TAXATION SYSTEM

Dominion, Volume 18, Issue 193, 10 May 1924, Page 8

TAXATION SYSTEM

LENDING INSTITUTIONS WOULD WELCOME CHANGE MORTGAGE SECURITIES (BY TBLEGBAPH.—PRESS ASSOCIATION.) Auckland, May 9. Before the Taxation Commission today, the policy of large lending institutions was outlined by Mr. H. P. Kissling, general manager of the New Zealand Insurance Company. He said that such institutions would welcome a change in the system of taxation, but investors did not like continual alterations in such settled stocks as municipal or company debentures. The present very high rate on debentures of 4s. 6d. precluded companies such as his from investing in them. Mr. Justice Sim: Is it the small mm who invests in debentures of this kind? Witness: He can, because he gets a remission if his taxation does not come up to the maximum. To Mr. Hunt, witness said that high taxation seriously affected investments in mortgages. His company could not lend on mortgage and pay ss. lOd. in the £1 because the directors objected to charging more than 6} per cent., the limit which it was estimated that farmers could pay. Institutions would look for investments which would return them about 5 per cent. net. Their lighthouses were the tax-free war loans expiring in 1938 and 1939. Mr. Weston: Supposing the limit of graduated tax as applied to company taxation could be pulled down to 4s. 6d., would you recommend an alteration in the present rate on debentures (4s. 6d.) ? Do you think it advisable to increase the present rate on debentures in view of the possibility of taxation coming down to the neighbourhood of 4s. 6d. ? Jilr. Kissling: Perhaps the best way I could reply is to say that it would not tempt large institutions to invest in municipal debentures, even at 3s. If they have to pay ss. lOd. in the £l, it fixes the return on the investment nt less than what institutions could get on tax free war bonds. When Mr. Kissling emphasised that frequent change in the rates of taxation was prejudicing investments, Mr. Shirtcliffe stated that it was hoped that any further alteration would be final. Mr. Shirtcliffe: Do you think that uncertain values of land have anything to do with the reluctance to lend on mortgage ? "Witness: Since 1921 there has been a marked change and lenders have changed their margins. Mr. Shirtcliffe: We may say that until rural lands have reached a stable value according to their capacity to produce, borrowers will find it hard to obtain accommodation? Witness: Yes. Mr. Shirtcliffe : Supposing we brought the company taxation down to 4s. 6d., would that be sufficient to send you back to mortgage securities ? Witness: Yes, that would give us a rather better return than tax-free war loans and also provided we had an assurance that it would remain stable. The inquiry was adjourned till Monday.