taxing system

Dominion, Volume 31, Issue 142, 12 March 1938, Page 12

taxing system

Minister Points To Anomalies TIGHTENING THE LAW Clauses In Finance Bill Under Discussion “This new procedure will bring into being a formula that will stop quite a lot of tax evasion,” said the Minister of Finance, Hon. W. Nash, in the House of Representatives last night, when referring to a clause in the Finance Bill dealing with alterations in the dates on which financial years may close. In future, any taxpayer, with the consent of the commissioner, may furnish a return for the year ending on the date of the annual balance of his accounts. The income for that year will be deemed to have been earned during the year ending .March 31 nearest that date. In this connection, September 30 of any year will be regarded as being nearer to the preceding March 31 If a taxpayer adopts this practice h e will not be able to depart from it without the prior consent of the commissioner. “There has been a procedure —why, I don’t know—under which companies have changed the date of their financial’year,” said Mr. Nash. “Presuming that they balanced on March 31, they then changed to June 30. For some unexplainable reason the commissioners in the past have taken the income derived during the year ended June 30 only and the companies have got away with the tax for the three months during which the change was made. Profits made between March 31 and June 30 were not assessed for income tax.” Loss to Department. Mr. Nash said that in one instance £14,400 did not come into the assessment, and the company beat the Government for £5517. The Rt. Hon. G. W. Forbes (Opposition, Hurunui) : What were the commissioners doing? Mr Nash: I don’t know. • We were not in charge then. If we can recover the money we will. For some reason I can’t understand the commissioners accepted the annual return as if the profits that were assessable for tax were for the 12 months only. The Leader of the Opposition, Hon. Adam Hamilton: What does the law say? Does it say that that is all right? Mr. Nash: Apparently the commissioners thought so. In another case’the revenue lost amounted to £3733. Oiie company got away with the whole year. Mr. W. J. Broadfoot (Opposition. Waitomo) : The exception that proves the rule. ' K ' Mr. Nash: They got away with the year 1932. This -alteration may occasion some companies having to pay double tax, not for the purpose of double taxing them, but they will.have to pay two taxes in one year. They will still have earned the income on which they pay the tax. “Minister Not to Blame.” After referring to another case in which the tax had been evaded, .Mr. Nash said that no blame was attachable to tlie Minister in charge of the department at the time. There might be inside tlie existing tax procedure such anomalies that the Government knew nothing whatever of. “We- have some particularly fine commissioners,” added Mr. Nash, “but we do not know what taxes are written off, for whom they are written off or why. We happen to have some competent commissioners and they write them off. They make decisions inside tlie law and in accord with their judgment. It is my opinion that information of a much more detailed type should be made available to Parliament. Half the time the Minister does not know about it We are trying to recover that money, and if there is a way of recovering it we will take it, because the money is,due to the State. I do not know what was in the minds of those who carried it through, and they should be heard before too much is said about the matter.” “The Bill will also give an element of relief to taxpayers by authorising tlie Commissioner of Taxes to remit the penalty in certain circumstances,” said Mr. Nash. •‘Hitherto the commissioner has been unable to do that. It is a reasonable hardship provision in regard to penalty. The general hardship provision is also amended. A business man may make a profit of £5OO on paper, but before the tax is due to be paid he may incur a debt or make a loss that reduces tlie profit to nothing. Tlie commissioner is now given discretion to give a greater measure of relief than he lias been permitted to give in the past. In-each ease tlie commissioner cannot remit more than £25 without tlie authority of tlie Minister of Finance.” “When a Finance Bill appears near the end of a session," said .the Leader of the Opposition, who followed the Minister, “there are generally some sticky patches and a few clauses which are at least debatable. However, on tills occasion tlie Minister is to lie congratulated on avoiding anything which might prove contentious.” The minor taxing amendments in the Bill were generally approved by Mr. Hamilton. who said the provision with regard to tlie fixing of annual balance dates appeared to lie necessary. Tlie .Minister was quite right in attempting to .close up all possible avenues of escape from legitimate taxation. Tlie clause empowering the Commissioner of Taxes to remit, tlie penalty for late payment of income tax did, not come into the same category. There was an element of danger in it. as the penalty had always had tlie effect of keeping people up to tlie mark. With the commissioner entitled to allow a certain amount of liberty, there might possibly be a falling off in prompt payments. Tlie Bill was taken almost to tlie conclusion of the committee stage. After 15 clauses had been approved, progress was reported as further clauses have yet to be introduced for insertion iii tlie Bjll. Tlie House adjourned at 10.40 p.m.