TAXATION ANOMALIES

Evening Post, Volume C, Issue 36, 11 August 1920, Page 7

TAXATION ANOMALIES

THE NEED FOR REVISION

ANNUAL BILL DEBATED

MEMBERS EXPRESS THEIR VIEWS.

Advantage was taken by members of the introduction by Administrator's Message of the annual Land and Income Tax Bill in the House of RepreEentatives yeaterday to raise a general discussion, upon taxation, which ultimately developed into a debate upon the unearned increment. In answer to the ActingLeader of the Opposition (Mr. T. M. Wilted), the Prime Minister said that the new taxation proposals would be brought down later, when they had been gone into by the Finance Committee recently set up. The Bill at present before the House contained the usual provisions to enable the collection of taxation for the year ending 31st March last. Mr. W. A. Veitch (Wanganui) wanted to know what the Government intended to do about the general matter of the incidence of taxation, and impressed upon the Prime Minister the need for a readjustment. Customs and excise duties were estimated this year to produce over six and a-quarter millions, or about £6 per head of population. With the profits of the retail and wholesale merchants added, that meant that the family of a man and his wife and six children "would have to pay from 25s to 30s a week. 'On the other hand, the' estimated increase on land and income tax "was a mere trifle. He wanted to know whether the death duty and stamp duty measures to be brought down later were the consolidations promised or whether they were new. Mr. Massey replied that they were not the consolidating measures. The law draftsmen; had so much work to do that it was doubtful whether the consolidating measures would be brought down this session. Mr. Veitch protested against any delay, and said that it must be caused by faulty administration. It seemed clear that the House was being kept employed with minor matters while the law draftsmen were trying to catch up with matters handed to them at too late an hour by Ministers. There was too much of a tendency on the part of Ministers to drift along. The Minister of. Agriculture : ''"Name the Ministers." Mr. Veitch : "Why should I name them? You all sin alike." He again urged the need for bringing down a measure to relieve the poorer people aaid to put the burden, of taxation on the rich people of the country. Mr. W. E. Parry (Auckland Central) argued that the Customs taxation pressed unduly on the poor man; in fact, it amounted to about 12j per cent, of the average yearly earnings of the working man with a wife and two children. Mr. C. E. Statham (Dunedin Central) asked whether the Bill could not be held over and the new proposals brought down in time to apply to the year ended 31st March, 1920. Direct taxation, according to the Budget, was falling, while taxation by the Customs and excise was rising by about a million. Dr. A. K. Newman (Wellington East) siipported Mr. Statham's request. Mr. Massey : "We collect the taxation at the beginning of November, and all arrangements have to be made." Dr. Newman again urged that the new proposals should be hastened, and then stressed the need for differentiating between earned and imearned income. Mr. W. D. Lysnar (Gisborne) spoke of the need for revising taxation of Native lands and of syndicates' profits, and also urged that the Bill should wait until the Publio Accounts Committee's recommendations had been made. Mr. J. P Luke (Wellington North) pleaded the case of superannuated Civil servants and others similarly placed. Money must be found somehow for urgent works, however, while it must be remembered that New Zealand was much better off in the matter of taxation than, for instance, England. A "HOTCH-POTCH" SYSTEM. Mr. J. M'Combs (Lyttelton) characterised the present system of taxation as a "hotch-potch," and then went on to refer to the need for readjusting company taxation, which at present pressed heavily on the small shareholder, while the larger shareholders escaped lightly. Mr. D. Jones (Kaiapoi) reminded members that the farmer paid both land and income tax, and then said that Mr. Veitcli's method of arriving at the amount of indirect taxation falling on the average poor man was wrong. The average working man was not the man who bought the articles which contributed the greater part of the Customs duty. It must be remembered, too, that certain duties had been imposed for the protection of industries, and that if they were lifted many men would be thrown o\it of work. 9 Mr. H. E. Holland (Builer) claimed | that more than two-thirds of the people paying income tax had less than £650 per year. The Government would be on sound lines if it taxed those receiving more than that sum in such a way as to reduce their incomes to £650. He quoted from the latest returns to show the ■actual numbers receiving specified incomes ranging from £7000 to £650. The- Hon. J. A.' Hanan (Invercargill) said development work called for money, and those who had means could look forward to increased taxation. He wished to see a form of taxation which would discourage land speculation and stimulate production. Mr. Parry (Auckland Central) argued that there were great community-created values which at present went unfaxed. Mr. J. M'Combs (Lyttelton) said that up to 25 per cent, of the community-creat-ed values, which amounted to 15 millions in one year, should be taken by the State. The Prime Minister interjected that the figures quoted by Mr. M'Combs included the results of further subdivisions and improvements. Mr. J. Horn (Wakatipu) said they should find some means of, giving relief on account of family expenses to the man who did not pay taxation on his income. PRIME MINISTER REPLIES. When the Bill was reported to the House the Prime Minister replied to one or two points. He hoped that no reflection had been intended on the Law Draftsman for not having Bills ready, because he had been doing very good work. (Members interjected that no such reflection had been suggested.) Mr.' Massey proceeded to point out that the present Bill was the one that came down every year; that any new taxing legislation that had to be introduced took at least six months to prepare before all the calculations were complete, and consequently had to be started upon six months before the legislation was actually brought before Parliament. Proposals had cotno down from the Income Tax Department for the Finance Committee, which was meeting now, and v/hich was working i:pon them.' These' proposals would then go back to the Law Draftsman and be put into the necessary legislative form. My. Maeeey replifid to statements regiirdiug the disparity in the. iqcreujtt is

