INCIDENCE OF TAXATION

Dominion, Volume 16, Issue 176, 13 April 1923, Page 4

INCIDENCE OF TAXATION

LOCAL BODIES AND THEIR LOANS

IS POSTERITY’S BURDEN TOO HEAVY? ' HARD FACTS, AND A WARNING

"Local bodies, with thoir superior securities, can do better than the primary producer in the investment market. Their borrowing has doublet! in the last ton years, and the Joans now outstanding, apart from Government loans, total nearly thirty millions sterling. Posterity will have to repay the loans with interest, is the burden becoming too heavy for them to bear?"

This was the text of a discourse yesterday by a gentleman in the city who, in a semi-official capacity, is closely associated with finance, especially as it relates to the powers of local bodies. To follow his reasoning, it is desirable to briefly review the finance of local governing bodies. A casual study of it reveals a process of evolution from a state of semi-d'gnend-ence on the Central Government to a stage where, with the exception of subsidies on rates and occasional grants for special works, all expense is borne locally. While local bodies were the proper authorities to deal with such matters as the construction of roads and bridges, it was recognised that work of this nature was to a large extent of national significance, and Government aid was freely accorded. This is evidenced by a consideration of the fact that, under various Acts, including the Roads and Bridges Construction Act, 1882, advances were mado under which the recipient body, although bound to pay a half-yearly interest for a number of years, the period varying inversely with the rate of interest, was relieved from all further liability, ipso facto, on payment of the last instalment. With the increase in population and growth of prosperity, however, the opinion grew that local authorities should, in all fairness, bear the greater part of the expense of their own activities. This resulted in the withdrawal of advantageous conditions, and at tho present/ time, although the credit of the State is still available for the benefit of those local bodies requiring loans, and such assistance as indicated is given, they are to nil intents and purposes self-sup-porting. By far tho greater volume of the revenue of local bodies is expended on public works. Pari passu with the development of the local authority, notably the borough, has grown' the tendency to extend its activities to public utility trading concerns, such as tramways, gas and electrio supply works, which,. being of the social monopoly type of industry, are pre-eminently suitable for municipal undertaking. The sources from which the various classes of local bodies secure the moneys necessary to exercise their functions varv greatly, according' to the nature of the statutory duties of the local bodies concerned. Generally, however, receipts fall , under one of three main classes, vic.., rates, licenses, and fees, and receipts which cannot properly ho regarded as revenue.

LESSENING THE PRODUCERS’ CREDIT “When New Zealand was founded it was a small colonv, a long way from the markets of the world,” said our authority yesterday. “The settlers had to band together, and. by means of Government borrowing, they established railways and other business undertakings of the colony. They did it so successfully that we have gone on in the same way, until now every local bod.v wants to borrow on the security of its rates- for such major undertakings as harbours and hydro-electric plants. I should not be surprised to see twenty or thirty millions borrowed in the next ten years for hydro-elec-tricity alone. It may be a- fine thing in the E.hstract, but, on the other hand, on account of the high overhead charges and the relatively small consumption, it mav not turn out to be so cheap. Up till now our borrowing for local works amounts to £23 nor head of the population of Now Zealand. I have been reading with interest the views of the authorities you have consulted regarding the incidence of taxation, and I agree that it is becoming more and more difficult for the primary producer to get financial accommodation, as it >’s bceoinhi" more easv—i\aro the fashion, may I say—for local authorities to get whathe cannot. Does it portend anything to you. as it does Jo rae .- > n Abe wav of a warning that the credit, of tho producer, tho mainstay of our past progress, and future wealth, is being lessened? Does it not suggest a warning that future generations will have to- pay hack, with interest, all the money borrowed bv local authorities, wh’ch amounts to-dnv, in outstanding loans, apart from Government loans, to nearly thirty millions sterling? Arc we piling on to the shoulders of posterity a burden that mav become too heavy for them to bear?”

MORE HARBOURS THAN WE NEED

He quoted from the day’s Dominion a report that there were more ports on tho Now Zealand coast for handling cargo than in. Great Britain, Canada, or South Africa. 'All these ports, were seeking Home boats, and were being developed by means that became more exnensivo with the passing of years. The position would bo created tinder which, at some distant date, there would ho enough ports in tho Dominion to handle the whole of our produce over a few months, and for tho rest of tho year mi’Jimic-.of capital would be lying idle. Not only that, but Home boats would spend as much as three to six months on our const, eatinrr up £2OO a day in wages, wharfage due and other charges. There would not be the produce in tho countrv serve them.

CONTROLLING AUTHORITY OVER BORROWING

“There shou’d be a controlling authority, that wan’d take a national view of these matters, that would say that Wellington is required ns a national port, another at Paten. and so on; that the balance, after the main national ports had been delimited, should act as feeders, with a limit to the expenditure in development. . It is idle to say that- what we aro doing is being done on the local authority’s rates. It is really a burden on the country. We are’ suffering already from the borrowing that tho war forced on. us. I am aware that there is

an objection on the part of Governments or parliamentarians io take up this policy, ns it would involve sequestration of local votes. The total of the revenue earned by t’y.e country before tho war is now required to meet the interest on the national debt. Every pound borrowed on the security of tho rates is a limitat on of ih« national resources in taxation. If we could call together the nation’s leading c'tizens, by way of a commission ol inquiry into the whole question of national and local borrowing, I feel that its advice' would set us on the right track by restricting the national expenditure to the national purse, with nothing held over for posterity beyond what could be met, nob by additional taxation, but with a .fraction over and above the earning power of the community, to- be met by short-dated loans.” (Concluded.)