THE HOUSE

Dominion, Volume 10, Issue 3173, 25 August 1917, Page 8

THE HOUSE

.'[FINANCIAL DEBATE Sin JOSEPH WARD REPLIES, TO. . ..V CRITICS. j Tho, House of Representatives ,met at '2.30 -p.m. . .. .. ... , JJr. -.A.- WALKER (Duncdin . North) continued, the i'inancial debate. He liiade a protest against taxation of commodities in-general use, and especiallyagainst the taxation of tea. He suggested to the Minister of Finance that he should extend the graduations in the income tax above.-7s. 6d. in the pound for incomes J£6«o : ,a.'year,.'.'™ advocated a reallotmeAt of portfolios, devoting most attention lo tlic Reform members of ttie Government.. 'His-opinion was that these Mir.istersdield too many of the important portfolio?.' .He advocated a general elec- . tioii,'tliiii,vciir "to clear. tlie air." Sfli'. JOSEPH. WARD (Minister oM'inaiiqe) -replied .at-3.45 p.-iii. He said that lie- wished- to ;• thank the House for the manner" in which ' tho ■ Budget -had been debated,; aiid for 'the general cordiality with wliisli-it bad been'received. The last speaker,,.had...iii'..his''skilful' attempt' at Cabinet-making, forgotten that, there was a vacancy-still.. (Laughter.) . An lion, member: 'Is: lie in the running? ' ; Sir Josejl; Ward said he thought tho honourable member should have had in mind the wordf 'cf -tli'e old song. "Walker IWalked Away.";"(Lahghter:) Only one or two of the proposals in. this very important Budget hail been adversely criticised, and these w.>r,> not 'all the most material.'-sections' of it; Somo members had' tak^h'excipticri It the vote'of .£250,OOU.i'qr, folt.jv.''ph ?r,elision, but he could Assui'b the Ji-;"! t-ia',: this work' was absolutely esscFtv.ii. f'.i,i:o of .-the extensions would havo assoonas the v.-ivo and 'V v.-rjuisiles could b" obtained. Verv -w nombers had found fault with, the nr-'jw<*s for snecial taxation to compel certain peonlo to sub-scr-be In flip War loan. He could as-sure.-.these honourable gentlemen that in spite of their airy talk about the ease of raising money in New Zealand iliat . something of the kind was, absolutely necessary if we were to get the jponey required. He asked honourable members to await his proposals in the Taxing Bills. ■ War Bonuses. K# isaid ihat : the members who. Nad tiled-. to-castigato the. Government by protesting against-ths payment Of v-av Iwnusis"to. Civil Servants should got up

and apologise. No war bonus had been given to. any Civil Servant in receipt of more than J-jl.i a year. A special vote was taken for the recognition of special services by the higher paid olticesw. 'I liesc special services were always recognised by private businesses, and if the' Government did not pay lor this extra worj; additional men would have had to bec-iu-I at higher cost. The Tea Tax. Some members had shown remarkable lack of courage regarding (he lea lax— a tax of id. per head of tho population, a tax of 3d. a week, amounting to l-.s. (id. a year, for a family of five. It was too paltry an affair to justify all the outcry. And tho Government had such an easy alternative. This money was •'being riased.to provide'.funds'- for tho. payment of war bonus to pensioners. Sir. 'Walker: There were other alternatives. Sir Joseph Ward: Don the honourable gentleman forget that we have another year ahead of us? Does lie imagine that the Government was unaware of these other avenues? lie went oa to sn.v that there would be more taxes next year, and -if the war went on cv?ry available source would be tapped. The Exccss Profits Tax. He justified the dropping of the profits tax on the ground that it would not provide the money required. Jt' the lax had been double it would have been short of two millions of 'the amount which the House was now asked to provide. If. on the other hand, the proposals of some honourable gent emen were accepted ruin would be brought upou this country, but the Government was not so weakas to accept them. 'J here was a regrettable lack of understanding on the part of some people as to the seriousness of our present position, and ho regretted to say that, some of the people whose pet schemes were not adopted by the Government were sending circulars round the country practically advising the people not to subscribe to the. War Loan. Tax Commissioner on Excess Profits. He read to the House the following re-' I port bv the Commissioner of Taxes on the excess profits tax:— "The-collection oi land and income., tax and excess profits dutv for year elided Jlarch 31 last yielded Xi,975,213, made up as follows:— X tax 713,118 Ordinary income tax 1,Ki11,701 j Special tax under Section 5 762,175 iixccss profits tax 1,862,5)1(i ( A 975,243 ; "from this it will be seen that tho j excess profits duty, in spite of the sau- j guine predictions that were made by j many persons as to its yield, some reach- ( ing .£7,0110,000, fell short of the estimate , by <£110,000. i[Sir Joseph Ward explained j here: "I stated iij. 'the House on a pro- j vious occasion that this was .£IBO,OOO, j but I had then in mind'the .fc33,000 that , had been deferred for people who were unable ic pay ill time."] It is thre that with amounts paid since llarch 31 and those still to be paid wc shall just about reach tho two million, but then t'hero is always a certain of tax' uncollected at tho end o£ a finaucial year.