income tax and the Customs duties. From the speeches it might have been thought that the Government was collecting about 75 per cent, more in Customs, compared with 10 per cent, a few years ago. It was not so. In 190Q the Customs duty, was 38.8 per cent, of the total revenue. To-day it was not half that. Mr. Holland : "You cannot' get away j from the fact that you are increasing it by a million." Mr. Massey : "I could do with it." But what about the increase in the land and income tax? That ha- besn multiplied four or five times. When the Bill came along from the Finance Committee they would have an opportunity of dealing with the incidence of taxation. Mr. Massey went on to say that in New Zealand people were exempted from income tax up to £300 per annum, whereas in Britain the limit was £130. Mr. Holland : "£2OO in .Australia " Mr. Massey proceeded that .3.6 pel cent, of the taxpayers in New Zealand paid 80 per cent, of the direct taxation —including, of course, companies. A few days ago he had made Departmental inquiry as to whether any man's will had been worth a million sterling, and had been answered in the negative. No one had died in New Zealand worth a million. _ Mr. Massey went on to'explain fallacies held regarding what was unimproved value, stating that the great majority of people did not know the real meaning of the term. A member : "It should be calied the taxable value." Mr. Holland: "What about the taxable value of the land on the looks and the Felling value as it is to-day?" Mr. Massey replied that the valuers could not put the values up to the highest point of the land sold in the surrounding neighbourhood, as some stemed to think. They would be in a mess if they did; the time might come when (he hoped it would not) the ' values migth have to be reduced. Mr. T. M. Wilford rose to explain that the Biddiford Estate had been worth £1.200.000, though perhaps the State did not get the taxation on that amount. INCREASE FROM CUSTOMS. Mr. H. E. Holland (Builer) pointed out that the Customs taxation war being increased by about one million steriling, while the land tax would only go iup, under the Budget proposals, by £45,000 (though land values had increased by fifteen millions), and income tax increases were to be £150,429, notwithstanding that exports alone had increased by eighteen millions. Mr. A. S. Malcolm (Clutha) asked if it would not be possible to release farmers from taxation on income derived from land which already was taxed. AN- INTERESTING VIEW. Mr. D. Jones (Kaiapoi) dealt interestingly with the confused ideas held in-re-.gard to the unimproved values, giving the side of the question from the farmers' point of view. He explained that into the increased unimproved value of land must be reckoned the increased value in sheep and stock, due, he pointed out, to the skill of the farmers in ■breeding. In a stated period the value of the wool taken" off the sheep, for instance, had increased by £4.000,000, and he gave similar figures for their car■cases, and the cattle and dairy stock, stating that if all these increases in the value of stock and sheep were taken together it would be found to be greater than the stipulated increase in the unimproved value of land for the same period. Yet the extreme Labour members called this community-created, value. What about the debt, ilso, that ithe community owed to the ea.rly pioneers who went out into the -wilderness and settled the couetry ? Was that not to be taken into calculation? How many men would have gone out and undergone the* hardships of those days under the principles promulgated by the extreme Labour representatives to-day '! If wealth was to be evenly distributed apart from the work a man did, and the hardships he suffered, those men would rather remain in the towns and ■have some of tie pleasures. Who, then, ■would go out into, the backblocks to create these community-values ? There ■were men in the House who professedly wanted the whqle results of their laibours Mr. Parry : "So do you." Mr. Jones : "Very -well, then, there a.re still fifty or sixty thousand acres of ;Crown land still available, and the lion, member can go out into it and get this full returns of his labour." (Laughter.) A member : "That won't be much." (Laughter.) A MEMBER'S OFFER. Mr. Jones said that there were some men who would not go out because they ■wanted the comforts. of the cities. I;a reply to interjections, he declared he would finance any member of that party on a block of land if they would take it on. . Mr. M'Combs: "At tfhat interest?" Mr. Jones : " Six per cent." He would only impose fair conditions. Mr. Parry : "I will take it on." Mr. Jones : "Well, I make the offer now\ I will finance the money." The lion, member could get aE the return for his labour. (Laughter.) Mr. Holland : "And we will finance you into the coal mines with a pick and ishovel, and give you the product of your labour." Mr. Jones said he' had workedas hard ■as any coal miners for what he hadigot. Mr. Parry : "They work as hard es you do." Mr. Jones : "I am not opposed to their doing that." (Laughter.) The interjections at this period nece:«itated the Speaker calling for order. Mr. Jones went on to state that the man on the farm, especially the single man, worked the longest hours of any —sometimes sixty or seventy a week. .He did it because he hoped to become independent. It was he who was giving the labourer in the city better conditions and better wages, by increasing the wealth of the community. If the men in the towns cared to work as hard, or as long,- they also would become ;is well off eventually as the farmer. WHO CREATES VALUES? Mr. E. J. Howard (Christohurch South) said it was useless to say that the man who owned the land liad made the unimproved vajue. On ths contrary, it was the man who slept in the little "humpy," with windows covered with sacking, who had been responsible. It was the men and women who toiled! from mom to night, while the member for Kaiapoi had been doing his beat to prevent them from gaining the right toregister under the Arbitration Court, who had done most to increase values. If a landowner employed one hand or ten hands, each on» was entitled to his ahare of what was produced. Labour had never said that it wanted to confiscate property, but it had argued that when the Government had conscripted human lives it should have been, prepared to conscript wealth. This discussion, however, was getting nowhere, and:, to his mind, the Prime Minister was only giving them something' to fill in time while he got hia real business ready. Mr. Massey : "Well, sit down, and we'll go on." Mr. Jones : "Mr. Parry started it." Mr. W. D., Lysna.r (Gisborne) said it was' not sound policy to attempt to extract anything more than the -Public Department Extinction Act provided for. He want into detni'; to prove that the farmer himself created what was termed the unearned increment. Mr. J. Horn (Wakatipu) argued! that th* unearned increment was caused by publio works, aad therefors eaii it.

