REDUCED TAXATION

Dominion, Volume 16, Issue 2, 27 September 1922, Page 8

REDUCED TAXATION

> MR. MASSEYS BILL INTRODUCED SUPER-TAX LIFTED FROM INCOMES l LAND TAX ALSO LOWERED TOTAL CONCESSION EXCEEDS £900,000 Reductions of the land tax and the income tax are proposed in the Land an d Income Tax Amendment Bill, which was introduced in the House of Representatives yesterday afternoon . The super-tax on land is to be further reduced from 20 per cent, to 10 per cent, and the super-tax on incom es is to be removed altogether. The Bill makes s ome other amendments in the existing law.

When the Bill was introduced the Prime Minister explained its provisions to the House. He reminded members that earlier in the session the super-tax on land had been reduced from 33 3<3rd per cent, to 20 per cent. He was proposing now to reduce the tax further to 10 per cent. “J am doiqg this because the financial outlook has soihewhat improved,” said Mr. Massey. ‘‘l know that in doing it lam taking a risk. But I have thought that matter out very carefully, and 1 believe that,,the. proper thing to do "is to' take the risk and trust to the industry of the people and the productive capacity of the country as a whole.” Tlio Leader of the Opposition (Mr. Wilford) said that his side of the House had proposed that the super tax should bo taken off the estates below £20,000 in value. Mr. Massey: I never knew of anything so unstatesmanlike as that proposal to reduce the taxation on everything below £20,000 and let the restremain. without taking into account tho actual financial position of the

people concerned. . i Another clause of the Bill, continued tho Prime Minister, referred to tho land tax on Native land. Considerable blocks of Native land had been leased in recent years, and it had been found that the land tax sometimes was greater than the amount of the rent received from the land. That was a«. unfair position, and an amendment was being made. He did not knou that the Government had gone far enough, but it had proposed a considerable concession. The Bill provided that the land tax should not exceed in any case 25 per cent, of tho amount of the rent. ! THE INCOME TAX

“We are reducing the amount or the income tax by knocking olt tho super tax altogelner,” continued the Prime Minister. “There was -20 per cent, of super fax left, and we are knocking it off. That will effect a very considerable reduction. 1 estimate S' that taking the land tax and the income tax together the concession that I am proposing to make will amount to £929,000. That is the estimated amount of the reduction of the revenue by these concessions.” Mr. Holland (Buller): How are you going to get it back? Mr. Massey: “L have not forgotten that during the first five months of the present financial year wo. made a saving of over £2,000,000 in expenditure. I hope that the amount being saved will increase as the year goes on. We spent during the five months £2,100,000 less than we spent during tho same period of last year.” Mr. Wiltord: That is not a saving. Mr. Massey: Well, I do not know what the honourable gentleman calls »t. ; Mr. P. Fraser (Wellington Central): / Does that include the third cut? Mr. Massey: No, that is quite a different thing. It includes the cut. Air. W. Parry (Auckland Central): That means that you cut down wages by two millions. Mr. Massey: It docs not mean anything of the sort. If we maintain this enormous load of land tax and income tax we are going to run tho country into disaster. We arc killing industry by asking the people, to pay such an enormous amount of taxation. There is no doubt about that. Members on the Labour benches complain about unemployment. The reason for unemployment is partly that the people who employ labour in normal times arc not allo to do it under present conditions. There are arrears of land and incomy tax to the amount of £900,000.

REDUCTIONS THIS YEAR A member: When will the reductions Commence ?

Mr. Massey: They will commence with thia financial year. . . r Mr. D. Jones (Kaiapoi) interjected that the Labour members were sorry , taxation wia being redr.ced. Mr. Massey: They will be sorry for the country if taxation is not reduced in the near future. Members have learned that the number of sheep has decreased by four millions in the last four years. Mr. W. It. Smith (Waimarino): What is being done to pre . ent it? Farmers aro being sold up every day and are going out, and nothing is being done to prevent it.

