COMPANY TAXATION

Dominion, Volume 10, Issue 3178, 31 August 1917, Page 5

COMPANY TAXATION

"INEQUITABLE AND UNSCIENTIFIC." Tho council of the Wellington Chamber of Cbmmerce met yesterday to dirJites the taxation proposals of tlio Finauce Bill. It was decided to hold a meeting of business men from all parts of the Dominion in Wellington on Tuesday next, to consider the question of the taxation of shareholders in limited liability companies. "The methods of company taxation suggested in the now Finauco Bill appear to be both, inequitable and unscientific," said a business man yesterday when discussing the proposals. "There aro only two methods which can be considered fair and .proper in assessing companies: "(1) That all companies should pay an equal rate, as was done previous, to the war, the rate to be such as would produce tho sanio amount as is expected to' be obtained .from companies under the present proposal. "(2) The income! tax to be paid by the individual shareholders of companies. "It is understood that the second course would," for various reasons, not bo acceptable to the Government—therefore it is not dwelt upon. "The adoption of tho first proposal would do away with certain inequities and discouragements to enterprise that are inevitable if the present provision in the Finance. Bill is adopted, its incongruities being such as are sure to lead to as much dissatisfaction, if not more, than has been felt with the excess profits tax, whereas thero was little or no dissatisfaction expressed with the previous method of an oven tax for all companies. . ' ■ "To give concrete instances of tic unfair operation of the proposed tax: "Two loan companies are doing business ou the same borrowing and lending rates. One has a capital ten times that of the pther. Its profits, therefore, amount to, say, over '.£GdOO, and it would therefore pay tax of 7s. Gd. in the £. "he other company's profits amount to, say, <£1000, aud its rate of tax will therefore be, 2s. 6d. in' the £. The small company is, consequently, placed at an advantage as compared with its more enterprising neighbour. "Again, two trading concerns are engaged in the same trade. One has a large capital and makes profit of, say, idOO, paying tax at the rate of 7s. Gd. The other has a small capital and makes a profit of under .£IOOO, and escapes with 2s. 6d. tax. It is, therefore, placed at an advantage in dealing with its customers, and it naturally follows that it docs not wish tolose that advantage by extending, its enterprise and enlarging its business. "The passing of the provisions of the Bill in their present shape ycukl be likely therefore to deter the fmmation of companies for the prosecution of any large enterprise., , 'TVith regard to Clause SI, which is intended to give relief to small, shareholders in companies, the operations of its provisions would be absurd, pay (that a big company pays a regular dividend to its shareholders of .8 per cent, per annum. A shareholder whose total income did not exceed .£3OO per annum would bo entitled to claim from the Commissioner of Taxes, a sum equal to tho tax paid by the company in respect of his dividend. This tax b?ing, say, 7s. 6d. in tho £, would amount to over one-third more than the amount of lus dividend, and would therefore bring the dividend received by him np to more than 10 2-3rds per cent., an increase entirely unlooked for, paid at the expense of the country, and more than the company would have paid had no war tax been imposed. » "Family companies should pay tho same tax as individuals."