WAGE : INTEREST

Evening Post, Volume CXI, Issue 44, 21 February 1931, Page 6

WAGE : INTEREST

WHY NOT" CUT BOTH

CORRESPONDENTS' VIEWS

Criticising tho proposed cut in wages because it does not go far enough, a correspondent, "YV.S.L.," in a letter to "Tho Post" urges that Parliament legislate to reduce at once, proportionally, all mortgages, interests, rents, wages. Another correspondent, "A Business Man," agrees that it is useless to reduce wages without reducing mortgage and other interest. He argues that somewhere about 4 per cent, should bo the maximum, interest recoverable on mortgage, so that mortgagors may have some prospect of meeting their obligations. Banks and lending institutions should be treated in the same way. Prohibitive duties should be put on luxuries including motor-cars. The cororspondent also thinks that, in order to help.to meet the interest charges on an earthquake loan (presumably to be raised by the Government, but "to be handled by an independent board") there should be a tax (say, 5 per cent.) on the interest paid on deposits with banks and financial institutions. The same percentage tax should be charged on all dividends declared by companies. In case companies tried to evade this tax by transferring profits to reserve instead of distributing them, "A Business Man" would take power to tax reserves. Tho tax yield from these sources "should provide interest and sinking fund" on the said loan- to meet earthquake effects. ■ "There is," the same correspondent adds, "approximately ten millions of fire insurance in Napier arid Hastings, a very small amount of which is covered by earthquake- shock and fire resulting from earthquake. . . j To provide for the future, legislation should be passed making it illegal for j any insurance company doing business i in New Zealand from exempting fire resulting from earthquake from their insurance policies. The- _ insurance companies should adjust their rates to cover this extra hazard, and such additional premium should not be brought into their income account for taxation \ purposes, but should be invested in a separate account (and not subject to | tax) to provide for such a contingency as the Hawkes Bay disaster. In dealing with this aspect I am dealing with fire resulting from earthquake only, becauso I consider earthquake shock is a phase of cover that each individual insurer must decide as to his requirements, but any such premium should be treated in the same way as for a premium for fire resulting from earthquake. I consider that tho Government should extend tho time for payment of income tax, not only to "Hawkes Bay, but to the whole Domin- j ion, because this disaster is so farreaching that tho expected payments will be so delayed that it may be impossible to meet the tax on the due date. I do*not consider that any redue-1 tion in borough or council rates is justified, because the .various authorities may have oversea interest to pay, and we must not impair our oversea credit by deferred payment of interest. «Et may be necessary to legislate and legalise extension of time for the payment of rates."

"A Business Man" is convinced that, unless interests and dividends are thus dealt with, the reduction of Civil Servants'' salaries, or of wages as a whole, will have an incomplete effect on the situation. But the policy outlined above would prevent New Zealand from slipping into Australia's position. "According to an article written.' by W. M. Hughes, criticising' Sir Otto Niemeyer's report, the Australian debt per capita is £170, New Zealand debt £179." While commending Mr. Forbes's, bold economising policy, the correspondent thinks 'that the Prime Minister should go further as outlined above, and that to this end United and Reform should fuse.

Another correspondent, '' Equity,'' quotes page 5 of the Budget of 1930 to show the accumulated surpluses of the Consolidated Fund were- then in credit £2,356,337, including a cash ( credit of £1,510,239. "Why, he asks, does not the Government ease the Budget position by taking, at least a million of this money (the product of over-taxation in former yeai;s) just as a company would in bad times jtake, money f ro,m its reserves to ease the position of. its shareholders?