"If the taxis to-be-continued itliis year I would not venture to estimate the yield at more than ,£1,250,000, while if the modifications and concessions that are sure to bo domanded when it comes before ths House again are granted an estimato of ;t!l,000,1)00 would not be safe. "That modification is required to remove the present inequity cannot bo denied. In this country there is naturally a far larger proportion of undertak-, ings in the course of development than in tho older countries, and these by reason of tho absence of a normal standard incouic are taxed out of all j proportion to tho actual income earned 'when compared with established undertakings with a normal standard. In many of tho former cases the "tax paid amounted to upwards of 33 l-3rd per cent, of the assessable income, while in many of the latter the percentage was only half that. The* worst aspect of this, in my opinion, was that in a large proportion of the latter cmcs the taxpayer was quite willing to pay more. Many of them told me that they did not consider that they were taxed heavily enough, and two or three actually paid in amounts up to J3MO which they considered they should pay, but which under the law I was not entitled to collect.

"In the attached schedule I have given a few illustrations of the inequalities referred to above. The difficulty .is to fix a standard which while it resulted in an adequate assessment of established concerns, would not penalise thoso in the process of development. "I see no way out of tho difficulty. Thinking of this brings to mind another objectionable feature in connection with this tax and that is tho discretionary power vested in the Commissioner. Yoii will remember that I objected on principle to this last year. My experience since then has - certainly, not weakened my objection. It is not right that an individual or oven a body of individuals should have the power that I liavo under the present Act to fix in camera assessment of tax. .

"Tho underlying idea of fhe Act, viz., to appropriate a portion of tho profits duo to war conditions, is admittedly a good one, but this tho. Act has failed in many cases to do. To assess actual war profits would require a procedure and machinery so elaborate' that in normal times would be slow and difficult to operate, _ and under present conditions impossible. Even the present method of assessment, simplo as it is compared with what it would bo if we hnd to assess actual "war. profits," imposed a very severe strain' on 'tho depleted staff. For this reason. I could not recommend tho suggeition of having an alternative scheme whereby wo might take "citlior income lax or excess profits, according to which gave the greater amount. Such a scheme would increase rather than lesseu the work, and whero promptitude .in collection of the -revenue is essential itis important l.liab the scheme of assessment and collection should not be so involved as to cause delay.' Thero is the further objection that it would increase tho uncertainty of the taxpayer as to the amount ho would liavo to pay. "To summarise, my objections Ip tho excess profits tax are:—

"That I do not'think it will yield the revenue obtained last year.

