BANKS AND TIE STATE

Evening Post, Volume CXXXII, Issue 86, 8 October 1941, Page 6

BANKS AND TIE STATE

CONTROL ISSUE

MINISTER'S OPINION

EFFICIENT SERVICE

> Reasons why there was no need for the State to take control of the ; trading banks in New Zealand were i given by the Minister of Finance (Mr. Nash) in the House of Representatives yesterday, when he explained a clause in the Land and i Income Tax Amendment Bill, ; changing the system of taxation on i these institutions. They would pay income tax on the same basis as ; trading companies in future, he ; said. 1 Mr. Nash paid a tribute to the trading banks for the help they had rendered the country during the war. The limitations on banking practice were ; so great, he said, that they could not- ' today make anything like the profits [ they had previously made, while never before in the Dominion's history^ had overdraft rates been so low. If he thought that the monetary system of the Dominion could be better managed under a single control he would be an advocate of the State taking over all banks. "But," he continued, "at the moment I think the service that is being rendered by the trading banks to the Dominion, and the price they are charging for that service, is being provided at as low a cost and in as efficient a manner as the State could do it. If that is so, I am not worrying. If I felt that, as in the past, banking companies used during crises ail the powers they have for the purpose of drawing out of the community more than they are entitled to, I would not argue it; but their powers today are very limited because of the alteration in the law in connexion with the establishment of j the Reserve Bank." THE OLD SYSTEM. Explaining the change in the income tax affecting banks, the Minister said that the old system was exceedingly arbitrary and had led to anomalies which were grossly unfair. One bank last year was liable for £154 of income tax for every.£loo profit it made. That could not go on for long. The banks would now pay income tax on the same basis as trading companies. This had not been possible in the past, but there had been such a co-related arrangement in all the countries where the banks traded, and New Zealand was in such close touch with all the taxing authorities, that it was now possible to secure a full statement of the profits made in this country. In addition to that, New Zealand would" collect from the Bank of New Zealand income tax on the profit it made overseas. He thought this would also apply to one other bank. In respect of banks registered overseas and trading in New Zealand the Dominion would collect in full on profits made in the Dominion. The Hon. A. Hamilton (National, Awarua): How will this affect the Treasury? The Minister: We will not get so much money. •SOCIALISE ONE BANK." To give substantial taxation exemptions to trading banks was something new for the Labour Party, said Mr. J. A. Lee (Democratic Labour, Grey Lynn). If New Zealand was to continue to allow the trading banks to be controlled privately there could be no argument against it. The present method was making private monopoly of the credit machinery impossible. He held the view that without a reduction in taxation the banks could not have continued to advance large sums of Eresh credit to the Government for war purposes. He held that it would be better to proceed with the policy of the Labour Party and socialise one of the banking- institutions. Even if that were done there was still a case for this measure. '