TAXATION

Evening Post, Volume CVIII, Issue 62, 10 September 1924, Page 9

TAXATION

A LONG DEBATE

LAND AND INCOME TAX BILL

THE REDUCTIONS EXPLAINED

The whole, of last night's sitting of the House of i Representatives was devoted to' discussing the Land and Income Tax (Annual) Bill. There was a prolonged debate on the second reading..-.-.. ... . :-' ■

At the commencement of the debate, Mr. Speaker, said that he could not allow full discussion of other forms of taxation than were involved in the Bill. ;

The Prime .Minister, rising to move I the second 'reading, said that: he proposed to keep, strictly to the proposals to reduce laud and income tax. - The suggested alteration •in the: rate .of land tax, he said, provided for a 10 per cent., deduction on the schedule rates, reducing the maximum, amount of land tax from the present* 7.85 d.in the £ to 7.06 d.-in. the £; and reducing the minimum rate from-the present Id in the £ to 9-10ths of a penny in the £. The decrease in the land tax Tevenue would be £136,000. Tha suggested alteration !in the rate of income tax, which provided for 33 per cent, reduction in the schedule rates, in place of. 20. per cent, reduction last year, reduced the maximum rate from the present 5s 10 2-5 dto 4s 10 2-3 d. in the ,£, and reduced the minimum from' 9 3-5 dto 8d in the.£. ; The decrease in income tas revenue would be £583,000. Mr.' Massey/passed on to compare the rates of land and income tax-, for the year 1913-14 with {hose prevailing at 31st March, 1924. The amount of land tax paid for the year ended 31st March, 1914, was £767,451. The rate of ordinary land tax was equal to Id In the £. The rate of graduated land tax on amounts not less than £5000 was l-32d in the £, rising by graduation to a maximum of 5 5-6 din the £ at £200,000.; The.amount of land tax paid for the year ended 31st March, 1924, was £1,426,462, so that it had more than doubled since 1914. The rate of land tax not exceeding £1000 was Id in the £; exceeding £1000 it was Id in the £, increased by l-20,000d per £1 up to a maximum" of 7 17-720 din the £•: ; .. '• ■'"• . ■' , V

Mr.. W. E. Parry ■ '(Auckland Central): "Give us the assessable incomes during the same period."

Mr. Massey: "I can't do the impossible." He said he was prepared to give the House all possible information before the Bill went to, the Committee stage.

INCOME TAX COMPARISONS

The amount of income tax collected up-- to ■ 31st March, 1914, he proceeded,

was £554,271. The rate of income tax for persons on amounts not exceeding £400 was 6d in the £ jz-from £401 to £1400 it was equal to 6d in. the £, increased by 3-4OOd for every £1 in excess of £400; from £1401 to £2400. it" was Is l^d, increased by 1-4CXM for every £1 in excess: of £1400; exceeding £2400 it was Is 4d in the £. 'The rate:of income tax for companies not exceeding £1200 \yas Is in the £; from £1201 to £1600, it was Is in the £, increased by 2-100 d for every £1 in excess of £1200 ; -frbni £1601-; to ,-£2400 it was: Is ;2d,. increased by l-400d' -for; "every £1 .in excess of £1600; exceeding £2400 it was Is 4d in the £. The amount of'income/tax' collected for the year ended 31si> March, 1924,. was £3,781,531, "as; compared with £554,271 in 1913-14!" The rate of income tax not exceeding £400 was Is in the £, less 20 per cent.; exceeding £400, but not exceeding £6000, it was Is in the £, increased by 1-ICOd for every £1 in excess of £400; exceeding £6000 it was 5s 8d in the £ increased byl-20Od for every £1 in excess of £6000;; for £10,----000 and over it was 7s 4d in; tho £, less 20 per* cent., making a maximum of 5s 10 2-sd. ■-.-■ .;■-•:■ ...;:.

