CORRESPONDENCE

Evening Post, Volume CXV, Issue 140, 16 June 1933, Page 6

CORRESPONDENCE

LOCAL BODY LOANS (To the Editor.) Sir, —Having in mind your many valuable interpretations concerning finance legislation during the past eighteen months, and which have been very helpful to myself and other small investors, may I crave another interpretation from you. During Slay, 1032, one of the Wellington City Council's many 5% per cent, loans matured, and investors were asked to renew, ov in other words to take lip a new issue at 5Vt per cent. The chief inducement held but for renewal was that "the interest would not be subject to the 10 per cent, stamp diity that pertained to all loans prior to May, 1932. True to, promise the first half-year's coupons (on December 1) were honoured without deduction; But, judge of my surprise upon presenting coupons on June 1, 1933 at the bank when I was told they were subject to (not'lo per cent.) but 20 per cent, reduction. Now, Sir, I'was led to believe that the intention of the Legislature regarding all local body loans was to exact au extra 10 per cent.' from debentureholders (in addition to: that already chargeable on debentures issued prior to-April, 1932). -If that is correct'should not the. debentures issued in May,- 1932, as free from the 10 per cent; duty., be subject only to 10 per. cent: and:not 20. per cent; deduction? If my reasoning is unsound will you kindly state whether the recentlyimposed 20 per cent, reduction is to apply to all local body, loans irrespective o£ the date of issue.. I 'understand, of course, that; interest must not be brought lower than iVt. per -cent.—T'am, etc., •-■• : ■■;" ■■A'VICTIM. [By the Local Bodies Interest 'Reduction and Loans Conversion Act interest on all loans domiciled in Ne\v Zealand and issued prior to the passing of the Act is subject to. a. reduction of 20 per cent., but so as not to reduce the interest below &V<l per cent. This interest reduction does not apply if the loans-are converted in .future on the lines laid down in the Act; but it applies' to conversions or renewals made prior to the Act being passed. The reduction by 20 per cent, when the loan has been renewed on the undertaking that it will not be subject t6 the s existing stamp duty is undoubtedly a moral violation of' that undertaking, similar in effect to the reduction of interest under the Government conversion ■ scheme as it affected Government bonds renewed in January, 1933,. with a- promise that, they .would be exempt' from ■ the then existing stamp duty.^Ed.]i ; '■' ■ l ;;• ;, • '•;■'