WAR TAXATION

Evening Post, Volume XCII, Issue 40, 16 August 1916, Page 3

WAR TAXATION

THE NEW LEGISLATION

ITS OPERATION FURTHER

EXPLAINED

In the Evening Post yesterday was published the first section of an explanatory exposition of the operation of the Finance Act (War Taxation Act), passed last session. Following is the second article, dealing with other phases of the new taxation : — In any case where the Commissioner is satisfied that the computation of the standard income by any of the methods (A), (B), (0), (D), outlined yesterdaywould entail serious hardship on any taxpayer by reason of the recent commencement of the business of such taxpayer, or by reason of the fact that the amount of capital actually employed by the taxpayer in his business is, owing to the nature of that ;business, small compared i with the capital necessarily at stake for that business, the Commissioner may compute the standard income in such a manner as, having regard to all the circumstances of the case, he deems just and reasonable. The Commissioner may also allow time for payment of the excess profits duty if he considers that serious hardship would be entailed by payment on the date fixed.

Provision is made for the hearing of objections to assessments of excess profits duty, at the election of the taxpayer either by a Magistrate's Court, under the Land and Income Tax Act, 1916, or a special board of appeal constituted by the Finance Act, 1916.

Returns and statements required for the purpose of assessing the excess profits duty: —

A taxpayer who elects under (A), (B), or (C) is required to furnish (unless he has already done so) a return or returns of income for the year or years which he elects to take, and also a statement of assets and liabilities as at Ist April, 1915, and as at the commencing date of the year or years to which his election relates.

That is, if he elects to take the year ending 31st March, 1914, as the standard, a return will be required for that year (if he has not already forwarded one), and also a statement of assets and liabilities as at Ist April, 1915 (the commencement of the income year), and as at the Ist April, 1913 (the commencement of the standard year). A taxpayer who elects under (D), or whose first year in business terminates during the year ending 31st March, 19X6, is required to furnish (unless he has alrea/dy done so), a return for the year ended 31st March, 1916, or date of completion of first year's business, as the case may be, and also a statement of assets and liabilities as at the Ist April, 1915, or the date of commencement of business, as the case may be.

For instance : If a taxpayer commenced business on the Ist January, 1915, he should furnish a- return for the year ending 31st December, 1915 (if he has not already done so), and a statement of assets and liabilities as at the Ist January, 1915. Where annual balance-sheets and profit and loss accounts have been prepared, a copy of the same will be accepted in lieu of the aforementioned returns and statements. In cases where the taxpayer has furnished all the returns and statements required b" need only notify the Commissioner of his election. Every taxpayer who has derived excess ■profits is required to notify the Commissioner of his election as to standard income. Forms, of return, notification of election, and statement of assets and liabilities, will shortly be obtainable at all postal money order offices in the Dominion. In addition to the ordinary income tax, the Finance Act, 1916, provides for a special tax on all assessable income over £300. Up to £900 the rate is 2£ per cent. (6d in the £). Over £900 the rate is 5 per cent. (Is in ihe £)—e.g., (!) If a taxpayer has an assessable income of £500, he will nay on £200 at 6d in tho £, equals £5; (2) If a taxpayer has' an assessable income of £1201, he will pay on £901 at Is in the £, equals £45 Is. Where excess profits duty is payable, the duty is allowed as a deduction in arriving at ithe taxable balance for ordinary income tax, and also for special income tax. The following is a tyoical assessment: A taxpayer's assessable income for the income year is £1200 and his standard income is £900. He pays £40 per annum, in life insurance premiums, and owns his business premises, of which the Government valuation is £2000. Excess Profits Duty :— Assessable income, ±il^00; standard income, £900; excess profits, £300—Duty at 45 per cent £135 0 0 Special Income Tax:— Assessable income, a^iOO; less £300 and excess profits duty £135, £435; taxable balance, £765—5765 at 6d in the £ £19 2 6 Ordinary Income Tax :— Assessable income, £1200; less excess profits duty £335, special exemptions ■ £300, life insurance premiums &*i>, 5 per cent, on Government valuation business premises (£2000), £100; £575— Taxable balance, £625 at 7 11-16 din £ £20 0 4 Super tax, 33^ p.c. ... 613 5 Total tax .£IBO 16 3 By reason of the special exemptions being deductible in arriving at the ordinary income tax and not in arriving a.t the other duties a taxpayer may be liable for nhe latter ana not for' the former. That is: A taxpayer has an income of £400 and a standard income of £350. He pays £40 per annum in life insurance premiums and has two children under sixteen years of age dependant on him. His assessment would be as follows :— £ s. d. Excess Profits Duty:— Assessable income £400, standard income £350, excess profits £50, ditto duty 45 pc!r cent 22 10 0 Special Income Tax :— Assessabln income £400, less special exemption ! £300, less excess profits duty £22 10s, £322 10s, taxable balance £77 10s ; £77 10s at 6d in the £ 118 9 Ordinary Graduated Income Tax: — Assessable income £400, less excels profits duty £22 10s, special exemptions £300, life insurance premium £40, 2 children at £25, £50; £412 10s; taxable balance nil. TotaJ tax 24 8 9 In & similar way, after the excess profits duty is deducted, the baJance. may ba under £300; coaaeaueatly neither of the Jaoomg taxes would be payable.. " t