WEIGHT OF TAXATION

Evening Post, Volume CXL, Issue 59, 7 September 1945, Page 9

WEIGHT OF TAXATION

REDUCTIONS SOUGHT

AMENDMENT NARROWLY DEFEATED

After the second reading* of the Land and Income Tax (Annual) Bill had been moved in the House of Representatives yesterday afternoon by the Minister of Finance (Mr. Nash), an amendment was tabled by Mr. W. J. Poison (National, Stratford), on behalf of the Opposition, urgingl reconsideration by the Government of its taxation proposals with a view to reductions being made. On a division the amendment was defeated by 37 votes to 34, a result which led Opposition members to comment, "A close call." Mr. Poison's amendment was that the second reading* of the Bill be deferred for 21 days to enable the Government in the meantime to reconsider its taxation proposals "with a view to giving* much-needed relief to the people in general and in particular to those who are responsible for the upbringing, maintenance, and education of children." The debate was continued all afternoon and evening and was not completed when the House adjourned until this morning.

Mr. Nash, moving the second reading of the Bill, dealt with various aspects of both land and income tax. As far as land tax was concerned he said that estimated revenue this year was £930,000 compared with £952,000 last year, and £987,000 in 1943. He contended that the reduction each year was due to the subdivision of large estates into small holdings. An interesting point was that Is 3d of the land tax revenue came from companies and 2s 3d from individual taxpayers, and he drew attention to the fact that land tax was allowed as a deduction from income before it was taxable. It was a fact that over the last five years, heavy as the income tax had been, people had had more left than ever before. Mr: H. T. Morton (National, Waitemata): What about annuitants? Mr. Nash: That is exceptional. I am talking about the residue left to taxpayers. Over the years persons have been better off and companies have been better off. In a survey of tax figures, the Minister said that as far as companies were concerned 2s 6d was paid on the first £, and that was increased by l/100d for every further pound of income until the income reached £6300, when the rate • was 7s 9d in the £.. After that the increase was by l/150d for every £, reaching a maximum of 8s 8d in the £ at £7950. To those rates 33 1-3 per cent, was added, making a total of 11s 6d and 2s 3d. In addition companies paid social security and national security taxes at 2s 6d in the £ so that the maximum rate on company income was 14s and 2s 3d, provided that the company was not making more money out of the war than before the war broke out. An interesting point was that in Australia there was a fiat rate for companies of 6s in the £, but when dividends were paid they were again assessable for tax in the hands of the income receiver. In Britain the tax was 10s in the £, but again tax was payable in the shareholder's assessment. There was argument that companies should not pay social security tax. He thought they should Mr. Nash quoted from a table showing the increasing amount of the residue left to companies after the payment of all taxation. The residue rose from £7,300,000 in 1934 to £14,700,000 in 1944.- ■•- »• •■■ ■-- ■■■■"-: • The Government proposed to make some provision for adjustments in connection with depreciation and other matters, but he hoped later to introduce a Land and Income Tax Amendment Bill to give effect to those proposals. TAXES ON INDIVIDUALS. Figures relating to taxes on individuals were then referred to by the Minister. After allowing for deductions, the tax was levied at 2s. bd in the £ for the first £100, increasing by 3d in the £ for each succeeding £100. The maximum rate was slightly under 12s in the £ at £3800 taxable income The basis rate was set out in-the 194U Act The intention had been to adhere to the same basis each year and adjust the percentage according to revenue requirements. Since 1942 the increase had been 33 1-3 per cent. That took the maximum to 15s 6d in the £ Social security and national security taxes at 2s 6d in the £ brought the total to 18s in the £, but members had to remember that no one paid 18s in the £ on their total income, with the qualification about excess profits. For instance, a man with a taxable earned income of £4000 would pay 18s in the £ on only £300. Then a man with a wife and three children received an exemption of £400 before paying any tax at an. Mr W. J. Poison (National, Stratford)" contended that taxation should be at the lowest possible rate on which the State could manage affairs. Although inflation in wartime was m=scapable, the fact remained that it was in New Zealand to a substantial extent. One of the most tragic features of the high taxation that had been sustained in the Dominion was the -effect on superannuitants, who tiad to pay high taxes and whose money was depreciated. _ Another criticism offered by Mr. Poison was that companies, by passon g on the whole of their taxation to the purchasers of their goods, Decome nothing more nor less than ;ax-collectors for the Government. The time had arrived, with the war jver for the people to have a downward variation of taxation. The 3udget showed that the Minister had i very substantial sum up his sleeve md a great deal of it in the War Expenses Account. He had been able to xansfer £6;000,000 or £7,000.000 from he Consolidated Fund to that account, md he still had £1,250,000 in the Consolidated Fund. If he were willing ;here could be a heavy drop in taxa;ion. From the day the Government ;ook office —and before —it made promises, but had not fulfilled a single 3ne of them. CALLING OUT FOR RELIEF. Mr. Poison said that the Government was no longer entitled to take from the people such an enormous amount of taxation, not only through income lax, but also through sales tax on goods that were available, anfl the national security tax. The country was calling out for relief from such taxes. He then moved his amendment, which was seconded by Mr. T. L. Macdonald (National, Mataura). Mr. A. S. Richards (Government, Roskill) said the insurance premiums paid by dairy farmers in 1940-41 and onward indicated that the payment of ■.icome tax by them was no particular hardship, especially at a time when the Government was trying to get rid of some of the consequences of war. [t had always been the Government's policy and that of the Labour movement generally to place the burden of taxation on tliose best able to bear it., and he ventured to say that it had worked out more justly than any other policy. Mr. W. A. Bodkin (National, Central Otago) said no one could suggest it was reasonable for the Government to levy the same amount of taxation now as when the country was at war. If the taxation proposals were to be justified the onus was on the Government to establish the fact that the revenue to be collected was necessary for peacetime economy. It must be obvious to all that that was not the Every statement by the Minister of Rehabilitation (Mr. ,Skinner) emphasised that the great measure of rehabilitation today was being provided by private enterprise. Industries had been working overtime and thousands of people had been in receipt of a substantial sum'every month for overtime. Those people were in a position to pay taxation in the war period, but the time had about arrived when they

