INCOME TAX

Evening Post, Volume CIV, Issue 73, 23 September 1927, Page 9

INCOME TAX

DIFFERENT VIEWPOINTS

MR. HUNT AND HIS CRITICS

A review of the new income tax position by Mr. W. D. Hunt, published in "The Post" a week or so ago, has given rise to a considerable amount of discussion concerning the effect of the new charges upon different classes of taxpayers. The general tenor of Mr. Hunt's remarks was that taxpayers with.incomes under £2000 a year, for whom a good deal of sympathy had been expressed, would pay little more under the new taxation than they had paid under tho s taxation of 1914, the year before the war. "The Government's proposals," Mr. Hunt said, "would put a very small proportion of the burden upon such people. A man with an assessable income of £500 a year would pay on the average 10s a year more; a man with £1000 a year, ari average of £6 a year more; a man with £1500 a year, an average of £15 a year; and a.man with £2000 a year, an average of £25 a year.' • The contentions of Home of Mr. Hunt's critics were that the man with the assessable income of £500 will pay £1 11s 3d more than he did under the taxation of 1914; the man with £1000, £34,5s 4d more; the man with £1500, £58 15s more, and the man with £2000, £84 3s 4d. EXEMPTIONS. The difference between the figures of the authorities arose, Mr. Hunt stated from their different viewpoints in regard to tue exemptions. Mr. Hunt referring to tho matter this morning made his position clear. The. whole matter, he explained, turned upon tho exomptions and allowances that had been made since 1914. These he enumerated as follow: — (a) There is now a 10 per cent, reduction in the tax on earned income up to £2000. There was no reduction in 1914. The bulk of the income upon which tax has to bo paid by individuals is earned. (b) In 1914 exemptions on account of life insurance premiums were limited to £50. They now can bo deducted up to 15 per cent, of any income up to £ 2000, and up to 15 per cent, of earned incomes without limit as to amount. (c) In 1914 contributions to pension and superannuation funds were not deductible. Now they stand on the same footing as life insurance premiums. (d) In 1914 the allowance for children was limited to £25 up to five children under sixteen years of age, and no allowance was made when the total incomes' of husband and wife "exceeded £425. Now there is an allowance of £50 per child for any number of children under eighteen years of age, without any limit as to the size of the income, tt The only reduced allowance is the exemption of £300. In 1914 the exemption applied to all incomes. Now it begins to fall when the income exceeds £450 and disappears at £900. BASIS OF COMPARISON. Mr. Hunt stated that his critics, while giving prominence to the reduction of the £300 exemption, had ignored altogether the now exemptions and allowances. "For a taxpayer to qualify for the amounts of taxation they had set against his income," ho said, "it would be necessary (1) that his income should bo unearned, that is, all derived from investments; (2) that be should have no children under the age of eighteen; (3) that ho should have no life insurance, and (4) that ho should earn no money by personal effort. This class of taxpayer is in a very small minority, but when he is found he surely is not harshly treated by tho new scale. At any rate, ho is' not tho individual for whom goneral sympathy has been expressed. Ho simply is asked to shoulder his fair sharo of tho war burden. Tho goneral criticism of tho taxation! have read in tho newspapers is to tho effect that the new rates are an attack upon salaried and professional classes and certain to press unduly upon the heads of families already carrying a heavy burden." To meet this contention Mr. Hunt reiterated tho relief provided for the average taxpayer. HOW IT WOKKS OUT. "The exemptions and abatcmonts are now so numerous," he said, "that they vary with almost every case. Howovcr, I will assume we aro dealing with a family man, with an carnod income and four children under cightedn. Ho- uses 15 per cent, of his income to pay life insurance premiums or to secure superannuation benefits. All his savings ar.o invested in his home, winch in this country is free from income tax. Let us take such a man earning an annual income of £500, £750, £IQOO, or £2000. With an income of £500 a year in 1914 ho would havo paid in taxation £3 15s; in 1927 ho will pay nothing, his exemption bein£ £275, his children's allowance £200, and his life insurance £75. With an income of £750 his taxation, after similar deductions, would have been £10 in 1914, and will bo £7 10s in 1D27. With a salary of £1000 his taxation would bo respectively £21. 6s 7d and £25 lls lid, with a salary of £1500 £55 14a Id and £59 9s 3d, and with a salary of £2000, £97 2s 2d and £106 17s 6d. In my previous interview on this subject I gave approximately tho average differences, not tho differences in special cases. There are far nioro earned incomes than unearned incomes roturned by individuals, and thoro aro far more cases similar to the one I have assumed than thero are similar to thoso my critics havo stated." DEBENTURE TAXATION. In concluding,"Mr. Hunt compliment-" 6d the Minister of Finance upon having removed a long-standing grievance in placing companies in the Bamo position as public bodies in respect to interest on debentures issued by them. This would be a great convenience to both companies and their debenture-holdors, and would deprive the Stato of no taxation rightly payable.