TAXATION

Evening Post, Volume CV, Issue 124, 28 May 1928, Page 10

TAXATION

.. ■«■ COMPANIES AND LAND MINISTERIAL STATEMENT PEOTESTS DEALT WITH "For many years successive coufcrenoos have pased resolutions on the subject of taxation, without eliciting any reply from the Government of tlie Day." • , This was the concluding paragraph of a communication from the Associated Chambers of Commerce conference sitting at Chriatchurch in October last, Jo the Minister of Finance. The Association of Chambers of Commerce has now been replied to. At the Christchurch confereneo resolutions were passed protesting against "the continued ignoring by. the Government of the recommendations of its Taxation Commission." The conference also expressed its "great disappointment in the failure df the Government to give relief to income tax payers in its recent legislation," and it urged substantial relief in the next Financial. Bill. The conference also expressed the opinion that should the Government not accept at once the recommendation of the Royal Commission of 1924, on the subject of land tax, the Government would immediately give its favourable consideration to the following proposals:—(a) That the present system of ; graduated land tax on urban properties should be abolished; (b) that the assessing of land tax against lessees ami occupiers as distinct from owners, being unjust, should be abolished. WHAT HAS BEEN DONE. | In his reply, the Minister of Finance 'said he though that to discuss fully any .one of the resolutions passed by the conferenco was hardly possible in correspondence. "However, I would like to put before your executive a few considerations bearing on one or two points," he added. ""With reference to the statement that the Government continues to ignore the recommendations of its Taxation Commission," he wrote, "I have to point out that a large number of the recommendations had the approval of the Government and have been carried' out. It is true that the two major recommendations of the Commission have Hot been adopted. They were:—(l) That a change should be made in the method of taxation of the income of companies, i.e., taxing the shareholders on the profits distributed as dividends and taxing the company at half-rates on the undistributed profits. (2) That the' laud tax should be abolished. "With regard to (1) I have to state .that it was found that the loss of revenue involved was such that to meet it the rate for individual taxpayers with taxable balances up to about £2000 would require to be doubled and the graduation accelerated to reach a maximum of 4s Gd at a much lower figure than at present. The loss of revenue' would be greater so soon as methods of legal avoidance could be put in operation. The aim of the taxpayers would be to have as much as possible assessed to the companies at half-rate, and in this connection it should bo noted that about 70 per cent, of the companies are private companies which do not necessarily distribute dividends to their shareholders. NO DOUBLE TAXATION. "The expedient .to meet a loss of revenue suggested by the Commission' was a supplementary flat tax on companies on all their profits, which meant a continuation in a limited form of the present method of assessment, involving doutile taxation of the samo.income. Double . taxation is indefensible in principle, and an immediate agitation would arise against it. It is not considered desirable to impose double taxation even as a temporary expedient. "With regard to (2), viz., that the land tax should be abolished: Whatever the merits of this proposal I do not think it is within tho range of practical politics at present. The land tax is regarded by tho majority of farmers as a fair substitute for income tax. It represents a stable source of revenue when incomes show a temporary downward and fluctuating tendency. It furnishes a partial solution to the question of the unearned increment and has tho support of public opinion. "With reference to the proposal of the conference that the present system of graduated laud tax on urban proper ties should be abolished, I would point out that so long as the owner of urban land receives the allowance of 5 per cent, "on the capital'value as a deduction in his income tax assessment no inequity is likely to arise. In fact, cases have come under my notice in which, by virtue of the deduction, the .payer of income tax has actually not only paid no land tax but has paid substantially less income tax than he would have paid had he held no land. In other words, the 5 per cent, deduction from the capital value amounts to considerably more than his land'tax. ' LESSEES AND OCCUPIERS. "Regarding tho resolution of tho conference ,' that the assessing of laud lax against lessees and occupiers as distinct from owners being unjust should bo abolished,' I would point' out that graduation in the ease of land tax is in accordance with modern opinion and tho provision for assessing lessees and occupiers as owners is an es.sontial A jart of the graduated system. Without it evasion would occur. The lcsseeM's given credit for tho tax paid by tho owner, so that thcro ia no double taxation. "Concerning 'tho protests against the surpluses budgeted for in the last six years being used for reduction of debt rather than reduction of taxation,' I have to point out first of all that iv tho period mentioned there wore very considerable reductions in taxation. In fact, betwen 1921 and 1925 the maximum rate of income tax was reduced from 8s 9(1 to 4s 6d in the pound. Secondly, the application of surplus revenue to capital purposes has not been confined to the post-war period. Large sums were regularly transferred to 'the Public Works Fund in pre-war days, and thus obviated tho spending of an equivalent amount of loan moneys on purposes that were necessary but financially unproductive. It must, I think, be admitted that this is sound in principle. DEADWEIGHT DEBT. "The steady pursuance of this policy of reduction of deadweight debt through the difficult years since the war has, I think, ' produced striking' results in maintaining our high credit, in reducing our war debt by & 10,000,----000,.and in establishing a capital debt redemption fund of £24,000,000. These facts navo no counterpart in v other Dominions." Tho Minister concludes: "The general of surpluses and taxation was discussed in tho last Budget, and I can. only emphasise that, apart from tho question of what proportion of our capital requirements should bo provided out of revenue, it should be recognised that in'public finance each year's transactions nvust stand alone, and before taxation can bo reduced on tho strength of a surplus in any one year, thcro must, in the interests of stable finance, bo a reasonable, assurance that the revenues will be maintained in future years. I shall be glad on somo future occasion to meet your executive for purposes of general discussion, as I recognise tho keen interest taken by you iv these, problems and their proper solution,"