AMERICA'S EXAMPLE

These , comparisons, , said /the ; Prime Minister, were exceedingly 'interesting, and would give members some idea of what wa3 intended in the Bill. He had no doubt that members had referred to the report of the Taxation Commission, Jbut there was a : great d.aal more in the evidence given before the. Commission than there was in the report itself. He did not think members had had copies of the evidence yet. Mr^- Massey read one sentence in the report recording the Commission's opinion that the weight or taxation was most important,, and that it' was; essential in the interests of thefuture..prosperity, of the 'Dominion that the weight of taxation should be reduceu as rapidly as possible. He did not'think anything could be more direct than that. Most other countries' had been exceedingly anxious to reduce their taxation, as was indicated in the Press cables from day to day. America had probably been the most consistent country in thisi/re-. spect. She had been wonder^illy successful in restoring the prosperity, of the country. About two years ago there was very serious depression; in the^States, and he'understood. there !>yas.still a certain amount of depressicm": in soino' d' tricts. Mr. Massey quoted,from a speech by. President Coolidge iff support of the' yninciple of reducing taxation, as much as possible.' That.was a very valuabl opinion, he said, and every word of it .applied equally to New Zealand.

Kov/ Zealand, he continued, was not now merely beginning the reduction 01 taxation, for the process had been gqiru on for two years past,' and the reduction already effected had been very welcome to the .public, and, he believed, had had good results. , "I: notice,: with a great: deal of pleasure," remarked the Pr-ir Minister, "that the proposals in the Bill Jiavo been well received throughout the country. If there has been any . complaint,, jt has been that the reduction has not been big enough. I don't know that we could have given any further reduction, i want to reduce the burden, of taxation on the people as much: as possible, but it 13 quite possible to go too

In Britain, continued Mr. Massey the Government had been endeavourine to reduce taxation, but there it was dif fent from New Zealand or any other ot the Dominions.' ■

"Oh' ut"" MonteitL (Wellington East) :■ The Prime. Minister (emphatically) : Oh yes What, they did in .■ Britain' rreaSd IC:,5uf tlbyth^—»*

"They have a great deal to do in the ra.nuMion.of Customs duty,": replied the endeavouring to reduce taxation. They bad commenced with an attomptto place company taxation on a better fooW than had obtained for a long time. They had now adopted a flat rate. The Federal Government had reduced the tax down to 5 per cent. The rate of taxation was Is in the £, but in addition'to that there were the .taxes charged by the btate Government, concerning which W was not informed. The Taxation Commission stated (.hat it would be a. mistake tv do anything in the way of altering the

present system of company taxation for the next two years, and the permanent head of the Taxation Department agreed with that opinion. Care must-be exercised how the taxation upon the individual was altered, said Mr. Massey, for they were bearing about as much as they could carry. He had.-received in the past few days some startling instances in that ..respect,;";.and their taxation could not .-be. increased, and must be reduced/ Germany had; managed to reduce taxation in an.'-extraordinary fashion by manipulation of the mark. As: a result, she had wiped jO ff a large portion of her debt, and had been enabled to reduce taxation, ihat could not be done in New Zealand Ke did not think British -people would agree to what had been done in Germany. ■ A Liberal member: "Swindling." France,had not done.much by way of reducing , taxation, because .of the -tremendous expenditure in connection with ncr army.

The/Prime Minister then went on to refer, to -the possible effect of reduced taxation in -New Zealand. He alluded to the undertaking given, by. the Colonial Sugar Refining Company that it was willing to make concessions in the pnce of sugar: But for the, Government's intentions m regard to taxation he did not know that a settlement1 of that.question could have been arrived at If the cost of .living was ,to 'be reduced the taxation must come down, and'the cct of.sugar;...affected the cost of living Big business houses undoubtedly passed on taxation to their customers; and tlie. same . applied to interest, especially bank interest. There would' be no reduction in-the cost of- living that was Worth haying until taxation was reduced. Reduced taxation would also mean-less An 'instance of that--was' afforded by the fact- that as soon as reduced taxation- was. effected in-the past two years a' demand set' in/for more labour. ; Mr. Massey.. said he: did not expect that the Dominion would ever return to the normal taxaj!oll .i?y?l-:of . 1913.-14. ■■'-The".burden'■ of the war debt hung around our necks, 'j"j tnouSh': it was becoming easier, he did not believe the 1913: • rate would ever be reverted to. In'conclusion, he read'an extract: from. the London "Financial Times," commenting favourably upon the financial position: of New Zea■Jaud.- ; .It was because of the fact that taxation was. being reduced and that exports were increasing,- he said,, that tile Dominions credit was -so high in London. If .we once let our credit go down-^V6_ should have a great dear of difficulty in overtaking it: He hoped our credit_ would, remain good.: for otherwise: it might be: impossible to ask for special concessions.' ■:-.;- ■

