SPECIAL TAXATION

Evening Post, Volume CXI, Issue 98, 28 April 1931, Page 8

SPECIAL TAXATION

The Prime Minister was well advised to withdraw the insurance tax provision from the Earthquake Bill, as it was evident that the proposal, if proceeded with this session, would not receive the thorough consideration that should be given to it. Its adoption would have been warranted only on the ground that it was an extraordinary measure designed to meet an emergency. But more than this was intended in the Bill. The tax ■ was to reimburse the London Reserve Fund and afterwards to build up an Earthquake. Fund for use, if need arose, in any future disaster. It was' to be permanent taxation. As a permanent tax it was unsound. It violated the general principle that revenue sources should not' be earmarked for special purposes—a principle which should be observed unless the revenue source and the revenue purpose are so closely associated as to justify" the earmarking. In this case a measure of association could be proved inasmuch as the tax was to be levied on property liable to destruction by earthquake in order to provide funds,for restoration. But! the association,was incomplete since the tax took account only of property value and not of the risk of destruction. A ferro-concrete building in Dunedin, where earthquake risk is less, would pay .at the same rate as. less stable structures in earthquake faults. The tax w.*s nol, therefore, an equitable form of compulsory earthquake insurance. As a general property, tax it was even more imperfect since it was to be levied only on certain classes of property, and the owner whose property was not insured or insurable would escape altogether. We cannot wholly agree witli those who submitted, against the proposal, thai it was objectionable as a tax on thrift. It is such a tax, but it is no more - inequitable than the tax on income derived from sa\'ings—a tax which former Governments have imposed without hesitation. ■ But it does' make a distinction between different clashes of property. In the recess the Government will have leisure to examine these and other objections and prepare a more equitable measure. It may then be decided whether it is desirable to levy a special earmarked lax to reimburse the London Reserve Fund or to make provision for such reimbursement from general revenue. The argument for a special tax is not a strong one. Special taxation is in the long run just as great a burden on the country as general taxation. It only makes the burden appear lighter. Finance Ministers know this quite well, but they will .usually try to cover up their demands because they know that political fates are often decided on appearances.