Mr. Massey: This is being done to prevent it. It appears that a number of men in the House are sorry to hear about anything in the nature of a reduction of taxation.

After replying to some other interjections, the Prime Minister said that the reduction, in the number of sheep /was due in part to the fact that farmers had been compelled to sell their Hock sheen for fats krt. Smith : They will have to do it this year again. Mr. Massey: ‘T hope that wool will go up, and that we shall have a good lambing season. That will help us.” Some mere interruptions were made at this stage, and the Primo Minister remarked that if Opposition members did not like the Bill they could vote against it. OTHER CONCESSIONS Turning ajiain to the clauses of the Bill, Mr. Massey said that the present law allowed the payer of income tacc an exemption of £5O of assessable income for ca'h child. The Bill proposed to extend this exemption to cover grandparents in cases where they were maintaining children. Another clause provided that for taxation ■ ■purposes coal lands, as well aa timber-lands, should bo treated as depreciating assets. lhe present law recognised depreciation in the case of sawmilling operations, but not in the case of -ca’ mining. The Bill did not interfere with company taxation directly, but the companies would share in the general reduction. The Bill ®tisar clauses of minor importance.

Its chief features were the reduction of the land tax and the income tax. A LABOUR VIEW

Mr. J. McCombs (Lyttelton) said that so far as the income tax was con- , cerned it was quite plain that the remissions were being given mainly t" those with incomes of over £lOOO a year. The small fa’-m.'is and the small traders were getting piactically nothing out of the. Government’s alteration in ’he incidence of taxation. Last rear th* Customs tariff was increased to the small farmer. Mr. Massey: By what? What particulars items? Mr? McCombs: “On quite a number of items —items that are being manufactured to the disadvantage of Great Britain and that co’se from America, and elsewhere. If the Government is in a position to remit £929,000 and wishes that to be’enjoyed by the great mass of the people, then the reduction should be in the taxation on articles of common necessity the like of which ate not manufactui’d in the Dominion.” Instead of helptnr tnese people the Government were helping the big landowners and the big income tax layers, who wore probably finding tlie narty funds for. the Government

to fight tho next election. At the same time the Government had ■reduced the. wages of the Public servants far beyond what was warranted by the reduction in the cost of living. Instead of the Government helping the workers of this country, it was guilty of a swindle, if that was a Parliamentary expression, in taking the money out of the pockete of the Civil servants and handing it over to men who would give ten, twenty, and a hundred pounds at a time to their political friends in this country—the landowners and the big taxpayers. Mr. D. J. Sullivan (Avon) asked if the Primo Minister was going, to redeem a promise to give pensions to the blind when the country was in a financial position to do so. ? Mr. It. McCallum (Wair.iu) asked if the Primo Minister could give instances as to how the reduction was going to affect the large landowners.

WAGE-EARNERS WILL BENEFIT Mr. Massey: “I am not doing this to benefit any class in particular, but the country as a whole. If there is any pne class that will benefit by this reduction, that class will be the wageearners of thiy country. (Hear, hear.) What has happened already in the country districts? There were men who were employed on the stations and farms, their numbers running into tens of thousands. These men had normally been employed right through the winter. They were men who took as much interest in the employer's work as did the employer himself. (Hear, hear.) But when the slump in prices came these men had to be turned out in hundreds to do what they could. If it had not been for the extraordinary heavy taxation a very large number of these men would have been kept in their employment. They are an exceedingly useful set of men, men who could be relied upon to do anything. Most of their, went to the Great War and were prepared to go again if the necessity arose. These are the men who suffered in the winter months and many of them had families who suffered with them.” Mr. Massey added that the member for Lyttelton had been impertinent in stating that the large landowners had been contributing largely to the funds of the Reform Party. Even if they had wished they could not have contributed to the funds of the party. The large landowners had contributed precious little in the pa-st, and they were not able to contribute now.

