INCOME TAX LAW

Evening Post, Volume CXXIX, Issue 59, 9 March 1940, Page 12

INCOME TAX LAW

EXISTING ANOMALIES

REPLY TO MINISTER

Mr. C. R. Richardson writes as follows:—In Thursday's issue .of "The Post" you published a statement by the Minister of Finance, under the heading "Income Tax Law" -which opens with the following—"My attention has been drawn to the text of a paper read recently before the !New Zealand Society of Accountants and purporting to be a critical survey disclosing a number of existing taxation anomalies. It is a plausible paper. It has been widely reproduced in the Press as being an informative and convincing exposition of the unfairness and hardship of certain provisions in the income tax lawr Its author is stated to be a taxation expert, but as his critical survey condemns provisions which have been expressly repealed, this may be art exaggeration." In referring to the particular, anomaly which has been dealt with by way of repeal, the Minister further stated: — "It is quite true that this w.as the law at one time, but the. position was changed by Section li x of the Amending Act passed last session. It seems difficult to believe that the author of the paper with his study of tax procedure was ignorant of this fact.*' Now, Sir, there is ample room for a difference of opinion oh the merits or fairness- of various provisions in our existing income-tax law* and it is certainly clear that the Minister and I are at variance in our views on several important aspects of the matter. In view of the somewhat damaging terms of the Minister's statement, however, in which he first of all calls in question my professional capacity and then proceeds to impugn the honesty of my motives, I feel bound to take the "necessary steps to correct his apparent misapprehensions in the matter. In the first place, I am not a ■ taxation "expert," and have never claimed to be one. I have, in fact, consistently and strenuously objected to the use of the term in connection with my calling, which is that of an advisory accountant and taxation consultant. As to ray qualification to act in this capacity I am quite content to be judged upon the standard of service I have been able to render to a very substantial section of the taxpaying .community—not even excepting members of the Government —to whom in many cases the increasing'complexities of our taxation system provide a very real source of worry and concern. ' AN AMENDED SECTION. In so far as my alleged misrepresentation of the position in connection with the non-allowance of the special exemption for a widowed mother to "unearned income" taxpayers is concerned—and upon which ground the Minister has apparently based his slighting reference to my professional capacity and personal honesty—l would point out that in presenting the paper on taxation before the Accountants' Convention, I expressly and deliberately emphasised that this particular anomaly had, in fact, been rectified as from April 1, 1940, by the terms of the section to which the Minister has referred, although I was fully justified in pointing out that it still had operation for the present assessment year, jln the- circumstances, therefore; it is clear that "the' Minister has not been fully apprised of what transpired at the meeting, and that the criticism which he has directed at me has been based on a lack of knowledge of the true facts. There is a great deal which could be said, of course, in reply to the Minister's contentions in justification of certain aspects of the existing taxation law, but I do not propose to join issue with him in this regard, other than to refer to the following points:— TAXATION OF UNEARNED INCOME. In justifying the existing discrimination against "unearned" incomes, the Minister points out that a person whose income is derived from a source which ensures the dual advantages of security of sustenance regardless of capacity to work and freedom from necessity to provide for the future, should quite properly be subjected to a higher rate of tax than the salaried taxpayer. If such isthe case, however, then it would appear that I was fully justified in pointing out that this particular principle is not consistently applied in practice, since incomes from "pensions" are hot taxed as "unearned," in the same way that annuities and investment incomes are so taxed. COMPANY TAXATION. The Minister's justification for the existing basis of taxation upon companies—without the allowance of any compensating adjustment to shareholders whose appropriate rate of tax is lower than the company's rate— appears to be that the company's rate of tax and tax obligations are really matters of comparative indifference to shareholders of the company provided, they receive a reasonable rate of. dividend. He states further, that the shareholders in most public companies do not actually pay a high rate of tax; in fact, according to the Minister, they pay no tax at all. I can only say that I am sure this exposition of the Minister's appreciation of the position will be read by all such shareholders in public companies with shocked amazement. APPOINTMENT OF INDEPENDENT TRIBUNAL. This question was raised in the course of the discussion which followed my address, and was not attributable to any sponsorship on my part. In regard to the Minister's contention that the existing law provides a simple, inexpensive, and ready means! of rer solving questions at issue between the Commissioner of Taxes and taxpayers by the process of a reference to the Magistrate's Court, - however, I would point out that a taxpayer, affected would be unable to proceed on the assumption that the Department would be prepared to abide by an adverse decision of the Magistrate's Court, and would not require the matter to be referred to. a higher Court, with the attendant additional expense to the taxpayer and the added fact of publicity in the proceedings In these circumstances, therefore, the facilities at present available to the taxpayer are more apparent than real. CRITICISM OF DEPARTMENT. I desire to point out that it was no part of my purpose to impute unfairness to the Department in its adminisr tration of the taxing -"statutes, al.'hough this aspect of the^question was certainly the subject of i reference by a number of speakers at the meeting. In point of fact I made the specific statement that the Department had a very difficult job of woijfc to perform, and that it would be generally acknowledged that it accomplished its task very well. "i , In conclusion, I may perhaps be forgiven for expressing the hope that the Minister might one day himself be caught in the toils of his own taxation net, in which event it might yet be possible for me to demonstrate to him the value of the service which can be afforded to a harassed taxpayer by a person acting in my capacity, as a taxation consultant*