TAX REDUCTIONS

Evening Post, Volume CXL, Issue 48, 25 August 1945, Page 8

TAX REDUCTIONS

LONG OVERDUE

THE BUDGET EXAMINED

After making a study of the Budget the Joint Taxation Committee which functions under the aegis of the Associated Chambers of Commerce has drawn attention to nine points which it suggests' should be closely examined by taxpayers, the public in general, and the Government, especially for the period of post-war reconstruction. The points raised are as follows: — 1. The Minister took particular care to emphasise that the standard of living depends upon the volume of goods produced and services made available. "The production of goods and services is the prime essential, without which there is no living standard." (Page 12.) 2. In the circumstances, it is fair to assume that the prime objective of the Government should be to do the utmost in its power to achieve the greatest possible measure of production, in relation to both goods and services. 3. To achieve the foregoing objective, it is clear that every possible encouragement should be offered to those concerned with the organisation of trade and industry. Payment by results is obviously the only means of attaining maximum production, and this principle clearly applies in respect of both employer and employee. 4. Excessive and unfair taxation must necessarily operate as one of the strongest curbs to the achievement of maximum production. Under war conditions the taxpaying community tolerates this position, even though it strongly resents unfairness in the taxation system. POLICY SHOULD BE REVISED. 5. In referring to the subject of taxation in his Budget Statement, the Minister said:: The time has not yet come for a general review of taxation, for we still have heavy costs of war and rehabilitation to meet." At the time of making this statement, the United Nations were still at war with Japan, but now that the war is over, it is entirely reasonable to expect that the Minister should be j prepared to revise this statement of Government policy. The real fact of the matter is that the time for a general review of taxation is long overdue and taxpayers are entitled to expect that the Government will undertake this task without further delay. It is not too much to say that the Government's programme for rehabilitation and full employment is likely to be seriously . prejudiced if the position is not faced up to immediately. To quote the Minister again, "Without the production of goods and services, there is no living standard." To this might well be added, "If sufficient inducement is not offered to those responsible for the .organisation of production, then it is hopeless for the Government to expect to achieve its objective of maximum production.' 6. Reference might well be made to the extremely unfair incidence of graduated company income tax as stultifying expansion and increased employment and production. In the same way, it appears fair to suggest that the excess profits tax legislation should be repealed forthwith. Under the -existing law this tax will apply not only for the current year, but also for the following assessment year. Whilst it must be acknowledged that the authorities have endeavoured to apply the excess profits tax legisla; tion with a reasonable measure oi toleranqe, the fact remains that many extremely anomalous cases continue to arise, and the continuance of the tax must obviously operate as a brake upon enterprise and increased produc--7 The Minister stated that the incidence of taxation in general is under examination and it is proposed during the year to take steps to remove any proved injustices or anomalies. On this aspect of the question it appears reasonable to suggest that the correction of the anomalies in question should be made operative in respect of taxation payable during the current assessment year; that some appropriate opportunity should be afforded to the taxpaying community of tendering evidence of injustices and anomalies in the existing incidence of taxation. DEPRECIATION ALLOWANCE. 8 The Government's proposal to grant a special depreciation allowance of the cost of new plant and buildings —spread over five years—will no doubt be regarded as very acceptable, although it is to be observed that, in England, the proposal—in the case of new plant—is to allow 20 per cent, in the first year. It appears desirable that the Government should make some early pronouncement in clarification of the position in relation to the proposed special allowance. At. the moment, it appears from the Minister's statement that the new allowance will first be deductible against income o^ er ioA7 during the year ending March 31, 1947. If this in fact is the position, then it appears fair to suggest that the allowance should not be delayed, but should be made operatiye forthwith, in respect of any expenditure on new plant and buildings. It should also be made clear whether the allowance is to be restricted to expenditure in relation to new industrial activities, or whether the fact of the purchase of new plant will of itself be accepted as evidence of an intention to expand production. As projects are likely to be held up pending some clarification of the matter, some early official pronouncement is highly desirable. 9. The Government is to be commended on its decision to allow as a deduction for taxation purposes the cost of royalties, research, and patent rights. Any process which aims at getting down to a basis of imposing taxation only on real profits is obviously a step in the right direction. Here again, however, the Government should be urged to make this concession immediately applicable, that is in relation to assessments for the current year. In conclusion, we would again direct attention to the Minister's statement that "A rapid expansion in production, both primary and secondary, must be the predominant objective in our postwar activities." The objective is an excellent one. It only remains for the Minister to support his words by energetic action in removing the shackles from enterprise and industry. One of the most effective of these shackles is undoubtedly the weight and anomalous incidence of existing taxation.