HIGHER IMPOSTS

Dominion, Volume 32, Issue 261, 2 August 1939, Page 10

HIGHER IMPOSTS

Taxation On Incomes To Be Increased DEATH DUTIES RAISED More From Petrol And Beer I REVENUE & EXPENDITURE Estimated Surplus Of £17,000 Rates of income tax, estate succession and death duties, beet duty and the petrol tax are all to be increased by proposals contained in the Budget presented in the House of Representatives last night by the Acting-Minister of Finance, Mr. Savage. After allowing for the effect of this additional taxation there is an estimated budgetary surplus for the current financial year of f 17,000. Revenue is expected to amount to £38,260,000 and expenditure to £38,243,000. A summary of the estimated revenue and expenditure for the year is as fol-

Estimated surplus £17,000 Current Year’s Proposals. Discussing the 1939-40 financial proposals, Mr. Savage said that so far as expenditure was concerned the estimates provide for a continuation of «xisting services. Debt charges show an increase of £741,000, of which provision for interest for a full year on new borrowing for last year apd anticipated borrowing to finance this year’s capital expenditure programme accounts for £535,000. The balance, for the most part, arises from the automatic increase in the item for repayment of public debt. The coming into operation of the Social Security Act is reflected in some relatively large changes in the estimates. The items for pensions, apart from war pensions, have disappeared from the Consolidated Fund estimates, and have been replaced by a new vote providing for the transfer of £2,000,000 to the Social Security Fund. Education and Health. The votes for education and health show an increase of £547,000, but, even so, for the reason stated, the aggregate for all the votes grouped under the heading of “Social Services” is approximately £2,300,000 less than for last year. Against this the disappearance of the Employment Promotion Fund has rendered it necessary to make some provision under the Consolidated Fund for promotion of employment, as these subsidies cannot be discontinued all at once; Accordingly, for the purpose, £2,500,000 has been provided under vote “Labour,” and £400,000 under vote “Native.” These adjustments involve a net increase of approximately £600,000 in the expenditure from the Consolidated Fund. There is a heavy increase in the cost of defence, toward which the votes for the three services on the Consolidated Fund have been increased by £1,114,000. The various increases referred to have been offset to the extent of £185,000 by a. net decrease of this amount in other votes, leaving a net aggregate increase in the estimated Consolidated Fund expenditure of £2,270,000. Shrinkage in Revenue. On the revenue side of the account there is a total net shrinkage estimated at £822,000. The importation of raw materials in preference to finished goods under the import selection policy will, it is anticipated, reduce Customs duties by £1,650,000 in comparison with last year’s receipts. The yield from income tax at the existing rates is estimated to return £705,000 less than for 1938-39, while the revenue from stamp and death duties is anticipated to be lower by £130,000. Against these reductions are offset an increase in railway interest of £500.000, while other items have been increased by £1,163,000. of which £990,000 represents the profit derived from the issue of our own silver coins. These, with other minor increases and decreases, are estimated to reduce the total revenue by the £822,000 referred to. Allowing £200,000 for supplementary estimates and contingencies, the budgetary position is:— £ Expenditure 38,2-13,000 Revenue 35,760,000 Leaving a shortage of £2,483,000 Revenue From Taxation. In arriving at these results the expenditure estimates have been carefully overhauled, while, on the other hand, every endeavour has been made to ar-

rive at as accurate an estimate of the revenue as possible. The position therefore is that we are faced with the problem of increasing the revenue from taxation by £2,500,000. The problem is not an easy one, and the Government bare given very careful consideration to various alternatives in order that the additional burden might be so placed as to bear as lightly as possible upon the people.

To meet the position it is proposed io obtain a further £1,000,000 from income tax, £200,000 from additional death duties, £300,000 by increasing beer duty from 1/3 to 1/0 a gallon, and £1,000.000 through raising the petrol tax by fourpence a gallon.

Basic Income Tax Rate Increased.

For individuals the present rate of income tax is 1/8 in the pound, increased by l-100th of a penny for every pound of taxable income up to £oaoo, and thereafter by l-150th of a penny up to a maximum of 8/2 in the pound for earned income. On unearned income these rates are increased by one-third. To obtain the additional revenue it is proposed to increase the basic rate by fourpence, making it 2/- in the pound, and to continue the graduation beyond £5500 Ut l-100th of a penny instead of l-150th of a penny, as at present, up to a maximum of 8/7 in the pound reached at £7OOO. At the same time the amount of the general exemption will be reduced irorn £2lO to £2OO. This will have the effect of bringing within the scope of the tax a few more single men without dependants and of increasing the taxable balance of all other taxpayers by £lO. In regard to companies, the basic rate is to be raised from 1/- to 2/- in the pound to bring it to the same leiei as proposed for individuals. The rate of graduation, however, is to be reduced from the present rate of l-100tli of a penny in the pound up to £5500 and l-150th of a penny thereafter up to a •maximum of 7/6 in the pound to a rate of l-125th of a penny in the pound up to a maximum of 7/11 reached at £BB7o. Scale of Death Duties,

