INCOME-TAX UP TEN PER CENT

Dominion, Volume 23, Issue 256, 25 July 1930, Page 12

INCOME-TAX UP TEN PER CENT

Expenditure to be Reduced £1,684,000

MR. FORBES PRESENTS HIS BUDGET

Increases on Films, Totalisator and Bank Notes

AMUSEMENTS TO PAY MORE: STAMP DUTIES RAISED

Aii increase of 10 per cent, in income tax is the first item in the Government’s taxation proposals for the current year, according to the Financial Statement presented to the House of Representatives last evening by the Hon. G. W. Forbes, Prime Minister and Minister of Finance. With a prospective budgetary shortage of £3,095,000 reductions in l expenditure and various adjustments are to be made, leaving a balance of £1,660,000 to be provided from extra taxation. Approximately half this amount is to be provided by the Customs increases already announced. Duties and excise duties on liquor and cigarettes and tobacco are increased, and kinematograph films are to pay an additional 10 per cent, duty if of British origin and 25 per cent, if foreign. An increase is also made in the totalisator tax of 2| per cent., the Government taking 5 per cent., and the racing clubs 7| per cent, of the 12-| per cent, levied on investments. Bank-note duty, amusement tax and various stamp and death duties are also raised. Changes are also made in land taxation. The estimated revenue for the current year is £25,120,000 against £25,349,861 last year, and expenditure £24,874,000 against £25,200,882 last year. A surplus of £148,979 is shown for the year, tind there is an estimated surplus of £246,000 for the current year, but this is earmarked for the Supplementary Estimates. Expenditure is to be reduced by £1,684,000. Taxation last year totalled £19,494,115. Of this sum £8,837,335 was direct taxation and the balance £10,636,780 indirect. Included in the total revenue is £1,510,790 petrol tax duties, licenses, etc., in respect of motor vehicles. The total represented an increase of £1,482,972 over the previous year. The estimated revenue for the current year is £25,120,000 and expenditure £24,874,000, leaving £246,000 to provide for supplementary estimates and contingencies.

YEAR’S OPERATIONS

Summary of Figures SURPLUS OF £148,979 The surplus of £148,070 Is disclosed from the following figures showliig the transactions for the year:— REVENUE. ’ Taxation— £ £ Direct .... 8,837,335 Indirect 10,036,780 Other receipts 5,875,740 £25,349,801 EXPENDITURE. £ £ £ Permanent appropriations . 20,297,824 Less credits in reduction .. 3,070,219 Annual appropriations 9,226,500 Less credits in aid ' 1,253,223 Net expenditure chargeable against . revenue 25,200,882 Surplus £148,979 The following shows the year's results as reflected in the ordinary revenue account of the Consolidated Fund: — £ Balance brought forward, April 1, 1929 2,453,541 AddSurplus, 1929-30 148,979 Advance to Native Trustee repaid (net) 33,000 2,635,520 Less— Advances to Rural Intermediate Credit Board 162,000 Subsidies to local authorities for unemployment relief 111,728 Assistance toward res- •. toration of public works damaged by earthquake 3,516 Charges and expenses of raising loans 1,939 Balance March 31,1930 2,356,337 This balance was made up as follows:— £ Cash 1,510,239 Imprest outstanding .. 132,132 Investments 713,966 £2,356,337

REPARATION MONEYS Position of Dominion Discussing reparation payments Mr. Forbes said that, as far as New Zealand was concerned, the position was now as follows: — (a) Germany is required to. discharge her reparations debt by 36 annuities, commencing at £85.000,000 and increasing each year to £121,500,000, an average over the period of £99,500,000. Of this average annuity approximately one-third is unconditional, and the balance is conditional upon the state of trade in Germany, and under certain conditions may be postponed. (b) The British Empire’s share of the average annuity of £99,500,000 is approximately £20,450,000, of which the amount payable to New Zealand is £351,300. The present value of this amount compounded for thirty-six years at 5 per cent, per annum is approximately £5,812,900, and this, together with the payments already received (£1,750,000), is the cash return that New Zealand may expect toward reimbursing her for the losses incurred as the result of the war. In addition to the cash return there is, of course, the value of the reparation estates in Samoa, which are now the property of the Dominion. (e) To the capital of the newly constituted Bank for International Settlements the Government recently agreed to contribute the sum of £22,566 out of reparation moneys received from Germany. The capital is required to enable the bank to. conduct exchange operations and to provide part of the administration expenses. Id) A separate agreement has also been concluded between Germany and New Zealand whereby all German property in New Zealand remaining unliquidated at the date of the agreement will be returned to the German nationals concerned. The value of the property to be returned, subject to certain claims, is approximately £21,000, and this amount is at present held by the Publie Trustee as custodian of enemy property. The New Zealand reparation estates in Samoa are deemed to have been finally disposed of, and in terms of the agreement are to be retained by the New Zealand Government.