LIBERALS AND LAND TAX *rTh™£. ead, er of the Opposition'(Mr; T M.. Wilford) said that-legislation-.had been passed remitting .the - income tax on-incomes- derived from land.' He would •■ llf®., to.. know the; loss to' the Treasury winch took place on that: The loss, on the reduction of income tax last year on incomes where the -taxable balance was £500 and over, and on the reductions on properties where the unimproved value was^ £10,000 and over. When' the. Pnme-vMmister started to reduce taxation he should take into consideration, what the taxpayer had to pay for medical- and hospital expenses during the year. The Liberal- Party stood fo? a ■,(? J tax> >v"ich was the unmovable S°K d auf- fr°m '^h'ich revenue. ?, ou'd te-obtained. had to - see that, winle. they required revenue they *" Su a ™stH? °PP°rt™i«es of land taxnn^ + The lib6ral Party not prepared to agree to taxation t reductions on high;.^ncomes:. and .high Rvalues of property.';;-The return- he' tasked', for would S ho w .what,wa^ being given- to large landholders and those with hi* inbf all land lax payers. They knew that ttie small, farmer,: the /small holder^ tirely small income- was entitled to a reduction but the .Liberal Party differentiated between' those mcii and the men -ivith tho^ big .-.income'-. and veryV largeproperty owners who had a very big un! improved value. The gradations should not stop at,£lo,ooo a y^ar.* Th yt^nt c.l to increase the gradation ,rate on incomes over^ £5000 and up to £10 000 and ;fro.n £10,000 to It had been said -that : the PrimV Minster's proposals had .been well received ■throughout the Dominion, but that « not the speaker's opinion. , He • believed that the majority of the Press were behind , ( the Prime Minister, arid would see him through in his policy.' If opinion was. created, it.was' created by cer-' tain sections of.the Press, and those were not altogether • disinterested in' reductions of ; taxation.: ■ A man with an in-' come of £2000.a year could easily spW il2o a, year in taxation. When ques.tjons of land tax were being discussed, tiw, value-of city lands .must be taken ™rtlT + /!} tion; WKs not the State .entitled to : take, some taxation from the added.. value of cityxM an ds? The taxon city lands must be kept on, and must by.way, of : -relief to small, holders so ; that, they, might/have a Chance to.compete. .•-Taxation ■on • land- was a' sort of brake ..on land, values. \j Th e : Taxation l-ommission had an extraordinary mcthoci of making proposals/ It had come to th e _ conclusion that taxation', should be levied on a man's income derived from whatever:: sourcoV arid, then suggested that:;company taxation should be abolished. Later on,", it pi: oDo=ed that should bo-a;flatraL^ com-: panics. -Ityhad .been .very difficult :to ■'fconcilo. the/, -conclusions'..-of" Hie -last laxation Commission's report with the members public utterances. The Prime Jnmstcr had set up the Commission, but the .pr.ese.nt..B I ll.;.did. not- disclose' the pui-pose. It.seemed to him that, they .^vere tackhng the-; taxation/ question a ttle bit -a t a- Uitie.-, If' the Prime Minl&tei had brought down all his taxation proposals at; once, members would have been in a far better position, to. civo that should be taken in the various"-di-rections ■ suggested. . ...> -. ■GOVERNMENT STANDS FOR

LAND TAXATION

_lhe .-Minister; of Education (the Hoi). r'i lv %")' aa,' d lfc was satisfactory to find the/Liberal Party, realising- that the worst thing that could happen' to- the country was excessive taxation. It had been stated/that the greatest curse that cculd happen to the workers-of the community was heavy taxation. There was no financial authority who did not agree that was a sound policy to bring down taxation as soon as possible. Mr. Wil-fc-rd s.' suggestion had been that the' Government intended to repeal the land tax.-.He.-wished to refute that suggestion. This party stands for land taxation, said Mr. Parr, "but its policy is that it is unfair'to levy "a double tax on the farmer."' -

The Prime Minister: "That is the point." . ;

„*• .F. - Laiigsloiie (Waimarino) Jhere is no double'tax."

