INTEREST REDUCTION

Evening Post, Volume CXIII, Issue 73, 28 March 1932, Page 10

INTEREST REDUCTION

STOCK EXCHANGE VIEW

' ""DESTROYS THE COUNTRY'S CREDIT"

Tlie Auckland Stock Exchange has put JtS- views on the proposed 'compulsory reduction of interest before the Minister of Finance (Mr. Downie Stewart) and states that "We are opposed to a general reduction of interest by legislation, as it destroys the country's credit and the stain of broken contracts .will remain as a blot on the-Dominion'for many years to come. | From our exp'etfence as brokers we find the great majority of debenture-holders are quite prepared to pay "whatever taxation may be necessary during the next few years until the present depression' passes. We would emphasise that what , the investor objects to very strongly is interference with interest for, say, the next 20 years with no provision for readjustment during, the currency of his security.. While the depression raises a suggestion for a reduction of contractual interest no boom period has ever heard it put forward that as a measure of mere fairness such interest rates should be increased." .'. FLAT RATE SUGGESTED. .Attention is drawn to the previous suggestion made by the Exchange as follows: "It is respectfully suggested, but only as a last resource, and then strictly 1 as an emergency measure, to impose a tax ■at, a flat rate on all interest whether derived from bonds, mortgages, fixed deposits, savings bank deposits, etc., irreepective of the individual holders' lia- " bility for ordinary income tax. This would produce a large and readily-collected revei aue. The tax would.not destroy capital or "credit, as it would be recognised as a .temporary measure only, and in our opinion would make for the desired equality , qf sacrifice without placing the stain on the credit of the Dominion such as would b compulsory conversion of existing loans. ~^'We are opposed to the reduction of dividends on cumulative preference shares Unless and until the profits earned are insufficient to pay ordinary share dividends. "; INTEREST ON DIVIDENDS. 1 "Cases may be cited of Australian companies paying lower preferential dividends and reduced interest on debenture issues ■while maintaining the usual rate of ordinary share dividends. We have ■ in mind several companies where a reduction of preference dividends would simply mean an increased distribution to ordinary shareholders. "Wa are opposed to reduction of rents except in cases where no reduction has been made to meet existing conditions. ; The average reduction in Auckland is 40 per cent., and there is a- large number of vacant shops and houses. In addition, there is considerable difficulty in many cases in 'collecting even the reduced rentals.. Therefore, a compulsory reduction" in addition to those already made .would be quite v unfair to property-owners xrho have met their tenants in difficulty We suggest that'the taxation of, power board revenues should be immediately'introduced, and this may apply to' other State and municipal trading organisations. Suca taxes' will spread over the whole community, and, are easily collected."