TAXATION BURDEN

Dominion, Volume 18, Issue 185, 1 May 1924, Page 8

TAXATION BURDEN

CAN IT BE PASSED ON ? QUESTION OF PAYMENT FOR PRIVILEGE EVIDENCE BEFORE COMMISSION By Telegraph—Press Associatio*Dunedin, April 30. The Taxation Commission resumed its inquiry this morning. Mr. John Christie, farmer, stated that the land tax in its present fenn was the most equitable from the viewpoint of the working freehold farmer. It had been the means of producing closer settlement through the cutting up of large holdings. On the other hand, ho realised that the Government would require to devise some means to enable Crown tenants to provide a share of the taxation. The Crown tenant had, for many years, paid income tax only, and now paid nothing, while during the same time the freehold farmer paid land tax, super-tax, and income tax, plus heavy rating for charitable aid. The freehold farmer was taxed on the valuation placed on the land in boom times, and the Commission should consider revaluation. If. the freehold farmer were taxed on income as well as land it wnild be a tax on thrift and industry, and eventually the country would stiffer through lack of production. A YrnTfful field for taxation, at present unexnloited, was municipal, enterprise, such as bower and lighting. The taxation question was closely allied to efficient Government service. Earl Grey had said, on his return to England. that New Zealand was “a colony of about one million people, mostly in the employ of the Government.” “Iniquitous System." Mr. Alfred Fols, director of Messrs. Hallenstein Bros., submitted evidence on the subject of the incidence of the land tax. City and town properties, he contended, should be taxed on an entirely different principle from that applied to rural properties. The graduated land tax was originally designed to burst up large rural estates, and for preventing the aggregation of rural land. The application of such a principle to town land did not seem logical. For instance, his company owned the freehold or leasehold of a few poles in various towns, and as these properties were situated in retail areas their valuations were necessarily high. According to the present taxation law. the unimproved values of these small properties were added together, and they were taxed on the total at the highest graduated rate, as if they wore owners of an unduly large rural estate. This was an iniquitous system. All business concerns that owned or leased more than one property, either in the same town or in various towns, were affected similarly, and some of them consequently suffered great hardship. The tax hindered, and in some cases absolutely stooped, commercial and industrial development, which was the Inst thing any Government desired. That tendency was strongly accentuated. by section 52 of the Land and Income Tax Act of 1923, which further raised through th© addition of leaseholds, the graduated iate of land tax. also said it was a fallacy that taxation could bo onssed to the consumer. This could not be done, ns prices were regulated by competition. He also wished to strongly combat the idea that large concerns could easily stand heavv taxation. It was not iust or eouitable that because of their organisation they should te singled out and penalised. It was suggested that the land tax on town properties should bo abolished, especially as business <riil~'ms owning sf.ich nronerties also paid income tax, and, besides, were burdened by heavy municipal rates. It seemed to them that if the land tax were abolished altogether it would not be a serious matter, as it amounted last year to less than £1.000.000, which was a comparatively small, item in the revenue of the Dominion. In reply to Mr. Shirtcliffe, witness said that the remedy for the less which would follow the abolition of the land tax would be to make the income tax universal. A flat rate of land tax instead of the graduated land tax would be a satisfactory alternative. Witness thought it would bo impossible to pass on the tax as there were tea many businesses in the field. The True Basis. Mr. Walter Gow, a retired merchant who was a member of the previous taxation commission gave evidence. He said that he had had no intention? of appearing before, the commission, but for their invitation to him to be present. He was prepared to give them his views, both as to income tax and land tax. He don.rid,ered that taxation should be based on equity. The true basis of taxation should be a man’s ability to pay on his income. The income tax was a fair one, provided that they could adiust it to reach everyone equitably. Another principle which came into play was that of equality of sacrifice. Equality of sacrifice meant something more" than a mere flat rate of payment by everyone upon his income, for the reason that a man was relieved from payment of tax until his income reached a certain amount. For that reason, also, Thev found that the _ minimum amount was extended, in many cases where a man bad other responsibilities. such as children It was obvious that a man with a superfluity of money was in a better position to pay taxation than a man with just sufficient or little more than sufficient to enable him to pay for the necessaries of life. There should therefore be a graduation of taxation. The man with larger means should pay a larger proportion. There was, of course, a danger of carrying the graduation of taxation too far and killing the goose which laid the golden egg. Ho was afraid that at times they had done that in New Zealand. Payment for Privilege. There were other things, continued witness, which were fair subjects, of taxation. Privilege was one of these things. That brought him to taxation upon land. Land was a fair subject for taxation, because the ownership of it carried privileges which wore not common to other sources of income. Sooner or later, the possessor of land ’occame richer by reason of unearned increment. He was not prepared, Yiowever, to say that unearned increment appertained solely to land. There yas a community value which npnlied, he might say for the sake of argument, to income which might be earned by a solicitor. In the case of land, however, the community value created was very obvious, much in excess of the community value created in other directions, that was. anart. from income derived from land. They could not exclude the income derived from land and they could not double tax the owner of it, but thev could preferentially tax him. The community value existed more particularly in the case of town properties. He thought the taxation of land was a fair proposition. He did not think.

however, it was a fair proposition to make use of the land tax as an instrument for jxilitical purposes to break up large estates. If they were to tax land at all, it should be only because of the rivileges attached to its ownership. For that reason only there should be a flat rate of land tax and that should be applied to al) lands, country lands or town lands He woud make the tax applicable without exemption. A man who owned a section in town was just as much a subject of privilege as a man who owned a farm in the country. Tlioy had possession of something to which tho community had added value. That was more obvious in the town than in the country. He would advocate the imposition of a land tax without exemptions and without regard to any mortgage on land. A mortgagee was taxed without regard to the revenue he derived from his mortgage and privilege did not apply to a mortgagee at all. He thought it would be a very unwise policy to value land upon its speculative value. Ho thought that valuations should be strictly upon tho basis of what land could produce in the wav of income. That value would vary from time to time according to the produce taken from.the land. .As betwp.men land tax and income tax, he submitted that the true system was a man’s ability to pay according to his year!*/ income. A man usinrr his land properly l should not be called on to pay land tax as well as income tax The tax should be a flat tax without graduation so far as land tax was concerned. Ho believed in graduation. however, so far as income tax was concerned. In answer to a question, Mr. Gow said that the Government had power to break up estates, which had been enlarged by aggregation. It could take possession of them at a fair valuation. He thought that too much was made of the aggregation of estates Lands had been subdivided into too small areas and then the owners had found it impossible to make a living off them, and thev had been taken up bv others. He thought nothing of aggregation because it -was a reaction from undue subdivision. The president: AA’hat do you regard as a safe minimum for an income tax ? Mr. Gow said that he thought about 3s. or 3s. (id Sneaking on the company tax, he sail he thought it was quite inequitable. Ho did not think it was equitable to treat a company as an individual. A change should bo contemplated as soon as possible. in the taxation of companies as entities and individual taxation adopted. Mr. Shirtcliffe said that since 1918 1300 private companies had been registered. . r Mr. Gow said that every private company did not pay taxation of ss. 10(1. A company to pay 7 per cent, had to earn 10 per cent. ]\Tr. AVeston: Most comnanies do. Mr. Gow: Most companies don’t. Mr. Weston: Then you must have been unlucky. Mr. Gow: I always was' unlucky (Laughter.') After some cross-the-table talk, tne president said: Mr. Gow adheres to the majority report, of which he was a partv Air. Gow: That was so. The commission adjourned till 10 o’clock to-morrow morning.