"Tint its incidence is too >>rraiic and inequitable. •

"That no'.reliablo estimate of the . revenue to be''obtained from it can be made, 1 and that more especially in view of the modifications fhat might be made '"That too much discretionary power is required to deal with the large number of cases to which no fixed rules will apply. "That a graduated land and incomo tax eaii be more accurately estimated, and is more equitable in its incidence," What Are Profits? It was not possible- in this country to liavo'a laud (ax,.'a progressive land "tax, an income tax, and r progressive income tax, and in addition an excess profits tax. .ft was foolish to draw comparisons with England, where the land'tax was infinitesimal as compared with ours. He cordially endorsed the high' encomiums showered on the Commissioner of Taxes for his ability and tact. This officer, whom members valued .so highly, had reported that the excess profits; tax would not suffice to provide the.amount of money required. There was'much talk about the millions and millions of war profits supnosed to be ..earned in this country. Did lhe honourable members who spoke at large of these millions of war profits sunpose that no attempt had-'been made to discover.these profits? The Taxing De--oartment could not find them. He had therefore decided that he must not depend on taxing these millions, and he had decided to. get money from the same persons by -way of income tax. It was said that because wo had increased .our exports enormously we were making a. profit of the amount of the' increase. But 6ome of our exports were of sheep and cattle, and this heavy export of stock had been achieved at the exnense of depleting the Hocks Somp of the increase in export was not a profit, hut a realisation of capital. Mr: Okey: They would not have made so much this year. Sir Joseph Ward said that it was fallacious to calculate that all the thirty millions realised for our produce was profit. Tin ventured to suggest that the profit on the- thirty millions of export would be no more than 10 per cent. If it were !!u per rent, it would be a

marvel. To Ihoso peoplo who spoke of the enormously increasing wealth of tho community he would point out (hat the value of mortgage in New Zealand had increased by .'ll millions since tlic year before (he. war. This was :iut evidence of increasing wealth. Mr. M'CW.bs: It may be- due to inflation. Sir Joseph Ward said that ho knew of one'linn that had increased its profit rate by only one per • cent, tiiice tho war period, and that firm did purely an export business. Other businesses had had similar experiences. The Price Tax idea. He expressed the strongest disapproval of the proposal made-by Mr. Ansley for a price (ax. This tax would levy heavy toll on some poor men who made no profits at .ill. It would not remove the anomalies of'lite excess profits lax, which was escaped by many wealthy men in receipt of.rich incomes, and which was pnid by many comparatively poor men. Mr. Lee: You ought.(o give il back l( them-. .Sir Joseph Ward,: We cannot give any. thing back in wartime. Mr. T.pe: >,ofc even (lie butter t?x? Sir Joseph "Ward: AVe have never had that in the Treasury, and that is a pretty gcod indication that it is not a. tax. (Laughter.) He had always been opposed lo tho aggregotinii of land, for he believed that New Zealand would progress and develop most when Ihe land was occupied in small holdings. However, it was not possible for :i National Government to deal with a question of this kind, involving srave party issues. He was advised, however, that there had not been -so much 'aggregation as the remarks of some honourable members would lead one" to suppose, if, indeed, there had been any general movement at all towards aggregation. About Unnecessary Taxation. He .did not hold the view of some honourable gentlemen that taxes should be. takea from the people unless they were necessary. Mr. Webb:--But (hey are necessary. . Sir Joseph Ward said that if the honourable member were, to levy the heavy taxes he urged for the purposes ha had in mind he would ruin hundreds of people without knowing that he was doing it. Tho taxes already proposed would bo Equivalent to -10 per- cent, of the income of those paying the taxes, and he would seriously honourable members how much, farther we should go. Surely we should not go on to increase taxation when it was not required. His opinion was that we should levy' taxation now only sufficient to provide ('or war emergencies, and that after the war it won]-.', be the duty of the Government to reduce taxation to the lowest possible level. The land taxation imposed under the Budget would amount in cn-:es to a ground rent of £i 7s. Gd. per cent. Some critics in the House' had askwl for increased taxes on laud which would have been more than tho unimproved value of the land.

