The Dominion.

Dominion, Volume 8, Issue 2556, 2 September 1915, Page 4

The Dominion.

THURSDAY, SEPTEMBER 2, 1015. \ PENALISING SMALL INCOMES . ' 9 — A weak spot in the Government's taxation proposals was touched on by tie member for Hutt in the Budget Debate on Tuesday evening. "Under the. proposals of the Minister qf Finance to tax incomes and land," ho said, "small' shareholders of companies were called upon to pay on dividends at the highest rates." The point involved is one of very wide interest and importance' as affecting shareholders of public companies, and the injustice perpetrated by the existing law and seriously accentuated under the n:r>v taxation should he removed. The position is that companies ai'c now taxed on the whole of their income, the tax ranging from one shilling in the pound on incomes up to &1200, to one shilling and fourpencc in the pound on incomes over £2400: T ( he effect of this is in the first place that shareholders a fa Hot ta';d aa t individuals but l£eir vc&usctiye Lj iiK

comes from the company to vlnch they beloiig arc lumped togithor and taxed as a while. That is to #av, a man or a widow may have invented £500 in a company which- bas an iuoorne, say, of £3000, a,id piiys.a dividend of six per cent. The shareholder receives £30 income r nra the investment-, but whatever his or k-r income may bo is taxed oil this monoy as though he or she had an income over £2400 a year. The position, lioWover, is even mow unjbhfc than this. A company mav have a working capital of £100,000 ana an income of £5000 which enables it to pay a dividend at the rate of four per cent, to its shareholders. It is; taxed. at the highest rate which tho law establishes. Another mt.ve successful company with a capital of only £50,000 earns an income of £5000 and pays a dividend al, the rate of eight per cent. —or tlou'.le the rate of the bigger company. 'I he shareholders of the £100,000 Company only get half as much income on their investment as the shareholders in the smaller company, yet they arc .called on to pay just as much taxation. Still more glaring anopialies could be quoted under the existing law which takes no heed of the amount of capital invested in a company, but onlv the income the company cams. • These injustices are now to be aggravated by the extension of the graduated tax from the maximum of one shilling and fourpencc in the £l to a maximum of two' shillings in the £l oncompany incor/ies_ between £2400 and £5600. _ In addition a super-tax of 'one-third extra is to be imposed on all incomes. This means that all shareholders in companies, however big or little thsir individual incomes may be, are tc suffer, in justice piled on injustice by having their incomes from, suoh companies further taxed at a rat© from onethird hicrher to double that of last year. When the Land' and Income Tax Amendment Bill of 1013 was underi. discussion the then Finance Minister, Mr. . Allen, admitted the injustice of . the existing form of company taxation on the total income, and other members of Parliament also directed attention to it. In. Australia, we believe, the injustice'lus been overcome bytaxing'the individual incomes of shareholders, and not ths total of the whole of the incomes lumped together as is , done here. It must be homo in mind that public companies are essential to tho development of our commercial and manufacturing .reThey are in the. main'of ths nature- of co-operative concerns in which a number of .people come together to develop some branch of business which could not bs undertaken as well, if at all, by single individuals.; Instead'of discouraging investments, of savings in these enterprises which have . helped so materially to swell the volume of the country's prosperity they should at least -be treated with fairness.'. By all means let' the incomes earned by companies be taxed; if thought desirable individual incomes from such investments might even bo subjected to some special form tof taxation on the plea, sometimes v mit forward that they are "unearned" in, the sense that they are not worked for; but such taxation should.be framed on equitable lines and_ not as at present on a basis which ta,xes a man receiving an income of £25 from his investment at the same rate as a man -who receives £25,000. The Government should give the matter its attention or serious injustice will be done under the new proposals to a very largo number of people. ' -•