RESTRICTIVE TAXATION

Evening Post, Issue 88, 12 April 1924, Page 13

RESTRICTIVE TAXATION

HOW INDUSTRIES ARE AFFECTED

(Contributed.)

While the' incomef tax and its incidence have been discussed from various points of -view dnring the .Controversy that has been going on in the newspapers, no one, I think, has attempted to show how gravely both primary and secondary industries in this country are prejudicially affected by a -restrictive system of taxation, a ■ system, that is, which takes more than fair toll from the capital employed, and so leaves less for the payment of wages. and for development purposes.. ' A very good.illustration of what must happen under such a system is provided by a comparison between the growth of industries in'"Victoria and in Zealand. Victoria is better.. suited for a comparison of this kind than any of the. other States of the Commonwealth, because its conditions—population, climate, soil, and co forth —approximate closely to those of the Dominion, and because the "Victorian rate of taxation is" the lowest in Australia. It will be convenient to show first how the industries; of the two countries i have progressed' during recent years, and then to examine briefly the systems of taxation under which they have been developed, j Tlie. latest figures . available are those for 1921, and by comparing these with the figures for 1916,' a concise view of a six-year period may be obtained. Take) to begin with, two', primary .industries common to both countries, timber production and coal production, and see how they have progressed 'in the.' six-year period. The official' figures reveal the following facts: — "• '• : ■ '. ■ TIMBER PRODUCTION. Victoria. New. Zealand. super ft. . super ft. 1916 ......... 62,589,000 358,568,278 1921 113,215,000 ■ 30,7,667,834 COAL PRODUCTION.. " .Victoria. New Zealand. i tons. . , tons. 1916 '420,093 2,257,135 1921 604,923 1,809,095' Thus it will be seen that while Victoria's annual output of timber increased by 50,626,000 super, feet'• (nearly doubled) during the: six-year period, and its annual output of coal.by 184,825 tons, New Zealand's output of timber decreased by 9C0,444 super feet, and its annual output of coal by 448,040 tons. ..The figures in regard to i factories are equally striking, and even' more signicant, since they deal with secondary in-, dustries which affect a larger sectiori. s"of the community, and are extremely sensitive to economic conditions. The official figures for the sameperiod tell their own story:—. . • ■•'■'.,■• : . ; . Victoria. New Zealand. 1916, factories 5,413 4,670----,1921, factories . -6,532 ■:'. ■ 4,804 1916. hands em- ' ■'•'•• ' . . ployed ' 113,834 62,221 1921, hands em- '.-•••■■. . - - ■ 'ployed',... ,- 140,743 „.' 68,206 1916, wages ....... £11,036,345 £6.654,504 1921, -wages ...... £21,377,2i6 £12i569,g04 .These returns show that the'increase in ' the number of factories in Victoria during the period was 1119,, in the num-. ber ;of' hands tiiriplbyed:'26,9o9,: and. in the amount paid in wages .■£10,340,871. The corresponding. figures for, New' Zea-. land are. 134 additional ..factories,' 56,895 additional: ha_nds employed," arid £5,915,400 additional payment in wages. In other'words, Victoria's factories have increased by fcjL per cent.,';its hands employed by 23 per cent., arid its wages by 95 per cent., while New Zealand increases have been 3' per cent., 11 per cent., and 88 per cent, respectively. Expressed in another way;-, the increase' in , factories was nine times greater in Victoria than in New Zealand, the increase iv the hands' employed five times greater, and the increase in wages, on a per centum basis, approximately, the same. The value of the outputs in the,two countries was as follows; — - - ; . ■ Victoria. New .Zealand. 1916 ....'. £51,466,093 £45,454,184 1921 £106.008,294 £82,473,569 , £54,542,201. '£37,019,385 Tho increase in Victoria in the, sixyear.period was equal to 105 per cent., and the. increase in New. Zealand equal to 81 per cent. \ ';'■■• These, briefly, are the facts, which demonstrate conclusively that both primary and secondary industries aTe progressing much more rapidly in Victoria tjfan they aro in New Zealand. The natural cond- . ditioris of the two cquntries being' similar, as already mentioned, the reason for the difference between the progress of .their industries must be sought" in /some other direction. The obvious" explanation, I think, will be found in their widely different taxation systems. Necessarily, all bio; enterprises in both .Victoria and New' Zealand, involving the employment of a large amount of'capital, are undertaken by joint "stock companies. Victoria has encouraged this, class of investment by lightening its taxation as far as possible, which.New Zealand has actually penalised it by bringing companies of any' ' considerable magnitude under the highest graduation of the income tax. In Victoria a company pays as State taxation Is in the £ on the year's . distributed profits, whether they be small or great, and as Commonwealth, taxation 2s 5d in the £ on its' undistributed profits. In New' Zealand•' a company pays at the.same rate as an individual ■ does on. me whplfi of its .profits, and, if it is in a tolerably . large way. of business, it comes under the highest scale of graduation. Assuming that the Victorian company would distribute 80 per cent, of its profits in dividends, carrying the balance forward,, the, taxation of a company in Victoria^ (in-' eluding the Commonwealth taxation), and in New Zealand, would be as fok lows:— . Taxable balance. Victoria. Now Zealand. '£SCOO £370 16 8 £966 13 4 £10,000 ...... £741 13 4 £2,993' 6 8 It will' be seen that the taxation levied upon a company earning £10,000 in Victoria and the Commonwealth is £2251 13s _4d less than the taxation levied upon1 a company; earning the same, arnount'in New Zealand, or sufficient to pay a dividend of 2J- per cent, on a caprtal of. £100,000, Is it any wonder that companies, and; the enterprises .companies promote, to the advantage of the community, are flourishing in a. much greater extent in Victoria than they'are in New Zealand? A company with a capital of £100,000 in .Victoria earning £10,000 per annum has £2250 more than has a similar company with 'the same earnings in New Zealand to carry to reserve, to .use in extending its business, to reduce its charges for "goods or services, or to pay large dividends. That the surplus profits have been used wisely in Victoria there' tan be no doubt. The rapid expansion of industries, the multiplication, of factories, the lower prices for commodities, the general contentment ot the people all bear witness to this fact. Mr. Massey's promise of a system of taxation that, will .require every man to bear a fair .share of the country's burdens has raised high hopes of far-reaching reforms. Among these tiono can be more important than those that would stimulate the industrial life

of the Dominion by. freeing it from an incubus which has been retarding its development and expansion ever since,tho Government, in its hasty provision fcr the needs of wartime, placed upon- its shoulders an intolerable load '