WAR TAXES

Evening Post, Volume XCII, Issue 90, 13 October 1916, Page 4

WAR TAXES

FEDERAL SCHEME UNDER

FIRE

LEVY ON "ALL" WAR-TIME

PROFITS

EXEMPTIONS AND CRITICISMS.

The wealth side of the equation in the matter of war-sacrifice was the subject of some impressive .remarks by the Commonwealth / Prime Minister in his advocacy to Parliament of a compulsion referendum. "The .Government," said Mr. Hughes, "asks men to make a great, sacrifice; it asks them t& risk their lives in order to save their country. . .. But the country must in turn prove itself worthy of .such men. There must, be, as far. as is humanly possible, equality of .sacrifice. Wealth has its1 duties; it owes all it has to the State, and: must be prepared if necessary to sacrifice that all to the State." Of course, the sacrifice of "all" wealth to the State would be suicidal; .the State w.ould not know what to do .with it, would in fact be choked with it, and the withdrawal of ',producing wealth i from the work of production would im- 1 mediately ,bring general collapse. That certainly is not what Mr. Hughes meant. To dislocate all working capital, was far from his purpose, but to take all profits, not needed in furthering production, is another problem. The question arises: ,How close ,do the .new Federal war taxes (announced in the Commonwealth Parliament by the Treasurer, Mr. Higgs, on 27th September) approach to that-ideal? AN AMBITIOUS PROPOSAL. One of the most debated items among, these new taxes is a tax on "war-time profits" ; .which is, of course, a wider proposal than a tax .on war-profits only. The Treasurer announced "a war-tame profits iax" for 1915-16 of 50 per cent, on profits, allowing an exemption o£ £200 and "a profit standard" of 5 and 6 per cent, (the lower rate .applying .to companies, and the higher to private firms); for 1916-17 an .exemption of £200 is allowed and "a .profit standard" of 7 and 8 per .cent., .but all profits over' this are taken. Comparing these two taxation schedules, it is seen that .the basis of a "profit standard" (percentage exemption) and an exempted amount o£ personal income (£200) is common to both. But in 1915-16 the State claims half-profits; in 1916-17 it claims (above the exemptions) all. As some compensation for 'this clean sweep, .the .percentage exemption, or "profit standard," {or the latter year is raised by 2 per cent.

■If the1 above statement (condensed from ! tho Federal Treasurer's utterance in ,the i Commonvyealth parliament) is taken at ! its face value, it, appears to mean that ' all profits, above £200 a year exemption | and 7 or 8 per cent, interest pn capital, | are Called up by ithe Government. 'This in some cases might mean that the .taxpayer would be 'lejft with little more than a living income for himself and his 'dependents ; and .that might satisfy those who claim that if .one man's life is commandeered, another man should not be left ■with more tha.rl a subsistence income. But ,how far Mr. Hughes and Mr. Higgs go in their pursuit of equality of sacrifice will not be determinable until the new1 Federal taxation proposals are embqdied in a machinery Bill. For that Bill may contain exemptions not evident .in the skeleton .scheme now before the Federal Parliament. INDpSTRIAL HANDICAPS. The financial editor of the Sydney Daily Telegraph writes: tfWhat the 'wartime profits tax really means we do net unfJerstand. To take all profits over 7 or 8 per cent, 'would paralyse many industries. It would reduce many dividends wholesale, and sweep away all additions to reserves." "This taxation," comments the Argus, "will produce unexpected effects, as, for instance, in the case of a, firm .vrhoss profits for 1916-17 are £6000 in excess of the pre-war standard. This exqess will ba taken by ,'the Federal and, in addition, the firm pays State and Federal income.,tax, so that it will lose about £6500 for being foolish:-enough to make excess profits of £5000."

"The outstanding feature ,of the Federal .Government proposals in. respect to new taxation," says Mr. A. A. .docks,

president of ,tjie Sydney Chamber .of Commerce, "is the distinctly new departure of confiscation of the savings of the people. It has disturbed the minds of the' public far in pf the ain'oun.t involved, because it opens up an entirely new vista."

.Considerably different is the view of Mr. W. T' Wellington,' president of the Sydney .Chamber o.£ Manufacturers, who declares: "Generally speaking, there is nothing .excessive in the proposals. .Qertainly it may hit some firms with small capital which are working with bank assistance. We manufacturers, recognise that the position is serious and extraordinary, and arc prepared to bear pur share. In England th^e wealthy men are paying a much greater tax."

TAXES ON .SMALL PE.OPLE.

It is fair to_add that, in this new scheme of Fe&eral war taxation, all the new levies do not fall on wealth. The Federal Treasurer states that, the income tax will be raised all' round by onequarter, and the meaning of this is realised when the lowness of the exemptions js observed. In New Zealand the income-tax exemption is £300 a year ; that is to say, a man earning £300 or less does not pay income tax, and if he has ■five children he can earn £425 and pay no tax. In Australia, under this Federal proposal, the exemption for married men arid single men with dependents falls as low as £fS6 a year ; for others, it is right d.own to £100 a year. As wartaxation the new Commonwealth proposals appear to beat all Dominion records, especially when it is remembered that every Australian is subject to two tax-, gatherers, the Federal one (now in evidence) and that employed by his own State Gpvernment