LOCAL BODY DEBENTURES

Dominion, Volume 16, Issue 121, 7 February 1923, Page 7

LOCAL BODY DEBENTURES

4 INVESTORS RECEIVE FULL INTEREST. , In a letter appearing in yesterday’s Dominion on the question of debenture tax, a statement was made to the effect that a debenture tax of 2s.ba. in the £1 is mado on all local body debentures, the onus being upon tho local body to deduct the tax and pay it to the Treasury when paying the interest upon debentures it has issued. The secretary of the Harbour Board states that this statement is not in accordance with fact, and as it mign lead to a wrong impression and prejudice loans of local bodies now on the market, such as the Wellington Harbour Board loan, ho desired to place the present-dav position clearly befoie tho public. Tin position now was that under Section 8 of the Finance A.ct, 1921, power was given to the Income Tax Commissioner to absolve the local authority from directly collecting income tax on debentures issued providing the local body concerned supplied to the Tax Commissioner a certified list of all debcntuioholders. Upon receipt of this list the oni'i was transferred from the -ocal body to the Income Jax Departmentfor the collection of any tax due. It can be safely assumed that all local bodies had taken full advantage, of this method of exempting themselves from the duty of collecting the tax, and that investors in local body debentures now received full interest from this form of investment and paid to the Tax Department on their debenture interest only-pt the taxation rate that they were ikble for on their ordinary income. i.e., the debenture interest was included in the return of income and thereupon .paid only such rate of tax as the investor was liable for in tho ordinary way. It might also be pointed out that this rate could not be taxed at a higher rate than 2s. 6d. in the £l' even though the taxpayer was assessable at a higher rate of taxation.