ould pay the Government to push railways'and road's into some of its big '.locks of Orown lands. ■ THE UNEARNED INCREMENT. Mr. R. A. Wright (Wellington Suburbs) admitted that farm labour had increiased the values of the land, but saidi it must be remembered that many of the men who had started in this- capacity now owned their own farms. He pro tested against a- suggestion that financial interests controlled Parliament. Mr. J. R. Hamilton (Awarua) said those who had never toiled on the land seemed to consider always that they were best qualified to say what the land was best able to bear in the matter of taxation. He argued that tha toil of the fanners themselves accounted for what the extereme Labour Party called the unearned increment; if the farmers were given credit for union wages .from the day they took up their farms, the value of the land would not leave a penny for unearned increment. There was not 1 per cent, of the povertystricken quoted by Labour who had not had chances equal with those of the farmers. There were cases of land speculation, but Labour made the mis take of arguing as if those were typical of the general position. What Labour should do was to preach the gospel of thrift, economy, and self-reliance, instead of the gospel of go slow. If Labour went on as it was going it would soon be an offence to save money; why, the wealth of the country had been created by the men who had saved their mites, but, because they had been able to save a, thousand or two. they were now called bloated capitalists. Mr. P. Fraser .(Wellington Centra.]) dealt largely with the remarks of Mr. Wright, and argued that the financial interests were the real rulers of New . Zealand. The speech of the member for Kaiapoi had amounted practically to a" dirge; his quarrel seemed to be mainly with the Valuation Department. If he complained, he should be able to supply an alternative. Mr. V. H. Potter (Roskill) defended the farmer, who. he said, was entitkd to the fruits of his labour. ,If Labour wished to reduce the cost of living it should do its utmost to aid the farmer to increase his production, but, instead of that, it was thwarting the farmer Mid^the commercial man in every direction. The Bill was then read a first time.