A DIFFICULT TAXATION PROBLEM

Dominion, Volume 34, Issue 9, 5 October 1940, Page 10

A DIFFICULT TAXATION PROBLEM

It is well that the proposed tax on excess profits, provided for by the Bill introduced in the House of Representatives on Thursday, is not intended to be hastily applied. If the measure becomes law it will not be made operative until next year, and there should be sufhcient time for a thorough and expert exploration of ways and means by which injustices may be avoided. The passing of the Bill will leave on the hands of the Government as difficult a taxation problem as has ever been raised in this country, and one which will call for the assistance of the most experienced brains. The difficulty of avoiding inequity and anomaly in any measure aimed at a commandeer of “excess” business profits, in wartime nas long been recognized. Business circumstances vary in such a multitude of ways that it is virtually impossible to embody in a Statute itself provisions to suit all cases fairly. A proposed excess piofits tax in New Zealand during the Great War was abandoned because of the perplexities it threatened to introduce; and although the Britis i Government began taxing excess profits in 1914 with the advantage of being able to assess the tax on a past period of exceptionally placid and stable business conditions, it was not until nearly the end of the war that the scheme began to work smoothly. As far as can be ascertained the new British machinery for taxing excess wartime profits, introduced in September last and moi. recently amended, is being administered-in the light, of previous experience and with appreciably greater success. The Bill introduced foi this country appears to follow the broad lines of the latest Btitish enactment; and insofar as the principle of such a tax is acceptable, the provisions to be debated next week have the. recommendation ot the British precedent. But that is only the beginning of the matter. It is to be recognized—and emphasized —that the system of taxation envisaged by the Bill can become balanced and just, or onerous and grossly unjust, entirely according to the quality of care, judgment and understanding which is brought to bear on the task of assessing liability in individual cases. . . Of the innumerable potential difficulties in the way of levying this tax equitably, one or two are outstanding. Perhaps the. most urgent cases will be those of companies, partnerships and individuals for whom the years 1936-1939 constituted a lean or developmental period, but who are now profit-making. If, as proposed, tne average profits of the past three years is to be looked upon, as normal foi the purpose of comparison with today’s profits, it is plain that such concerns would come within the tax-collectors reach, with a likelihood of serious hardship, if not an inqierilling of their newly-gamed stability. What has the Government in mind concerning this and otner aspects of its taxation proposal? This question should be brought to the forefront of next week’s Parliamentary discussion, for the security of many already hard-pressed taxpayers will depend upon the answer. The position—again assuming, that the measure as drafted, is passed into law—calls for two things: First, the willingness and readiness of the Government to co-opt the best advice o> tainable; and, secondly, for those who are equipped to give such advice to come forward with constructive suggestions as to the wisest method of making assessments and handling appeals. There is opportunity here for a valuable public service to be given by such institutions as the New Zealand Society of Accountants, whose members have the requisite knowledge and experience of business conditions generally as well as of recent individual case, histories. A pooling ol the brains of those whose services as public auditors provide them with experience beyond the scope of departmental officers would be a very welcome sequel to the passing of the Bill.