The Dominion. THURSDAY, FEBRUARY 10, 1944. LOANS AND TAXATION

Dominion, Volume 37, Issue 115, 10 February 1944, Page 4

The Dominion. THURSDAY, FEBRUARY 10, 1944. LOANS AND TAXATION

According to the statement made by the Acting-Minister of Finance with respect to the new conversion loan the terms have been determined so as to give holders a return in line with maiket conditions. In effect that means a reduction on the long-dated stock of slightly over 5/- per cent, compared with the return offered in connexion with the big conversion issue in 1941, the rate of interest having been reduced from 3j) per c'ciit. to 3 per cent. In view of the marked shortage of trustee investments the terms offered should ensuie a good response, although probably many holders will ask why they should be asked to accept a return well below that being offered to holders of New Zealand securities overseas at the present time The official answer would most likely be that the terms offered in London were governed by market conditions ruling there, and that the margin between the two loans represents the difference between the domestic and the overseas money markets for this class of investment. There are, admittedly, many factors that have to be considered in connexion with transactions of this character, and an issue that gave a yield corresponding with that obtainable on the open market is, taken o-enerally, perhaps as sound a basis as any. But there are matters in connexion with these loans that should have the earnest attention of the Government. The thrifty people who have preferred the lowei return from Government stocks to the higher which investment in other ways probably would yield, were actuated by. the desiie for the maximum degree of security. They aimed at securing for themselves, as the result of their own industry and thrift, an assured income, and that desire was in every way admirable because it demonstrated a desire for personal independence and a strong disinclination to depend upon the State for their support. . . Withxtheliigh scale of taxation now in operation these people have been particularly hard hit by the penal tax on what is teinied unearned income, and-in its operation it is clearly inequitable, it is tantamount, in the case of individuals, to. a direct tax on savings. The money these people have been able to invest was, for the greater part, honestly earned and carefully saved., and for the Government to impose a drastic tax on the return obtained from the investment of that money, on the ground that such income is not earned, is to hide behind a pure technicality and allow a course to continue that is detrimental to thrift and individual independence. It discourages the very qualities that any well-governed State should endeavour to develop among its people. \ • i .1 v This is an aspect which the Government of. the day, particvlaily in the exceptional circumstances that now obtain, should review. • It has to face, in the coming financial year, a loan programme of as yet unknown but certainly of large proportions, and it will rightly appeal to the people to economize rigidly in their personal expenditure in order that funds may be made available to the Government for. the fuitheiance of the war effort. Nothing must be allowed to militate against the success of loans involving the raising of new money, and that being so the Government should examine the effects of this penal taxation, for if the results of thrift involve such heavy additional taxes then the incentive to save will be weakened. It should be dear to the Government that it is illogical to urge people to save for the purpose of lending to the State and, at the same time, maintain a system of taxation that particularly penalizes that form of investment and makes, serious inroads on the return to the people who by their self-denial and thrift seek to respond to the appeal.