The Mortnage Tax. Objectionable as Tiio mortgage tax might be on sentimental grounds, if exemption of mortgages were allowed the whole of the land revenue would slip away. He hoped, however, to be able to give some relief, to lliq nion who had given small ■ mortgages. .Exemption of mortgages allowed unscrupulous peoplo to increase their mortgages to such an extent that they had to pay no land tax at all. It was astounding how many people, acting within tho u»\ (l:d contrive to increase their mortgaged during the period of last year when mortgaged liuterests were exempt from taxation. Mr. Payne: You should make- (he penalty imprisonment.

Sir Joseph Ward : "The difficulty is that you hav-f to prove it. You c:ui.'t prevent man from mortgaging his land. In doing that he would, not be committing a breach of the Act." It had ot-en u.rged that the Government should increase the death duties tax. His answer to the suggestion was, "Lot us wait to see wlic- • thor wo require it." We were imposing an additional J.'G,000,000 in taxes on the people of New Zealand—a colossal sum— and if we had any luck during the year we should have, sufficient money to add materially to our reserve in London. He [ was strongly of opinion that nothing 1 would have a. greater effect in strengthening our position after Hie war than tho possession of reserve funds to meet the, extraordinary calls likely lo be made on the country when llio war was over.

The Loan. A splendid response was being made to the War Loan, ho was happy to fay. It -was supposed by some, people tbnt every investor in the War .Loan hud money ready waiting to put it into the loan. The great majority of tho people in this country wlio contributed t<> tho last War Loan borrowed part of the money—somo as much as !1(l per ccnt.. of the money—to put into the loan. But while many people had done this, others with means hail Jiot contributed to the loan. This was the reason uhy he proposed to introduce proposals to ensure equality ot sacrifice by compelling these people to. bear their burden. The Income Tax. A gre'it many members had ii:gcd tha removal.of the limit of .£6IOO, at which graduation of income tax ceased. But tho result of this would be to put half the companies in' .New Zealand into liquidation. Mr. Payne: You could get over that witli a special company tax. Sir Joseph Ward said that New Zealand wanted all the money it had set out.to get. Nor would it be a good thing as some honourable members supposed to drive out of the country all the men with big incomes. . New Zealand wanted all tho men with big incomes, and wanted them to go on paying their heavy income tax. It was because there were many such men in England that Britain was able now to send the Germans on. their way back to Germany. The "silver bullet" would be the most effective to end the war, and it was .nonsense to speak of wealth as if it were a danger or a pest. The taxes on wealth were already very high. In a case of which he had knowledge the land tax and income tax combined v;ould' amount in all to ]3s. in the pound on income. Mr. Young:. It often goes to 10s. Sir Joseph Ward said that in view of *this fact honourable members who urged heavier taxation should put on their considering caps. No "Squeal." IJe knew the taxes were going to bo burdensome. TherS were many people in the country who would have" to -borrow money this year to pay their taxes. But he could not help it. however sorry ho felt about it.■ If he had granted all the requests made to him for relief of alleged hardship he would have lost .£1,700,000 . in revenue; and that lie could, not - agree to do. Personally ho came under all tho taxes cseept those, on beer and whisky (which he never drunk), so that the taxation would hurt him as much as it, Would hurt anybody. If it should be n.eces.i.iry ?iext year to double the taxes and take the whole-of' a man's income-to win the war. he was willing to do. it. It was ono of the finest, features in connection with the war that men with large incomes were not "squealing" because of the burdens (l ey had to bear, .lie proposed to provide fur relief being given to small, shareholders in companies to protect them from .. tho levying of income tax at the maximum rate. Much had been , c aul in condemnation of the. tea tan. It was a tax which would be felt by tho workers, but it was the only war tax that' they had been asked to pay,'and <>'ne of'the objects of the tax was to provide IVmls with .which to give. .£220.000 in ■wncessions to the friends and relatives of the working people—the r.ld age pensioners and the sufferers from pneumoconiosis—a concession which would be' a great boon to them in these times.. Tie did not agree that the tax would appreciably increase tho cost of living. The Deveiius from Liquor. Ho had a little to say, (00, lo tho temperance people—for whom, lie said, he had a most profound respect—and their demand lor the abolition of liquor in war-time. This country injected National Prohibition, but tho House was endeavouring <o bring • about sectional Prohibition although tho people had not authorised it. This could not be denied. Mr. Malcolm: The people are deinandI"? Sir Josenh Ward sniii In- would cot

