PASSING IT ON

Dominion, Volume 13, Issue 309, 23 September 1920, Page 6

PASSING IT ON

LIMITED COMPANIES AND TAXATION "THE CONSUMER PAYS" 1 LAND AND INCOME TAX BILL UNDER I FIRE The incidenco of taxation on limited r companies was discussed at some length c at yesterday's conference of associated c Chambers of Commerce during considera- | tion of the Land and Income Tax Amendment Bill, Air. A. S. Barkart, of Auckland, was in the chair. The subject was introduced by Air. Ai. j Carr (Wellington), who stated that the j principle involved in the present-system 1 of taxation on limited companies was i i entirely wrong, and even if they did not ; - succeed in restraining the Minister in j , connection with his proposals they should / , take some action. Only those companies . who were-deriving profits above a cer- ] . tain amount should be called upon to , j pas- taxation. He believed that something ( ; like 78 per cejit. of the jieople in the . i country who had private incomes were , -' uot contributing by taxes towards the [ revenue of the country. 'Ibis position was neither just nor equitable. ISeceiv- ; ers of large dividends should contribute t something out, of these dividends to the - country's revenue. Ho saw no difficulty 3 in bringing down some scheme similar to 3 that adopted in connection with interest , ) on debentures. J Interesting Suggestions. | The chairman: Have you made auy . examination as to what revenue would 1 be obtained under your proposed scheme? j Mr. Carr replied in the negative, sug- } gesting, however, that the matter be 5 referred to tho Commissioner, w.ho knew 1 exactly what the capital of companies | f was. It might be considered necessary - to impose a Mat rate on the paid-up capi- , j tal of all limited companies, and on tlie , assessable value of excess profits. The chairman pointed out that 3 in 1917-18 there were 1945 com--1 panies with a taxable income t totalling ,£9,000,000. All that profit was not divided among the shareholders. b He had endeavoured to ascertain what - proportion of the <£9,000,000 was divided, e but in the absence of any details he asi sumed that 20 per cent, of the net profit t was reserved for various purposes. Eighty i per cent, of .£9,000.000 was £'t,200,000— 5 the amount which actually reached the e pockets of the shareholders. That e amount had to be split up according to I the classification of the taxpayers. The t class receiving under .£550 per annum paid practically nothing in income tax, but yet they were far and the largest taxpayers in the country. There - was no data available whereby they could T arrive at a fair estimate of the division » of that ,£7,200,000. T.bey would get only J 2223 individual taxpayers from tliis sum, " which was astonishing. Of this number t 2000 were in the JEBSO class and 180 in 6 the XIOOO class. There were only about 6 36,000 individual income taxpayers in tho " country. He was very keen on taxing 7 tha individual man, but it would be I found that they could not get more than 0 .£120,000 from them. The men between * the .£IO,OOO and .£20,000 a year mark had II a total income of only about ? all of whicb- went to show that there was too much expected, by the Treasury ? from this particular source of taxation. 11 If a ltat rate wero instituted) .lie was 'j convinced that the position would be , little better than at present,- while the ! " danger of doublo taxation on tho same income might result. Collecting from the Consumer. l " The companies were now contributing r ; .£3,000,000 in taxation. The man who , actually found this sum, however, was L" the consumer. In order to raiso this .£3,000,000. the companies passed an ex- „ tra .£1,000,000 on to tho consumers. This „ system of taction, therefore, was a very material factor in increasing the cost of .I living. He doubted if there were actually i. 200,000 working heads of families in the t. Uomiaion, and accepting ,£4,000,000 as the) sum parsed l on to the consumers it , meant that each head of a family cony tributed;'i2o annually towards this taxaj tion. In other words, tho cost of. living i. had been increased by theso means by is ,£2O. This factor appeared) to have been - e overlooked. "Unfortunately," he continrf ued, "the pot out of which wo can take 1 the porridge from the big men is too small for what we want." He added that if the companies were enabled to :o reduce the prices to the consumer through not having to find this ,£3,000;000 tax the i- country would be ft lot better off and ll there would be less nnrest. >t A delegate pointed out that as a gen.e eral rule -10 per cent, of companies' t.axi- able income went into the reserve fund, d The chairman: The whole point is that d we have not got enough working men. it They are not as numerous as wo believe it they are. d Mr. Barkart went on to refer to the :t fact that men rated below the ,£535 mark r- had .£80,000,000, which was praotically le never touched at all. The great bulk of it tho wage workers—say 90 per cent—did it -not even send in a return for income le tax, and a still larger proportion were t. not taxable. The ciuestion was: Were )r there any means by which- a portion or a- this .£86,000,000, which was floating x- around, could be got hold of for taxation e- purposes. e v \ The Cause of Increased Profits. A point, made by Mr. Carr was that the delegates had not quite realised that id the increased trade during 1 , the war period e _ had resulted in tho increased profits belf ing obtained in New Zealand. Had it c _ not Ibeen for this increased trade it 0 r would have been quite Impossible for the | h companies to pay the increased taxes, as The question therefore arose what was le going to happen when the trade of tho S country got back to normal. He did not ]g believo that the whole of tho excess taxain tion had been passed on. f. Tho chairman said that wherever pos•g sible tho companies had passed tho taxa■i- tion on to tlie detriment of tho consumo- er. There were, of course, some compand ies that were not in a position to pass it ie on. Summarising tho whole position, nt Mr. Bankart said that relief could only iw be obtained under tho following heads: ns (1) A higher graduated tax on big inp- comes; (2) an export tax; (3) higher death ie duties; (4) stricter economy in the adjy ministration of Departments of Stale, re The matter was further discussed, but ir no resolution was ndopted, it being generally agreed to refer the question to the o- proposed Koyal Commission, should one be set up.