Mr. Parry: You are giving them a chance to contribute now.Mr. Massey: “I never turn a copper down if it comes along, but these men have no money to contribute now. We have reduced no wages. All that we have done was consistent with the arrangement that was entered into, that when the cost of living was reduced wc would withdraw the whole or a. part of the bonus. That is on record half a dozen times.” What the member for Lyttelton' was doing was to mislead the workers. Such people were the worst enemies of the workers. The member’s figures were like soldiers — they could be made to face any way. He had challenged the member to mention items on which taxation had Been'increased and Mr. McCombs had not been able to mention a single item. The Government had increased taxation tm spirits and wines and beer, but these were luxuries, and luxuries should bear a larger amount of taxation.”

A Labour member: You increased the taxation on tea. Mr. Massey: “I did not increase th© taxation on tea. It remained the same, and the taxation on tea in England is, I believe, about a shilling a lb.” As to pensions to the blind he would be only too glad to grant them, but New Zealand was already giving the people pensions to the amount of aearly three millions a year, and it was more than this country could carry with comfort. Mr. McCombs: You are giving away over £900,000 now. Mr. Massey: “I am not. I am putting the finances of the country in a sound position.” The Prime Minister added that the Opposition proposal to take the silver-tax off estates under £20,000 in value would have meant that a man with an unencumbered estate worth £19.500 would have been relieved- of the tax, while another man with £25.000 worth of land carrying a mortgage of £19.000 would have been required to pay. That would be absolutely unfair. % INCOMES AND WEALTH Mr. Holland said that the Prime Minister’s suggestion that payors of

income tax were hard pressed, was not easily reconciled with official figures, which showed that the total assessable incomes in the country had increased from £13,000,(XX) in 1914 to £48,000.000 in 1921, an increase of £35,000,000. Tho private accumulated wealth had increased from £285,000,000 in 1915 to £562,000,000 in 1921, an average increase or £46>1)00,U00 a year. How could people want relief when they had such incomes?

Mr. Massey: Among these men are many who are business men, and who passed the taxation on to their customers by charging more for their goods than otherwise would have been the case.

Mr. Holland: Will the Prime Minister put legislation on the Statute Book to prevent that? Mr. Massey: Yes, I have done it before, and if necessary I will do it again. Mr. Holland insisted that the reductions were not going ‘o benefit tho small mon. The man with an assessable income of £lOOO a year was going to get relief to the amount of about £2O. This man did not need any relief. The men with smaller incomes were getting no relief worth while, and they were the men who really needed relief. The man with £5OOO a year was going to benefit to the extent of over £3OO a year under the Bill The £20,000 income was going to save £l5OO. What excuse was there for malting thdse concessions to men with incomes of from £lO,OOO to £30,000 a year? Mr. Holland declare! that the Bill was another move in the direction of putting the burden of war debt on the shoulders of the people.

PROTECT PUBLIC FINANCE The Hon. J. A. Hanan (Invercargill) asked the Prime Minister to furnish at the second reading stage a statement showing how the Bill would operate. Such a statement would indicate whether the proposals were equitable or not. He knew of men who had been unable to pay their income tax for three years. There were many persons unable to pay their land, and income tax this year. A sum of £900,000, in respect of these taxes was outstanding at present. Reduced taxation would stimulate production. In dealing with such a Bill it was necessary to consider the state of tho public finances. 'Hie national debt had been tremendously increased at a time of inflation. The interest would be paid during a time of deflation. That was a serious thine. The Railway Department and the Postal Department had not been paying. The war debt must be paid, and it, nnjst be paid by those best able to pay it. An important question was whether those who were going to benefit most by reduced taxation of their businesses would give the purchasers of their products or the users of their services a corresponding,benefit bv way of reduced charges. Ho hoped the Prime Minister would ho able to nssu-0 the House that there was nothing in (he B')1 which threatened to weaken the public finances.

