WAR LOAN RETURNS

Evening Post, Volume CXXXVI, Issue 9, 10 July 1943, Page 5

WAR LOAN RETURNS

BRITISH TAX-FREE ISSUES

Some ambiguity was apparent to readers of a comparison made between returns from New Zealand war loans and those of British war loans of the last war and attributed to the Minister of Finance (Mr. Nash). Interest 5 ates for the New Zealand war iloan for £35,000,000 are 2J per cent, per annum for. short terms and 3 per cent, tor long terms, whereas the Minister was reported as saying that loans issued in London during last war were issued first at 3h per cent., then U per cent., and next 5 per cent, the bulk l he ™oney being raised at 5 per cent. But the 4£ per cent, and 5 per cent. British war loans were^ issued free of income tax and, therefore, they represented a return of 7 or 8 per cent to persons or corporations in the higher income tax classes. A correspondent, however, has pointed out that in order to clarify and complete the comparison, the Minister ought to have explained that these loans were issued free of income tax to persons or corporations I ?i' dm, an T i y resjdent in or domiciled outside the United Kingdom. But others were not so exempted from income tax derived from income by way cf this interest. Presumably subscribers outside the United Kingdom would have to pay income tax in their own countries—New Zealand, for instanceon interest received from these British wa.r and issued to them by the British Government free of income or other taxation.

jls-h Government war loans issued in London during, the last war included £350,000,000, November, 1914 at 3k per cent, and 4£ per cent.; Ex?l?i c£ Ue!: ~Bonds ("unspecified amount), 1916 at 6 per cent.; War Loan, 4 per cent, at par and 5 per cent, at discount £95, January, 1917; Victory Bonds, 4 per cent, issue price £85 with annual drawings, in 1918 The prospectuses of all these issues contained a clause stating that the interf st on, 1 th T ? Bonds WO"W be "exempt t/V^ h l axation P^sent and future, it it is shown in the manner directed by the Treasury that they are in the beneficial ownership of a person who is neither domiciled nor ordinarily residing in the United Kingdom of Great Britain and Ireland" The same qualification for exemption of payment of British income tax present and future," was specifically mentioned in succeeding clauses in the prospectuses. In brief, subscribers to British war loans for the last war had to pay income and whatever other tax there might be levied on the interest received if they were domiciled m the United Kingdom. If not they were exempt from British income tax on war loan interest: but it did not follow that they escaped payment of the income tax of the countries in which they were resident or domiciled.