FINANCE

Evening Post, Volume C, Issue 90, 13 October 1920, Page 6

FINANCE

TAXING BILL FURTHER REVIEWED

AMENDMENTS INCORPORATED

Amendments to the Land and! Income Tax Bill were introduced into the House of Representatives last evening by Gov-ernor-General's Message.

The 1 amendments introduced differ from those previously circulated in the following particulars: —

New sub-claufies are added to make it clear that taxation shall be reviewed annually.

The clause relating to the taxation of divided companies is replaced by the following: "If the Commissioner is satisfied with respect to two or more companies consisting substantially of the saino shareholders or under the control of the same persons that the separate constitution of those companies is not ! bona fide for the purpose of more effectively '^carrying out their objects, but is for tlie purpose of reducing their taxation, the Oomnussionerj may, for ih^ purposes of income, tax, treat-those companies as if they were a single company, and in any such case those companies' shall be jointly assessed and jointly and severally' liable, with such right of contribution or indemnity between themselves as is just." Local and public authorities are required to be the agents of debentureholders whether those debenture-holders aro absentees or not. The following subclause is added to the section: "Nothing in this section shall be ao construed as to render liable to income tax any income that is exempt from taxation by virtue of section 84 of the principal Act. ' (Section 84 is the exemption section.) When the Bill came before the House ! last night Mr. T. M. Wilford (Leader of the Opposition) pointed out that two of the proposed amendments apparently rectified a mistake which had been made in'the Bill, but which had not been attended to in the previously introduced amendments. If the Bill, as drawn up, were passed, lie asserted, it would take from the representatives of the people their right to consider taxation proposals year by year by matang it unnecessary for a Taxing Bill to be brought down annually. Clearly this was admitted by the corrective amendments now introduced. He would like to know . .why such provision had been put in the Bill. The Prime Minister replied'that it was a mistake to say that in a-ny Bill introduced the Tight, of the representatives of the people to discuss taxation matters annually had been taken _ away. Thephad been no doubt in his own mina regarding the provisions of the Bill in this respect, but doubt had been raised by a well-known legal firm in Wellington that the wording of the clause might be arguable in that direction. To make things perfectly clear, however, and to remove doubt, he had had the present amendment introduced.

MUNICIPAL QUERIES. Mr. J. P. Luke (Wellington North) said there was still considerable doubt whether any of the revenues of local authorities would be taxed, and whether moneys held in trust for charitable purposes -would be taxable. He did not object to\the local bodies collecting taxation for debenture-holders, but he wished to be assured what effect this would have upon their finarices. He had been told that a large sum of money thait would have been available for the' Auckland City Council would not now be available because of taxation. ' s

Mi 1. J. M'Combs (Lyttelton) protested strongly against the taxation of local body debentures, which, he said, would have the effect of causing people to say they would not be bothered with them, at 5i per cent. Mr. M'Combs proceeded to make a second reading speech on the Bill. The Hon. J. A. Hanan (Invercarsrill) said some debenture-holders had failed to include debentures in their returns of' income, and some step was necessary to' see that they paid taxation.' Mr. Hanan pressed for a return of the larger incomes, so that more information might be obtained ac to who was paying the taxation. SOME SUGGESTIONS. Mr. C. E. Statham (Dunedin Central) expressed pleasure at the distinction made in the Bill between earned and unearned income. He had been responsible last year for the inclusion of this provision on the platform of the Progressive Party. Referring to the proposals of the Bill in regard to the taxation of company profits, with a rebate'in the case of the dividends of email, shareholders, he said there were companies which sometimes could not pay dividends," and in such cases the small shareholders could not obtain their rebates, though assisting to pay the companies' taxation. He believed the time would com% when the taxes would be imposed upon the individual and not upon the company. He agreed with the taxation of the profits of local body trading concerns. It had been said that as the ratepayers gave their backing to these concerns they were entitled to the benefit of the profits as an assistance towards the reduction of their rates. With this he 1 did not agree. Any profits should go to reduce the cost of the services to the people. The same principle should apply to State enterprises. He suggested a-s a step towards the suppression of speculation in land, that where property was bought and sold again within a year the State should take 9-lOths of the 'profits of the sale; if the sale took place the second year, after purchase, 8-lOths of the profit?, and so on—l-lOth each year being 'deducted until the tenth year, when the owner would have, all the proceeds.