COMPANY TAXATION Mr. A. D. McLeod (Wairarapa) challenged the validity 'of Mr. Holland’s arguments. Ho stressed the indirect benefit to the “small man” cf reductions in. the taxation of large businesses. There were large co-operative companies, he said, that in order to pay a dividend of six per cent., at present had to earn 12 or 13 per cent. This was the result of the heavy income taxation. Some companies that were carrying hundreds of farmers on their backs had to pay large amounts in land tax because of tho number of branches they had in various places. Their taxation came to something like 10s. in t/e £, and he was quite certain that/from its reduction thousands of small farmers would receive great benefit. The small man did not pay much income tax directly; hut.because of the high taxation on companies he had to pay high charges for all sorts of things. He would feel the benefit of a general reduction very consideriflilv. Mr. W. E. Parry /Auckland Central) told the House, that the Government was only “reducing the taxation of its wealthy friends.” He argued that the Government had shown its bias by giving taxation rebates which benefited only the wealthy, and by reducing the wages of its employees. MR. MASSEY REPLIES “It seems to me,” said the Prime Minister, replying, “that at this period of the Parliamentary term there are certain members whom it is impossible to please. Most of the time they are telling us about the necessity for reducing taxation, for getting the finances of the country into a sound, condition, and for making it easier for the mass of the public; yet when as Minister of Finance I bring down a Bill proposing to reduce, taxation, what am I met with? Nothing but abuse and misrepresentation. We are told that what is proposed is intended to benefit the big man and that wo don’t, care two pins for the small man. I say it is not correct.

“I commenced the reduction of taxation by reducing the taxation on the small man. In the session before last, the first proposal to reduce taxation was that we should do away with the mortgage tax so far as the small man on the land was concerned. It had tho effect of reducing taxation small farmers with mortgages, and it cost us a little over £lOO,OOO. I say that it was worth doing.” By the provisions of the present Bill, Mr. Massey added, the Government was increasing the wages fund of the country and making it easier for those who had been employers in the past to be employers in the future and to give occupation to men who would be much better off in private employment than working on relief jobs provided by the State. The Government had pledged itself to reduce the cost of government and to reduce taxation as far as possible, and it had not been unsuccessful ij fulfilling its pledge. MEANS OF EFFECTING REDUCTION

He would take the House into his confidence in regard to the means by which he proposed to finance the reduction proposed by the Bill. Some weeks ago, when tue Land Tax Bill was before the House, he had stated that tho reduction of taxation proposed by that measure represented the same amount of money in the aggregate ns the rebates given last year. He had thought at the tim<» that it would not he possible |o go further. Conditions, however, had somewhat improved. To reduce land and income tax by the same amount as they had been reduced by last year -would cost about £450,000. He did not propose to decrease the income of the Consolidated Fund this year by more than that amount for the purpose of reducing taxation. The enormous importations of the year before last had put some two millions of extraordinary revenue ‘nto the Consolidated Fund. He had ;ct the sum apart as a reserve. A Labour member: That is what '■Wu are going to use the surplus for? Poor unemployed I Mr. Massey: ‘'Poor unemployed!” 1 have heard that political cry so often that I am ashamed of the people who use it. Those crocodile tears we have got accustomed to. Picking up the thread of his speech again, the Prime Minister said that from the two millions mentioned he proposed to take half-a-million for the purpose of reducing taxation. Any member who did not approve of this course might vote against it or move an amendment and see how he got on. The Leader of tho Opposition (Mr.

THE “PASSING-ON” PROCESS

Wilford): You have a majority. You can do anything you like. Mr. Massey: Will the member say it is wrong? Mr. Wilford: No, nor have I done so. But all that nonsense about voting—yOu have a majority that can swamp opposition. Mr. Massey: The member doesn’t look at all pleased. Mr. Wilford: No, I’m not, with all that bluff and nonsense roti are talking. Mr. Massey: Now don’t get angry and don’t get personal, for goodness sake, because it’s a very wrong thing to do.

