BUSINESS DOUBTS

Evening Post, Volume CXXII, Issue 31, 5 August 1936, Page 12

BUSINESS DOUBTS

BURDEN OF TAXES

POSSIBLE EFFECTS

NOT ENOUGH FOR DEFENCE

A leading Wellington and New Zealand business man today offered criticism upon a number of the points of the new Budget, suggesting that in some respects the Government had acted too hastily, without regard to probable repercussions, which might later necessitate a review and a reducUon of the benefits conferred—at the expense of the taxpayer—while 100 little had been provided in other directions, notably for defence. 'It was pleasing to note that pensions were being provided for- invalids and their wives and children, he said but it was regrettable that increased taxation was necessary to provide the means to provide such pensions. The increase of £1,710.000 for pensions was an enormous additional burden upon a young country like New Zealand particularly when it was to be' wholly provided from increased taxation Commenting upon the policy of the Government in, regard to guaranteed prices, "The Post's" informant remarked that the criticism made by Mr. J. E. Leeson, chairman of directors of the Morrinsville Co-operative Dairy Company, was much to the point in that he had said that a farmer might receive about the same for his butterfat as for the season just past, and that this would allow him nothin" extra for higher farm wages and increased living costs, so that in fact he would be no better off, and probably would be worse off. TWO FINANCIAL POLICIES. As had already been pointed out, the surplus from last financial year was entirely due to the steps taken by the previous Government to balance the Budget, and it was interesting to note the different viewpoint of the Victorian Government, which was effecting substantial reductions m taxation and complete restorations in public servants' salary cuts, although it was thereby budgeting for a deficit in the coming year of £110,000. "In

my judgment," said "The Post's" informant, "this is very much sounder finance than that of the Dominion.

a "We are creating taxation burdens 3 for posterity that it may be very diffi- - cult to meet in the future, and I think E that the Government has undertaken : too much in the short space of time it ; has been in office. The laws of diminl ishing quantities will be operating, and ;it is not unlikely that' some of the ; benefits now being conferred by the ■ Government will have to be reviewed ; and reduced at a later date. The taxai tion in this little country is unreason- ! able, and it is obvious that under cer--1 tain conditions it could not be borne, being based upon continued prosperity! which, experience has proved, cannot |be relied upon. In my opinion some of the public works undertaken will merely add to the interest burden of the country. "The restoration of salary cuts has been ' expected, whatever Government was in office," he continued, "and I think that it will prove beneficial to .the country in the long run." DEFENCE LIGHTLY TREATED. In view of the international outlook, he continued, more might very well have been said by the. Government upon the provision of adequate defence. The strengthening of the Air Force and the Naval Division was most desirable, and he would have liked to see reference to a system under which every able-bodied man might take his part in the defence of his country. INCIDENCE OF TAXES. "A cursory glance at the incidence of income tax gives the impression that the average individual, including farmers,. civil servants, and others similarly placed, will pay little, if any more than last year," he continued' | "The bulk of the new taxation will be j taken from those with larger incomes and from properties and companies! In this connection, however, it is to be borne hi mind that there are many small shareholders in companies who are bound to. suffer heavily in the dividends (if any) they 'receive owing to the heavy company income tax Moreover, the effect of such a large increase in taxation will have repercussions and will not only tend to dry up the sources of such income, but j may in some instances tend to a sterilising of enterprise, with consequentunemployment.

"This Kiew could.be further elaborated upon; for instance, to charge graduated land- tax upon city properties, which are in many instances already overtaxed by local governments, is in my opinion most inequitable. I would be surprised to hear that the net return upon the average Wellington city property at present without such a tax, is 4 per cent., as in many cases practically, the whole of the rentals is absorbed by rates and taxes. Moreover, with small frontages it is not possible to erect tall1 buildings with a hope thereby of earning sufficient to make the properties pay. One is forced to the conclusion that this aspect has not been fully examined by the Government.

"One just wonders," he concluded, referring to the -statement made by the Minister of Finance as to the increase of £10,706,000 in the value of exports last year, "whether this can be maintained, and if not, what then? I would like to have seen the Government adopt a more conservative view of the country's finance. The Government would have been wiser to have hastened slowly."