WAR TAXATION

Dominion, Volume 10, Issue 3191, 15 September 1917, Page 10

WAR TAXATION

THE FINANCE BILL

AN INTERESTING PAPER

At the rooms of Hie New Zealand Accountants' Society last evening Ah , . H. A. Gold, of Messrs. Gold and Arcus, public accountants! read a paper entitled "Taxation and tho Finance Bill. 1917." Mr. R. Wilberfoss presided, and there was a fair attendance of members. After referring briefly to tho wi.ir, Mr. Gold went on to say: — "Taking the nation as a nation, it has gone on very much as hitherto. This, however, will have to bo changed, and is changing, by virtue of the necessities of the Government for providing for tho expenses incidental to, and arising from, tho part which New Zealand is proud to take as her share in the conflict. We are faced with the demand from the Gqyernmont to pay more for our lea, our sniokes, and our beer, and if we have the good fortune to have an income of ovor ,£9OO a year the 'other paxtnor' comes in to take an increasing share of our earnings. The question of taxation, a subject that has not hitherto been as carefully 'studied as it deserves, has become tho centre around which opinions many and varied have been expressed, all by reason of tho very high impositions which the Minister of Finance has deemed it not only expedient but necessary to levy on the people cf tho country. Economic Analysis of Wealth. "In tliß popular definition there are implied several distinct ideas, each, of which requires careful exposition, namely, utility, value, labour, and appropriation. That is to say, tho things that are included under wealth aro in general the result of labour; they posses exchange value; they are appropriated; and in all cases they must possess utility. It is found, also, that in different departments and in different problems the emphasis is laid with varying force on these fundamental ideas. Thus in consumption the etress is on utility, in production on labour, in distribution on appropriation, in exchange on valuo; whilst in dealing with functions of government, the relative importance of these ideas varies at difierent tors in. combination must co-exist, tho result of which is wealth." Canons of Taxation. Tho treatment of the general principles of taxation were then dealt with, and the lecturer quoted freely from economic writers of note, Nicholson being relied upon for this question of taxation. With respect to the principles of equal sacrifice tho opinion of Professor Solignian was quoted as follows:—"Tho imposition of equal sacrifice on all taxpayers must remain an ideal impossible of actual realisation. Sacrifice denotes something psychical, something psychological. A tax takes away commodities which are something material, something tangible. Tho sacrifice occasioned by tax is only one- factor in the problem, and may Iμ a minor factor." "It is alleged," continued Jfr. bold, "that a tax on income ought to vary acgording to the source of the. income— that, in particular, incomes from realised wealth, e.g., land, should be taied at a higher rate than incomes from talent and professional and business capacity—or, more generally, that terminable incomes should be taxed at a lower rate than perpetual incomes. In its practical form this discrimination is justified on the particular ground that the professional man is obliged to put aside, by way of insurance for himself or his family, a larger proportion of his terminable income. Thus there is a smaller free income from which to pay tho tax, and consequently a greater sacrifice." The Finance Bill. After referring to the lateness of year when the Budget is brought down, and an explanation of th"e Imperial Exchequer methods, Mr. Gold continued :— "Our condition of war compols the Minister of Finance to provide nearly two millions a month—his estimate was .£1,900,000. The methods adopted to seonre this money are the imposition of a graduated land tax, a» graduated- income tax, increased Customs toms and excise duties, and tho issue of a loan up to twenty-four millions sterling. Out of taxation alono no provision is made for actual war exepndituro. It provides interest on loans, but war expenditure is providod from tho raising of loans." Ho then referred in detail to tho clauses of the Finance Bill, pointing out the changes, and the improvements mado in methods, and with respect to tho taxation of shareholders, Mr. Gold observed: Income tax has always been payable by tho company, dividends being paid free of all tax, and shareholders have not had to return their income from such sources in their personal returns. It is urged by some that no oxception could be taken so long as tho tax was within reasonablo limits; but that as war conditions compel the levying of a heavy tax why should the shareholder whose income does not exceed £m bo entitled to a refund? Why not a refund to the shareholder whose income is .£SOO or .£600? Greater hardships may occur in individual cases in either of these latter than to those with ,£4OO a year income. Ihe principle must, however, be conceded that there is a point below which you cannot safety tax tho individual. The minimum income for taxing is and to avoid hardship as far as possible tho rise to <£400 for the purpose of this section is, when looked at broadly, p.robably as fair as is practicable. The further provision limiting tho refund to an amount that shall uot exceed 6 per cent, on the paid-up capital of his shares will probably vitiate any semblance of relief. Would it not be fair to allow, say, B per cent, on tho average market prico? The bone of contention on the whole section is that small will, or may j>B, penalised up to the maximum graduated tax, and companies qua companies (temporarily it may be) hard put to maintain their usual rate of dividend. But bear in mind the equilibrium must be restored, and this is achieved by the simple but effectivo expedient of passing it on. A tax of 7s. 6d. in the J2 is somewhat staggering: tho cost of war is staggering. Such a tax should have the effect of enforcing economy, which in turn will steady prices to the advantage of tho whole community."