Mr. A. Hamilton : "Would you im pose land tax, too?"

Mr. Statham : "Yes. If a man goes on to a farm it is right to assume that he wants to work it." At present the aim seemed to be to sell again as soon as possible at the greatest profit. A man who remained ten years' on a. property could be_ regarded as a bona fide settlor. Again, under the proposals of the new Bill, a landowner obtained too much relief. A man with a property of an unimproved value of £6000, '• carrying a mortgage of £4000,. and yielding an income of £900 per annum (allowances beins made for three children and £60 for life assurance), paid under the old Act in land and income tax £82 4s 6d. Under the new Bill he would pay £33 5s 4d— a relief of £49 19s 2d. On the other hand, a man with no land, but an income of £900 a year, paid under the old Ant £51 13s 7d, and under the present Bill £45 ss—a relief of only £4 8s 7d. THE BETTERMENT PRINCIPLE. Mr. R. JM'Callum (Wairau) advocated the adoption of the betterment principle in land taxation. He wished to see the Valuation Department under the control of the Commissioner of Taxes. He complimented the Government on the liberalising tendency of the Bill. Mr. A. M'Nicol (Pahiatua) asked thePrime Minister if he would consider the suggestion made by tbo Chambers of Commerce and the press that there should be a. Commission ccljip in the recess to make r thorough study of taxation. ; Mr, G, W. Forbes (Huruiuii) rsgvetted

that the Government had not done anything to check the extensive gambling in land.

Mr. Masiey : " We collect two millions in stamp duties." Mr. Forbes considered this was insufficient compared with the sums made.

Mr. H. E. Holland (Buller) pointed out that the annual interest.on private mortgages in New Zealand, averaging the rate at 6 per cent., was over 85 millions sterling. This was a- huge amount to be going to a handful of mortgagees, and it was affecting the output of products. In addition, the country was bearing the 8£ millions of interest per annum en the National Debt. One of the. future Erohjems would be : how to get rid of the urden of this interest. It was absurd that a country with so small a population should carry an obligation of this description. PRIME MINISTER REPLIES. Mr. Massey, in replying shortly before midnight, expressed pleasure at the preponderance of opinion in favour of the Bill. He did not suggest it was a per- ■ feet measure, but, since Dr. Newman also had approved it, it must bo as perfect as it was possible to be. (Laughter.) Replying to Mr. J. P. Luke, he said it was not proposed to tax water or electricity supplies, municipal milk enterprises, or municipal tramways. He ■hoped that if the municipalities made profits the public utilities would be increased. Mr. J. A. Young: " What is your definition of a trading Mr. Massey: "The fish market at Auckland is as near a case as I can quote." Charitable trusts, said Mr. Massey, had been referred to, but they were exempt'from taxation under the principal Act. The change in the manner of collection of interest on local body debentures had been made to prevent evasions, of which the Income Tax Department complained there had been many. Tho proposals were not perfect, but^ they would be an improvement. Some members had complained of unfairness to company shareholders to tax them through the companies. But there was no other way of collecting revenue. The position' had been gone into very carefully. The increase was not as much as it looked, because the_ present tax was collected on assessable income, which was the income before exemptions were deducted, whereas the proposed taxation would be on the taxable income. . Mr. Massey continued that recently Mr. Wilford had suggested the grade of taxation on the higher incomes was not steep enough. He had invited the Opposition Leader to suggest a grade, nut he had not done so. Ths grade referred to was l-200ths of a penny. He had secured a scale at l-50ths, of a penny. On this scale at £6000 per annum the taxation would be 5s 8d; at £7030. 7s 4d; st £10.000, 12s 4d; at £14,000, 19s; at £15,000, 20s «Bd. These results . showed •the difficulties of drawing up a scale.

IN COMMITTEE. The Bill, with amendments, "was then committed. At clause 6, an amended wording of the method of judging the improvements on land was propose* by Mr. Wilford and accepted by the Prime Minister. , The Opposition leader divided the House on clause 10 (which exempts from the absentee tax anyone away for health purposes) on the ground that it meant the'abolition of the absentee tax, which he considered should rather be doubled. He moved to. strike out the clause. The amendment was lost by 37 to 9 votes. , The Bill was reported with the amendments proposed by the Government, and was read a third time and passed.

The House.rose at 1 a.m.