HIGHER TAXES EXPECTED

Dominion, Volume 32, Issue 259, 31 July 1939, Page 8

HIGHER TAXES EXPECTED

Larger Incomes To Pay More? INCREASE IN DEATH DUTIES LIKELY Presentation Of Budget Tomorrow Increased taxation on higher income levels is expected to be announced in this year’s Budget, which will be presented in the House of Representatives tomorrow night. Since the all-round increases made by the Labour Government during its first year of office, the rates of taxation have remained unchanged, but indications are that certain classes of taxpayers will be faced with heavier demands from the State during the coming year. There has been no official intimation of what may be expected in the way of taxing proposals, but in a recent public debate in Wellington a Government member, Dr. McMillan (Dunedin West) made the significant statement that the Government intended to raise the tax on higher incomes and greatly to increase death duties. Even if this year’s expenditure is to remain the same as last year, it seems that increased taxation will be necessary to compensate for the drop in Customs revenue which may be expected to follow the restrictions on imports. Some members of the Government have claimed, it is true, that the control which has been exercised will not diminish the actual volume of imports, but the terms of the conversion loan announced in London last, week appear to indicate that drastic restriction of imports will be necessary to build up the Dominion’s overseas resources sufficiently to finance the repayment of the loan in the time stipulated. Exchange Control. Though exchange control and import restriction actually operated over the last three months of the past financial year, the effect of this policy had not then bad time to be reflected in the Customs revenue for that period, and, in addition, the measure of restriction is now considerably more severe than during the first six months of its operation. On the other hand, factors which are in the Government’s favour are the surplus of £BlO,OOO carried over from last year, and the £4,500,000 or more recently raised by the internal loan, while consideration must also be given to the export credits totalling £9,000,000 granted by the British Government. Against these, however, is the expected deficit of approximately £2,000,000 on this year’s operation of the guaranteed price scheme, in relation to which the recent report of the directors of the Reserve Bank has some significant passages. The directors pointed out that such deficits as these represented the creation of credit beyond the equivalent of commodities produced, and they considered it important that the inflationary tendency of such accommodation should not be overlooked. Expenditure on Defence. Though the Government may find it possible to reduce some of the departmental votes, it seems certain that a larger appropriation will be necessary for defence. It is likely that the greater part o£ export credit of £5,000,000 granted by Britain for Government purchases will be expended on defence equipment, but apart altogether from, that, the expansion of the territorial forces and other branches of the fighting services will involve heavier charges on the Consolidated Fund. It will be interesting, when the Budget is presented, to see whether the Government intends to make any concession to the popular demand for a reduction in public works expenditure. So far no Indication has been given of what may be expected in this direction, apart from the fact that several large State building projects, which are likely to make a heavy drain on this year’s public works vote, have recently been begun or are planned to start in the near future. In addition, the Government is committed to the completion of two major railway construction works, as well as other substantial undertakings. It appears that the bulk of the internal loan will be devoted to public works expenditure. Social Security Scheme. The effect of the social security scheme on the budgetary position remains obscure. While the full taxation of 1/- in the pound has been collected since the scheme was inaugurated on April 1, the medical service involved in the complete scheme is still far from complete, with a resultant financial benefit to the Government. With tlie scheme in full operation, social security taxation alone would be insufficient to finance it, and the deficiency would have to l»c met from the Consolidated Fund. There lurve been frequent rumours of an increase in the tax, but this seems highly improbable this year, tiny way, in view of the fact that only a partial medical service is being provider).