discuss tho ethics a!' the cai'ly-closing pro, posal. llis uuly interest in the question Kiis :u jlii)it.l:;r ,t' finance. If tliia country ever, declared i'jr National I'n;>11bition, il wouid liavi; to pruritic t'ur a loss of Custom:, revenue, to say nothing of Hie loss of revenue by local bodies troin licences, of it lea.;t a million iter, ling. 110 wanted to ask ilioio people who objected to l!io leu duty now tliey thought this extra inilhoii' could bj raised.

Continuing after tho dinner adjournnicnt, Sir Josc-ph Wind said he believed that New- /inland w;;s moviug in the direction of fatatc control of the liquor traffic. Sumo cliuugs ( iu ihnt dim-lion would be necessary. iVlieu tlie iiuic- came the Dominion would have to lind about a million of extra revenue to replace tlio revenue, at present drawn from liquor, and the money would nave Uj oa found to some extent by the people who were objecting to the tea duty. Bser and Luxuries. IMcrring to the beer duty,' the Minister said lie had not been responsible ior the failure of the revenue tram beer to reach , the estimate. He hud taken the figures supplied to him by his officers, and it should be recognised that the departure of 70,WU men iur the front was bound to affect the consumption of beer and consequently the revenue. With regard to the importation of luxuries, the ±louse should remember that the stoppage of the imports would deprive the Government of an important portion ol' its revenue. He was not sure that the money so saved by the people would reach the Treasury. A heavy increase in the duties would.check the importations, and so would not increase the revenue. A suggestion had been made that the Government had not collected all the money that should- be paid in income tax and profits tax; He could assure the House that the Treasury was 1 not neglecting its duty and was going to collect any money that was owiug. The Government lind been blamed for inserting a free-of-income-tax clause in the provisions of the War Loan. The facts of the matter were quite simple. There would have been no chance of getting the required'amount of money at 1J per cent, with income tax payable, il' tlie Government had issued the War Loan stock at -31 per cent, with income tax, an investor with- an iueome of JioOOO a year would have received a- return' of only JJ2 lis. per cent, on his investment, l'igures that had been prepared by his officers showed that with the present rates of income tax it would have been necessary to pay 0J- per cent, in order to give large investors a reasonable return on their loan stock after paying their income tax. The Government' could not do without the big investor at tho present time. If the Government had paid. (J.V per cent, the banks would have bfceii compelled to raise the rates of interest on deposits in order to hold them. Other financial institutions would have been forced to raise the mortgage rate, and tho price of money would have gone lip all over the country, the chief sufferers being the small people. With regard to the cntertuinmcnt tax, a. demand had been made for an increased rate. But he had seen, figures showing that at least one important group of picture theatres had not made profits during the last twelve months. This tax would liavo to be paid by the . people. But expedience in Australia and England had shown that the people would not pay the tax. Over 800 picture theatres in Kngland had been closed, and tho Australian authorities had found it necessary io exempt tickets costing up to sixpence. The estimate of the revenue (from the AiHtralimi entertainment tax had been J;1,C00,110, but only .£100,00(1 had been collected, the shortage being ,£900,000, In conclusion. Sir Joseph Ward reminded tho House again that the Budget proposals were intended primarily to produce the revenue demanded by the of the war. Tho new taxation munt bo considered in ilio light of that fact. The Speaker left the chair at 8.5 p.m. and tho Houso went into Committeo on the Estimates.