would be back on their award wages and would not be in a position to meet the heavy demands of taxation. RECKLESS EXPENDITURE. Unless there we're a reduction of taxation, there would be no encouragement to employers to make provision for returned service men and ! women by expansion of business. If the Minister of Finance were frank he would say that the Government dare not reduce taxation because there was a real danger of inflation, and it would hot help the matter if the Government, while; maintaining high taxation, also embarked on an orgy of reckless expenditure. . ' Mr. H. T. Morton (National. Waitemata) contrasted the difficult position of old people who had been thrifty and those who lived only on social security, pointing out that the former had to pay 2s 6d in the. pound on their investment income whuch was not levied on social securitjr payments. Mr. R. M. Algie (National, Remuera) asked whether it not be possible to give the older people who had been able to save a capital sum sufficient to give them an income of from £50 to £100 a year complete exemption from taxation on that income. The Minister of Finance said that the amounts mentioned by Mr. Algie would be free from taxation. One person could have an income of '£136 10s and be exempt from national and social security taxes, and two persons could have an income of £221. Mr. Algie. said that if that were so, it was a remarkable thing that such people wrote asking why their income 'of £50 and £40 could not be exempt. He thought he would present his file of correspondence on the subject to the Minister and the Social Security Department, and that such an answer as had been given by the Minister would be considered satisfactory. Mr. Algie contended that the old people were being paid in a currency .wnich the policy of the Government had permitted to become depreciated, and said that that was acknowledged by the increase in the age benefit this year from 32s 6d to 40s. Mr. F. Langstone (Government, Waimarino) said that the Opposition's representations on behalf of the older people and for a reduction of taxation were only moonshine. If the national security tax of Is 6d in the pound were taken off it would mean much more to those on the higher incomes than to those on the lower incomes. The workers were not going to be gulled by the sort of rubbish indulged in-by the Opposition, which was using the workers as a peg to hang a hat on to obtain a reduction in taxation so that those the party represented would have more to lend to the Government at 3 per cent. Balance-sheets showed that companies were better off today financially and that their assets in the main were in better shape. The question of hardship did not exist. STATE SPENDING. Mr. Langstone said that State spending had a tremendous influence on the country's economy and was responsible for some very big undertakings and for putting other projects into operation. He doubted whether industry as it was today would be able to absorb all the ex-service personnel. At the . present time it would be folly for the Government to let go one penny-piece of the taxation revenue. Should the Government have to go cap in hand to borrow and borrow from those who were asking for a reduction in taxation? It did not make sense and was not good, sound, logical government. Mr. T. C. Webb (National, Kaipara) said that if the Minister of Finance intended holding the money he was collecting because of his fear of inflation his action would be difficult to challenge. "But he has not said that," Mr. Webb continued. "I challenge him to say whether in fact he requires it for expenditure or from the people because he is afraid of inflation." Mr. Webb said that Mr. Langstone had said that if the national security tax of Is 6d in the £ were taken off the men with large incomes would benefit. "The bulk of income tax comes from people earning less than £700 a year," said Mr. Web"b. If the reduction were made people earning £700 a year or less would take £7,700,----000 of the reduction while people earning over £700 a year would take £1,875,000. That, surely was the answer. COST OF FOOD. The Minister of Health (Mr. Nordmeyer) quoted a series of prices of foodstuffs during the 1914-18 war and contrasted them with prices during the recent war, contending that overall increases in New Zealand had been less than in any other country of the Empire. The Government, he continued, had made urgent requests for shipping to bring back servicemen, but it might be impossible to return them all before the end of the financial year. They would continue to be paid and fed, and there was the large cost of transport to be met, as well as heavy commitments of which the cost had not yet been charged to New Zealand. It was therefore impossible for the Minister of Finance to reduce his estimates of expenditure, in spite of the fact that he had taken into account probable realisations from war assets. The alternative to reduced taxation was to pile up debt, which was stupidity of the worst possible kind. As for the so-called strangling effect of high taxation on business, he asked if the Opposition had not given the case away by declaring that taxation was passed on to the customer. Mr. M. H. Oram (National, Manawatu) said that undoubtedly the position in New Zealand was leading to inflation. Had the Minister of Finance desired to prevent inflation by continuing taxation he should have said so and should have brought down some scheme whereby taxation could be continued for /the time being, and a certain amount of it returned to the taxpayers later on when the danger of inflation would not be so great. In a scheme such as that he would have had the utmost support of the Opposition. Mr. H. E. Combs (Government, Wellington Suburbs) said the. war could not have been won on a time-payment basis, nor could the aftermath of the war be paid for that way. There must be a settling day, and it had come so far as the present generation was concerned. There were certain sections of war expenses that would continue for a very long time, and one of them was war pensions, which had to be on the fairest possible basis. The taxation being levied this year would go in part to pay pensions and gratuities. The £18,000,000 for gratuities must come out of the taxpayer's pocket. If the time-payment system were adopted for gratuities and they were passed on to the next generation, a returned soldier would be helping to pay his own gratuity.