Continuing, Mr.■" Parr said the Government Party was resolved that a reasonable land tax on unimproved values must stay, but it was not going to a«vee to. unfair double taxation on the "farmer. -Mr.. Wilford's "iiV ß ii)m-nts ■ seemed to indicate that lie wished to (ax .those companies wiiich. wore at present paviu" high taxation. Figures Mr, Wilfurd'imd

quoted.regarding high incomes really rolated to companies. The Bill would give that portion of the income-tax-paying community—the company—which contributed nearly three-fourths of the aggregate of income-tax, a much-needed reduction in taxation. He thought the companies ought to pay taxation, as such, in reward for the undoubted privileges which they enjoyed under the law :and for tile reason that a company tradeJ as one entity as against individual competitors. In New Zealand, however, there' could be little doubt that many companies- were struggling hard to keep going_ on account of high taxation. In reducing the taxation of land no injustice was .being done to-the small tax payer or persons on small salaries, because the= exemptions protected them. la England, the Labour Government had adopted the sound policy that if theie was a substantial surplus the legitimate use of that sui-plus was to reduce taxation which hampered the industries of the country. . ■-..:■'...... . . -.-.■■

A LABOUR AMENDMENT

The Leader of the Labour Party (Mr. H. E. Holland) said the Labour Party was opposed- to the proposals because the party did not agree that the reductions were necessary, and because it held that the country could-' riot afford to lose the revenue. There were many items of social legislation ; outstanding, .including .bousing and.various classes: of pensions, and financial provision was necessary to meet these requirements. The Prime Minister had quoted figures affecting the position as it was in 1914, but the country's liabilities had doubled since then. : In .1922, the assessable incomes amounted to £46,353,941, and the exemptions amounted to 54 per cent., leaving a balance of £21,470,362. ..In 1922-23 the amount of tax collected was £3,831,932, while in 1923-24, notwithstanding the:2o per.cent, reduction, the amount collected was £3,781,532, 'or a decrease of only £50,400. :■ The incomes, however, were enormously larger! thau the taxable balance. In 1922 there"wero 100,000 returns of income, : and 92,106 showed income made up • as. follows:— Companies/ 2164; non-resident traders,, 867; -general taxpayers, 89,075:' Only .38,571 of: the. 92,106 were, assessed', as having to pay income tax, the remaining 53,535 being either exempted as having ■a, lower, income than £300, or having no taxable balance, after the exemptions were provided 'for. ,Of .the 89,075 persons m the general class no fewer than 36,730! had : incomes of less than £300.' -Mr. Holland said he was prepared' to go before any meeting of landholders in any part of New Zealand arid prove to them,- as, against any state- : men.t which might come from the Government' bericHes. that the real working farmer got no material benefit from the proposals. There were only 4602 landowners who" paid income tax, and only a little more than half of those- could be said to be working farmers. Mr. Holland moved an amendment ■','.. to the effect that .there should be no reduction in direct taxation.

: Mr.1 F. " Langstorie (Waimarino) : seconded the amendment." While the assessable income had increased by; £8,000,000, he said,' the taxable balance had gone down- from £27,000,000 to' £21,000,000. ■There".had- been an'increase in wealth and a decroase. in the taxable balance, and the. Government, not weary- of doing: well,-wished to. give further reductions in taxation" when. the country had so: many grave problems to'face. More than 50 .per cent, of the land tax was paid^from lands, which were in the cities, and" the .. city^ r landowners could well afford to' pay more taxation 'than they paid: to-day.,,-The proposals-: were designed for the: sole purpose: of benefiting the political/friends of '.the' Government. For some 'time the .small/farmers had been -fed on, chaff by the/Reform Government, but they would not be1 fed on chaff/any. longer. ,- -. " . : : ■; ■•