To obtain the £200.000 from death duties, it is proposed to increase the scales for estate succession and girt duties by approximately 20 per cent., discontinue the present exemption of £lOOO for life insurance moneys, and slightly reduce the present exemption for estates passing to widows. The life insurance exemption was introduced in 1925, but experience has shown that there is no real jutsification for it, and it is not granted in Great Britain or in any of the Australian States. Concerning the exemption to widows, the present allowances are £5OOO in respebt of estate duty and £lO,OOO for succession duty. The exemptions now proposed are £3OOO plus one-third of the difference between this and the amount of her succession up to £4500, making a limit of £3500. In the case of succession duty the proposed exemption is £5OOO plus a third of the difference between this amount and the amount of her succession up to £lO,OOO, making a limit m £6666/13/4. Even with all these adjustments, death duties in New Zealand on estates below £5OOO are appreciably lower than those charged in Great Britain or in the Australian States. Statistics show that ,the great majority of estates in New Zealand are for amounts below £3OOO. and if such an estate is left to a widow no duties are payable. Higher Beer Duty. In regard to the proposed increase in beer duty Mr. Savage mentioned that the rate was 1/6 a gallon in 1934, but was then reduced to 1/3. Most of the additional revenue required is to lie obtained from income tax on the one hand and petrol tax on the other. The former is regarded by the Government as the appropriate field for providing for normal expansion of State activities, while the latter is considered in the light of a special contribution toward the additional heavy costs of defence. Petrol tax has been chosen because, directly and indirectly, it reaches every section of the community and all should share in the cost of defence. The tax has the merit of pressing much more lightly upon large families than other forms" of indirect taxation and a good deal of it is in the nature of a luxury tax. The rates of the mileage tax imposed by section 4 of the Motor Vehicles Amendment Act, 1934-35, upon motor vehicles using motive power, other than petrol, such as Diesel oil, will be increased correspondingly. MONEY FOR OVERSEAS Control Of Remittances PRESSURE ON STERLING The procedure relating to the remittance of money overseas—now subject to Reserve Bank permit—was explained by the Acting-Minister of Finance, Mr. Savage, in his Budget speech last night. De said that sterling funds are first of all earmarked to provide for State and local authority debt charges, which alone involve a very substantial sum. Then allowance is made for interest .on private debts and investments held by persons overseas and for certain other necessary expenditure, while the balance is available for imports, both State and private. Thus New Zealand is giving pride of place to her overseas commitments. In' applying the system, said Mr. Savage, every endeavour has been made to encourage the development of economically justifiable industries in New Zealand. In carrying out this policy, there has naturally been an increased demand for machinery for manufacturing purposes and for raw materials. We will receive the benefit of these importations in future years, but the immediate effect lias been to increase the demand for sterling funds, and this in turn has led to some delay recently in arranging remittances. This pressure upon sterling funds, combined with the fact that import licences for each half-year have mostly been issued early in the period to which they apply, with consequent immediate heavy demands upon the banks, has given rise to a feeling of uncertainty a.s to when sterling will be made available to importers individually. Importers have recently been invited to submit through their bankers particulars of the remittances required for their import business to December 31 next. On receipt of such particulars, licence-holders will be advised of the particular month or months during which their remittances may be made Thus the uncertainty will be removed and importers will know exactly where they stand and he able to place their orders abroad with confidence.

lows: — REVENUE. Taxation — £ - Customs .... 10,000,000 Beer duty .... 1,300,000 Sales tax .... 3,500,000 Highways ... 3,250,000 Stamp & death duties .... <>,480,000 Band tax .... 1,000,000 Income tax ... 9,000,000 Miscellaneous • 190,000 £ 32,320,000 Interest recoveries 2,780,000 Other receipts .. 3,160,000 5,940,000 f 38,260,000 EXPENDITURE. Permanent appropriations— ’ £ • Debt services . 10,022,000 Exchange .... 1,500,000 Transfer of highways revenue 3,233,000 Other permanent appropriations 376,000 £ ' - 15,131,000 Annual votes— Social services 10,613,000 Other services 12,299,000 22,912,000 Supplementary estimates and contingencies .. 200,000 38,243,000