WAGE TAX ANOMALIES

Evening Post, Volume CXIII, Issue 75, 30 March 1932, Page 6

WAGE TAX ANOMALIES

Unemployment legislation in New Zealand was framed to meet an emergency. It lias been extended to meet a greater need; and the financial provision has all the weaknesses of an emergency system. In the first place a flat-rate poll-tax of £1 10s a year was levied on adult males. This did not yield sufficient revenue, so it was replaced by a tax of £1 and an emergency charge of 3d in the pound on wages, salaries, and other income. This-charge was levied for a period which was to end on 31st July, 1932. ,The Unemployment Amendment Bill extends the period indefinitely and increases the charge. This alteration presents an anomaly in the levy on income other than salaries and Wages. In the first place there was difficulty in deciding how the levy on such income should be assessed. Obviously it would not have been right to exempt persons of independent means, or persons in business on their own account. But, as their income could not be assessed week by week, the returns for a year had to be taken; and the only returns available were those for the year from Ist April, 1930, to 31st March, 1931. It is well known that many incomes for this period were much greater than in the year in which the charge was levied, so that incomes other than salaries and wages would have paid on a higher basis than the incomes of employees. So the Legislature decided that the charge should be on two-thirds of such incomes in 1931 and on one-third of 1931-32 incomes in 1932. The two-thirds dharge has been collected and the one-third charge would be due this year. The amending Bill proposes, however, that instead of levying "■; on one-third at 3d in the pound, the tax shall" be on the whole- income at Is in the pound. " .. « This appears to 'us quite, ineqiii.table and to place people who are not employees under a much heavier I burden than those who are working for salaries and wages. While profits, and incomes are falling the ' tax is collected, not on the income in the actual year of collection, but on the year before when the-income was greater. If the charge were imposed for a limited period an adjustment might be made Avhen l\\a\ period ended; but the amending Bill authorises a permanent charge, and there is no undertaking that, when relief is given, the recipients of income other than wages will not have paid a year longer than the wageearners. If this applied only cipients of big "unearned" incomes it might be excused on the plea (which is nevertheless quite unsound) that the payers can afford it; but it applies to many other persons —to small tradesmen who are struggling as hard as wage-earners, and to men who have retired on small superannuation. It is especially unfair to the latter class, because they cannot hope to obtain any benefit whatever from the funds which they help'to build up; There is another anomaly arising from the proposal to make all women, apart from wage and salaryearners,: liable for the charge. This is proposed because it is considered anomalous to allow a woman ,in receipt of an independent income of £250 a year or less to escape while the woman who *. earns a smaller amount pays. But is this such a great anomaly? The tax is primarily a tax on employed persons who may become unemployed. The women with small independent incomes cannot hope to obtain benefit from it; and can it be said that a woman with a little over £20 a year (the limit proposed in the Bill) can afford to contribute to the support of others? We think that at least the limit should be made higher. Apart from the injustice there is the consideration of cost. Will it really pay the State to comb the country for incomes of £20 upwards to collect a small tax? If the collection is not thorough it will be unfair. Those who attempt evasion will have a chance of escaping. A tax which presents such possibilities of evasion is essentially unsound. We can admit that there is a measure of inequity in allowing a woman with, say, £200 a year to escape payment altogether; but it seems to us that the correction, if carried to the extent proposed, will produce greater injustice and positive hardship. Even at the risk of allowing some persons with small incomes and who can pay a little to escape it seems that it would be better to make the collection through the Income Tax Department, which has experience in this business. Already, it must be remembered, the tax on unearned income is subject to a surcharge of one-third, and the only persons who escape this arc lliosc whose incomes, unearned and earned, are below die taxable limits..