: Mr., 0..: J. Hawken (Egrnont) contended that; the. present: company tax was really a/,-levy';6f 25 per cent, on capital. A reduction of .^.taxation■'. was really n great benefit; to;' the working: man, because -tieavy taxation was : always passed p"n. Seasonable taxation was not passed on to tlia;same, extent. . When taxation was 2s in. tho £ a:, business man would not'make the same effort to pass it on as when it was 5s in'the £„ The smaller men in New -Zealand were not payingheavy taxation to-day. Among the daiirv farmers . the' Government taxation ;was not .what worried -them, .but; the" local taxation.: Keductions in-.;.taxatioh,,would bring down. .the. cost of giving, arid that' was what they wanted to do. The'single man was better ableto -pay ■■-■ taxation ■than :ariyorie else. : '.-.■'. .: .: ■ ;

INCIDENCE OF TAXATION FAIR

Mr. G. W. Forbes (Hurunui) said that the main thing to consider was that the incidence of taxation was fair. The sheep farmers' had never had a more pros-perous-year . than they had last: yeai% and the Government had made handsome concessions ;to them.- -..'.-..■:■

Mr/Massey :'"What about' the" wheat grower?" / , ' . -.. ■ •■■'..:

, ;Mr..'J?orbes: . ''In nine cases out. of ten he is a smaller man." Bearing that in mind, heLdid not see how the. Government could face the country and .propose :aV further' reduction.••■'; Mr. Forbes contended, that no fruits had resulted from all the expense and trouble that had, beeii gone:' to -by ; the Taxation Coramissioui and he criticised'the Government fpr ; -rioV bringing ."down all the taxation-proposals, in one comprehensive Bill. lie believed the farmera■ preferred the land' lax- to? the income; tax,' and he tliereforo welcomed the assurance of the: Minister of, Education that it was not proposed to. abolish it.; . The.bulk of the" concessions proposed in the Bill affected (lie...large ; landowfier. If the Government went on reducing the' taxaitiou on the large'landowriers a feeling would be created in the community that discrimination was being made between those earning income'from the land' and those earning income from others businesses or occupations. : There would be much greater assistance to the country if the money involved in the proposed reductions-were expended in- other directions—say, in purchasing farmers' fertilisers. The Prime Minister would be well-advised to revise his Bill and to show there was ah earnest wish to reduce taxation to those who were principally, affected. : ; -' .

"CASE OF VOTE-CATCHING"

The Minister of Agriculture (the Hon. W. Nosworthy) pointed out that the largo" landowner . referred to by Mr. b'orbes was not only 'taxed on mortgages but on every pound he. owed. The Government had made- large reductions to the small man, .and no credit was given for it; The Government was being asked to reduce taxation' upon those who paid hardly anything in taxation. It scorned to he a, case of. votecatching. ■ '■■'..

Mr.-'W.'li. Parry (Aimkland Central) quoted figures in criticism of the Prinus JMinister's siiilciiienb that they must try and get back -to the pre-war position. The rebates- proposed in the Bill would give large concessions to the banks, amounting altogether to: £85,898. It was not sufficient to let : the wealthy landowners off as had been done last year, but this year they were again being let off. Me contended that production would not be stimulated by the income tax- reduction. ''Production could only, he stimulated by a more equikiblo distribution of the ' wealth of the cuiuitry.. Tr l,hc'Oovi'i-iunervl,. .| J:l ;j moro attention to ujutlers that iculjy

affected the farmer it would receive much greater assistance than by bringing down the present Bill. Mr. Parry imputed vote-catching motives to the Government in bringing down its land tax proposals.

REFORMER OPPOSES THE BILL 1. Mr. ']?.--J. Rolleston (TimaTu) maintained that the amount paid by way of taxation at the present time was not more than sufficient to meet the needs of the country, and that if the remission proposed in tho Bill were allowed the! inequalities and injustices of the present system would be extenuated. Under the proposals in tho Bill, the taxable incomes up to, say, £5000 or £6COO, would pay less than~2d in the £ more than the pre-war rate. They must consider, however, that there were no exemptions in 1913 according to the number of children in a family. So far as he could see, the Bill resulted in tho taxpayer paying actually less than lie did in 1913. The speaker applied the samo line of argument to the various other scales of income on tho schedule. He did not think those who earned high incomes had very much to complain of. He did not think our taxation was excessive aa compared with that of other countries, nor could he see that in view of the heavy liabilities of the country there was any justificationl, in making the proposed reductions. It was argued that reduced taxation would result in a decline in the cost of living, but tlie reduction already made did not appear to have had that effect. The Government Statistician's all groups;figures in February, 1924, were 1621, as compared with 1584 in February, 1923. mat did not appear to indicate that' the reduction effected in taxation had materially reduced tha coat of living He opposed the Bill -