(e) With a view to capitalising a portion of the German reparation annuities, a total loan of approximately £60,000,000 was recently raised abroad, London contributing £12,000,000. An opportunity was given to place portion of the loan on the New Zealand market, but the Government deemed it advisable s to decline the offer. New Zealand’s share in the proceeds amounts to approximately f 74-

FALL IN REVENUE

Facing the Shortage ALL-ROUND DECREASES “The financial year which has just closed has been a difficult one from many points of view,” said Mr. Forbes, who read his statement to the full House. “Returns of overseas trade showed a decline in the value of exports, compared with that of the previous financial year, of over £8,000,000, while imports increased by over £4,000,000. The visible balance of trade for 1929-30 was, therefore, over £12,000,000 less favourable to the Dominion than for 1928-29. This reduction in the value of our exports is due almost entirely to the lower prices received. The declared value of butter, for instance, the principal export for tlffi year, declined 8-5 per cent., whereas the reduction in quantity was only 0.4 per cent.; and wool, the second in order of exports, declined by nearly £5,000,000, a fall of 32 per cent, in value, although a reduction in quantity of only 5 per cent. In considering these figures, however, account must be taken of the heavy stocks of produce held in New Zealand at. the end of the year. These were substantially higher than those on hand at the end of the previous financial year, and the proceeds of the produce carried over will improve the export figures for the current year to the extent of the amount eventually realised. “Partially on account of the falling-oft in the trade position, but mostly due to the reaction from Australian conditions, the exchange rates are at present very much against the importers. While there is some consolation in the fact that the exporters are benefiting from the position, and thus obtaining some set-off for the low prices they have received, the combination of the two factors —a contraction in the national income and an exchange rate of at least £5 per cent. — must result in a considerable falling-off in imports, and this, of course, means a corresponding decline in Customs revenue. Fall in Customs. “This, our largest item of revenue, is always difficult to gauge in advance, and at a time like the present, when there are so many uncertain factors to be considered, it presents a very complex problem indeed. Having regard to the experience of the past, and making allowances for the economic probabilities of the near future, it is estimated that the Customs revenue for' this year, . apart from any changes made in the tariff, will be £1,150,000 less than was received last financial year. The Customs revenue for the first three months of the financial year amounted to £2,006,243, as compared with £1,917.667 for the same period of last year; but an examination of the receipts for this year clearly indicates that the total has been considerably inflated by excessive clearances from bond due to fear of tariff increases. This is clearly shown by the fact that while the Customs revenue is higher, imports have declined. Further, unless a marked change not yet discernible occurs in the economic outlook, it is very probable that the falling-off in Customs revenue will be more marked during the balance of the financial year, for most of the goods now coming to hand were probably ordered before the present restrictive measures became effective. “Imports last year showed a comparative increase of £4,000,000 over those of the previous year. This year_a comparative decrease of at least £5,000,000 is likely. Furthermore, the falling-off will assuredly be greatest in the luxury items, on which the duties are highest. Land and Income Taxes. “The fall in export prices and the difficult times that have resulted therefrom will also affect the yield from land and income tax, although not to anything like the same extent. So far as income tax is concerned, the full effect will probably not be felt in the revenue until next financial year. Land tax, under the present legislation, would be affected by the provision for remissions in the casp of hardship, while land tax outstanding usually increases in times like the present. For the current financial year it is estimated that land and income tax, apart from any changes in the law. will be adversely affected to the extent of about £300,000. Railways Deficit.

“A loss of £1,300,000 in the railway accounts, coupled with the exhaustion of the liquid reserves, would mean that only about £900,000 could have been paid to the Consolidated Fund on account of interest, a decrease of £1,230,000 compared with the amount received last year. "In addition, it is expected that the revenue item, ‘lnterest on public moneys,’ would in the ordinary course have shown this year a comparative decrease of about £60,000, due to there being less money available for investment and to the low rates of interest offering on the London market for short-term investments.

“Then the item for miscellaneous revenue was last year increased by £60,000, derived from the sale of New Zealand’s interests in the Pacific cable, a certain accumulation of unclaimed moneys from the Public Trust Office received consequent upon legislation passed last ae»-

sion, and other amounts of a non-recur-ring nature. Consequently a comparative reduction of about £90,000 was likely this year. Higher Debt Charges. “On the expenditure side, under permanent appropriations, there will be unavoidable increases in debt charges, amounting, it is estimated, to £315,000, comprising £225,000 additional interest arising out of the increases in the public debt, and approximately £90,000 for debtrepayment charges. As I have already explained, the latter item will increase steadily each year, but such increases are offset by savings in interest ou debt redeemed. Pension Increases. “A further rigid item is found in pensions, where automatic increases are to be expected. The estimated increase for this year compared with last year’s expenditure amounts to £62,000, which increase is chiefly under the headings of old-age arid war pensions. In addition, increases are normally to be expected in hospital subsidies and various other items based on fixed rates.

"In reviewing the prospective budgetary position no allowance was made for any increase in departmental votes which normally increase a little each year as a result of expanding services. For instance, the Education vote has increased by an average of £90,000 per annum during the last five years. “Smaller increases and some decreases, probably largely offsetting one .another, were to be expected under other items; but, to sum up the position the Government was called upon to deal with, the anticipated principal variations from last year's revenue and expenditure, if operations had been carried out in the ordinary way on the same basis, are as follow :— Decreases in revenue— £ £ Customs 1,150,000 Interest on railway capital , 1,230.000 Land and income tax 300,000 Items other than tion 150,000 2,830,000 Increases in expenditure—■ Debt charges 315,000 Pensions and other fixed items 100,000 415,000 3,245,000 Less amount of last year's surplus 150,000 Prospective Budget shortage for 1930-31 £3,095,000 “I may mention that the amount of last year’s surplus has been deducted not because it can be brought into this year’s Budget, but because comparisons have been made with the revenue and expenditure for last year which resulted in a surplus of approximately £150,000. “An estimated Budget shortage of over £3,000,000, quite apart from any increase under departmental votes, that is what the Government, this House and the country generally has to face,” said Mr. Forbes. “Still, given the co-operation and support of honourable members and the people, the Government is satisfied that the position can be met and the Budget balanced, as, of course, it must be, withouj imposing undue hardship on any section of the community, for there is no doubt that the general financial position of the Dominion a» a whole la quite sound.