Mr. Massey proceeded io discuss company taxation. The Government could not reduci’. company taxation, he said, without increasing individual taxation —unless, as on the present occasion, it was in the position to make some reduction all round. He did hot see how the Government could alter the present system of taxation. The Labour members epoke as if reductions in the taxation of the banker, the business man, and the professional man did not benefit the small man at all. But was not , taxation always passed on ? It was always the man on the bottom rung of the ladder wh” paid. The Bill was going to benefit the producer and the working man. Air. Massey quoted figures to show that since 1913-14 the amount raised annually by the taxation of incomes had increased by 932 per cent., and the amount raised by taxation of land by 113 per cent.

Mr. Holland: What was the increase in the taxable incomes?

Mr. Massey 1 I know all about the increase in the taxable incomes, because there is £609,000 of income tax owing to me as Finance Minister since last year. I can’t collect a penny of it just now. It is not much use having taxable incomes when you can’t get the income tax. The Bill was read a first time.

DETAILS OF THE BILL LOSSES MAY BE SET AGAINST PROFITS THIS YEAR’S INCOME TAX. The. chief clauses of the Land and Income Tax Amendment Bill, as stated by the Prime Minister, reduce the super-land tax from 20 per cent, to 10 per cent. and remove altogether the super-income tax. Some of the other clauses are important. When a new valuation of any land is made at the request of the owner, the amended valuation is to operate as from March 31 succeeding the date of the application for revaluation. This provision is to be deemed to have been in force as from April 1, 1921.

Losses incurred by a taxpayer in any one year may be set off against profits earned within the three following years. The clause, which is not to operate in respect to any loss incurred prior to April 1, 1923, provides that a loss may be “carried forward and, so far as may be, deducted from or set off against assessable income for the’ three following years.” The relief is to be given as far as possible in the first year. War pensions are declared to be exempt from income tax. An amending clause provides that losss incurred by a taxpayer in one business may be set off for taxation purposes against profits earned in another business. Tho clause states that “in calculating the assessable income of any person deriving such income from two or more sources, any expenditure or loss exclusively incurred in the production of assessable income for any income year may be deducted from the total income derived by the taxpayer from all such sources as aforesaid.”

A husband and wife carrying on business together are not to be deemed to be carrying on business as partners unless in fact they arc carrying on business- under a deed of partnership. The tax on premiums paid to foreign insurance, companies not carrying on business in New Zealand is proposed to be reduced from 10 per cent, to five per cent. The rates of income tax for tho financial year commenced on April 1, 1922, are set out as follow:— On income assessable under subsection (3) of section 112 of the principal Act (companies’ debentures) the rate of income tax shall be 3s. for every £1 thereof.

On income assessable under sub-sec-tion (3) of section 24. of the Land and Income Tax Amendment Act, 1920 (local bodies’ debentures) the rate of income tax shall be 2s. 6d. for every £1 thereof. On tho taxable income of all taxpayers other than those referred to in clause 1 or clause 2 of this schedule the rates of income tax shall bo as follow: —

(a) Where the income on which tax is payable does not exceed £4OO, the rate shall be le. for every £1 thereot. (b) Where such income exceeds £4OO, but does not exceed £6OOO, the rate shall be Is. for every £1 thereof, increased by one-hun-dredth part of Id. for every £1 in excess of £4OO. (c) Where such income exceeds £6OOO, tne rate shall be ss. Hd. for every £1 thereof, increased by one two-hundredth part of Id. for every £1 in excess of £6OOO, but so as not to exceed in any case the rate of 7s. 4d. in the £l.

The income tax payable by any taxpayer a_s hereinbefore provided shall be reduced by 10 per centum of so much thereof as is levied in respect of earned income: Provided that if the earned income of a taxpayer for any year exceeds £2OOO the reduction provided for bj this clause shall be made only in reepect of the sum of £2OOO.