. I propose as a war tax to impose a 'dutv on totalisator dividends of 2J per cent. ' This is estimated to .produce £75.000. . . SUMMARY OP NEW TAXES ■ .'The rwholo. of the - taxing proposals ■ and increases in the rates. of the various public services will be revised with a view,.- ,to • remissions • andi. reductions . ' when- these are made possible by im- . -proved conditions. .In adjusting the taxation and tjje rates'for various public. services my object has, been to do ; so without imposing additional charges on the cost of living. I propose to alter the income tax and other taxes-so .that : those who have been making large profits, due chiefly to the conditions produced by the war shall pay a considerable portion of their earnings to, . .the;country, and this they should not grudge,ras the heavy borrowings incur- . rod for war charges have secured them in their, possession, and in the inestimable blessings they enjoy as members of the British race. For the'sake of convenience I summarise the proposed increases, in taxa- ' 1 tion and rates as follows; — '£ Land and income tax 619,600 • Post and Telegraph 380,000 ■ : " ■ Railways 360,000 Customs 285,000 Totalisator dividends .... .75;000 , Beer duty v 55,000 • Bank cheques '.-50,000 Landimortgages ;48,000 Receipts 40,000 ' Conveyances, transfers, ■ etc. v 40,000 '.'Succession duties'. 1 .30,000 ' , ■ ■; 'Non-alcoholic beverages-.20,000 , Banknotes 20j000 Sub-sales of 1and"...... : 10,000 • £2,032,600 . A Deficit still Possible. ' i I am, as I have indicated, estimating the total requirements at £2,000,000. A r revival: of inward; trade,_ which there is good reason to hope will .be the case, would- be favourably reflected upon the principal Departments • now adversely affected, and an early termination of the war would materially reduce the pros.pective liabilities.,.; We are reasonably . entitled ■ to take" both: these as probabilitiesi and are justified in basing our responsibilities on the "basis of £2,000,000.- lit must'not be forgotten that the •full amount of taxation and other,increases •of revenue will not come into ' *the during this year. I ■estimate that we will'receive by March; 31 - next not -more tlrin: £1,000,000-from the. increases now proposed." It is im- ' possible to give a fairly- reliable, ap- ; proximate estimate ,of the financial position, of the Consolidated Eund at March 31 next. It may. be that thero ; will be..a deficit, as the whole operation 1 . of the/increased rates and taxes cannot operate -fully .until the/, following year. I fee! it-to be my duty to point. this out now. There need misgivings on this account, as what I am now pr<> posing i,should, when- the ' changes : are in full, 1 swing,: more than balance the : revenue and expenditure.-V; 1 The Tariff. "While I realise that a . necessity exists", for revising the Customs tariff • generally in regard to certain matters, the subject is one of such importance arid difficulty that it cannot be dealt with at present. No. doubt the question ofi encouraging new;industries may, become more pressing when the war is over. We must .talco steps to prevent New Zealand being made the dumpingground [of foreign goods to' tne serious injury of- our industries, manufacturers, producers, and workmen. Thero is.no doubt that the.facilities offered to the German turer-'and merchant in gaining access to British and colonial markets have helped our, enemies to build up their large ; commercial and industrial [establishments, and to increase their! export' manufactures, thereby amassing great wealth from British countries, which has helped to. supply her with, the Binews of war. One way of preventing ' Germany again becoming a great commercial and industrial .nation , vfith the assistance of British countries is to prohibit German-made goods from, being imported into- New Zealand and other ■British countries. One of our supreme ■ • duties for- the future will b.e to make our people, as far as practicable, a selfreliant and self-contained The House will be asked to place a duty of 50 per cent-, on all importations, from countries that are now or may be enemies of- the British Empire; excepting such goods as may be exempted from time <to time by Order-in-Council.

- ; : ——— ■ • • ;■ * The comparison between, the estimated tax for the current, year ths tax for last year is as'followsi , Estimated Tax. Present Tax; ■ Decrease, Increaslr ' £ £ £ £ \ ■ Ordinary tax 307,000 307,000 ... 4» ' Mortgage tax 240,000 246,300 6300 ... }■' Graduated tax 339,340 265;100 ' ... . 74,246 ' '■ 886,340 818,400 net increase 67,940 Income tax , 1,090,660 539,000 ' v ... - C51,66Q : ; : 1 f Totals - £1,977,000 £1,357,400 ' £619,60Qi '