AMENDMENT DEFEATED

Messrs. H. Tv Armstrong (Christ-" church East) and A. L. Monteith (Well iington having opposed the Bill the diviswn., on Mr. Holland's amendment was reached at 1 a.m The amendment was defeated by 42 votes to Id, the division list being as follows '•—'

I- Against Amendments. For Amendment. .-■..•Atrnor*,,..-. -Armstrong ' -,' 1? U.:- ■■"'■■■ '.' Fraser ' - '.-' .. Bitchener Hanan . Bollard ■-. :•;--.. Holland Coates . • .Langstone - Comgan : Lee Dickson, J. MO. M'Combs ; -.; Dickson, J. S, ■ M'llvride' Edie M'Keen - ":- -.'"field . r . ■ .' . Monteith Forbes ... Munro Girling ' O'Brien : . • Glenn ■- -•■ p arry Guthrie■ ,- ; ''„ '-Rpllestori. P. J' Harm : Poland Hawken -. Thomson '■'■' , Hockly ..' - . ;-, -. Hudson '■■".- , {,' ; . '• .-,'■ ■■" Hunter ■'-..• '■. „ .-■ .. ■ -..-.; .. •- Lye .. .. '■"■■':. '... ;;. ■■■ '. Lysnar '„-■■■■.•'■ ...--. .< .'•■■ '-' M'Kay ■■.•;■-. ■-:■ „'■ ;M'Leod ■■■•■■• ■ .'■: ' ■'.;■ Macmillan / . l Massey '' ' * V" ■ ■"' '■■ " ; ■;.: Murdoch-■■■■ V- v >.. , .' ; .Nash ' ■, , - ' • Nosworthy : Parr . Pomare , Potter : : - ■■■■.-■ •■'■,.:. Ransom V. ' . ' Rolleston, J. 0. ; ' : Smith . ' ■■■' Stewart ■. ■ .'•■ .'. ' ■?,■■■. Sykes " • ■ ■ . - . Uru ■ . . .. ' - 'Wilford - . - ■"■■■■ , '■•■ ■"„. .: ' ! Williams . . . Witty "" ":.'■' : ■ ' ■'"■ !■ Wright ;v ■■.-.-■ ■ , v ■■•'■ .■:■■ >■ Young " ' . . ;- ; . ■ In replying,; the Prime Minister sajd that. wealth.vwas better distributed in; I New Zealand to-day than in any' other country in the world. He never believed that in any Parliament; they I would have seen half a. House fighting against proposals to ; reduce . v taxation such as they had seen that night. - . .Mr. P. Fraser (Wellington Central) :' "Don't worry; there's plenty more fight coming." '. '■■';: \ .The Prime Minister said he had never •suggested that land tax should be done away with. He did not want to do anything like that. ' . : ■:.>Mr.^Wilford : "I am glad to hear it." ■ ■/,The- Prime Minister : "I am glad the v hoh. member; is glad for once." Mr. ■Massey,''after- saying that-he was goin" to see; what he could do in the way of reducing the mortgage tax, said that he did not know of big estates which were escaping taxation in.the way some members 'suggested.' He '.quoted favourable comments' from Australian papers regarding New Zealand's policy of reducing taxation, and added that the time to reduce taxation was when we had prosperity. with us. They would never .be right-.until they achieved "a deflation trotted.out the old story about the Civil servants salaries, but the public were sick and tired of hearing about that. He reminded members, however, that - provision would have to.be made to meet ;increases:. in Civil servants' salaries amounting to £350,000. .»■"■" iea .The Bill was read a second timo and mit^ d ft0 the./ üblic A C coun™ aCorn mitteeior consideration' and report p.m! 16t^da S'° lo Se ath3° a-m- Mtil 2.30