The Evening Star THURSDAY, AUGUST 10, 1922. TOO HEAVILY TAXED.

Evening Star, Issue 18043, 10 August 1922, Page 4

The Evening Star THURSDAY, AUGUST 10, 1922. TOO HEAVILY TAXED.

When three months ago the Government set up a. committee of twelve gentlemen to investigate the incidence of taxation in New Zealand wo expressed doubt as towhether, besides making recommendations as to redistribution, the committee would feel itself authorised to comment on the heaviness of the total burden, lest the prerogatives of the Government be impinged on. Fortunately, the committee has taken to itself a free hand in this respect. It states as plainly as words can say it that ibis dominion is overtaxed, and that the sooner the Government brings down both its expenditure and the revenue it collects from taxation tho sooner will tho country, have enough strength to spare to step forward on the way back to prosperity, instead of staying stationary, staggering under a crushing/load. Elsewhere it has been laid down as one of tho principles of Budget-framing that any Trea--1 surer should ascertain a country’s probable expenditure without extravagance, and fix taxation to produce that amount and no more. This committee, however, deems ‘the present state of affairs so serious that it would have the Minister of Finance reverse that process. It says that already tho limits of taxation have been exceeded, that the Government should bring them back, to what it finds the country can bear, and that tho expenditure should bo reduced so as to correspond with tho smaller revenue so arrived at. So urgent is tho present need for reduction of taxation judged to be that the committee would! oven be- prepared to see the revenue fail to meet the reduced expenditure for a year or two and permit a moderate deficit in jthe national accounts.

In passing, it may be said that this does not, square with tho advice being given by allied experts investigating the economic chaos in Europe, which is that it cannot bo remedied unless the various Governments balance their Budgets, chiefly by imposing much more taxation. However, conditions are different here. There has been no false modesty on one tax collector's part. Ho has been so übiquitous as to develop from .a nuisance into a tyrant. According to the committee, his activities are most obnoxjpus in the land and tax spheres. It recommends that these be curtailed by some £1,375,000 a year; but, on the other hand, the committee suggests as an offset small addi-' tional increases of taxation in other directions, and calculates on less revenue being required from taxation on the assumption that tbs railways can be; transformed from a losing to, a profit-earning concern. That is not likely to be a matter of weeks or even of months, for it is notorious that tho railway plant urgently clamors for heavy expenditure before economical working can be dreamt of. As tho Financial Statement is forvtard enough to be promised next week, it is reasonable to suppose that the committee was in possession of Mr Massey’s estimate of what , land and income tax will yield in the current year. These source's yielded nearly ten millions in the year 1920-21, raid about £7,640,000 last year, and probably there will he a further drop this year; so that a further deduction of £1,575,000 from this last amount ‘would mean ,a big shrinkage of these items of revenue.. No other items are likely to increase, let alone compensate for such a fall. Tho moral is plain. Treasurers will have to budget 6a a much more modest scale. The total revenue must be greatly reduced, and the expenditure must be brought to a reasonably corresponding figure. Tho presentday Budgets show totals on either side of about £28,000,000; the last pre-war Budget showed totals of about £12,000,000. The population of Now Zealand has not very greatly increased in the meantime, and it is evident that our finances will have to be fraiped on a much less ambitious scale. There can never be a return to twelve million Budgets, because of big permanent war-debt additions; but the country cannot stand their being more than doubled, for this has involved land and income tax collectors taking up to nearly ten millions in a year instead of under ono and a-quarter millions sterling. Surely these figures show very plainly how excessive taxation dries up its own source in an impossible attempt to maintain a public service quite beyond our means. The expenditure side of the forthcoming Budget will show with how much resolution Mr Massey has faced this unpleasant problem of drastic economy, the need of which the committee once more demonstrates with tremendous emphasis. Tho committee was fairly evenly divided over the system of company taxation which New Zealand practises. It is certainly the stiffest of its kind in tho Empire, if not in tho world. But both those who advocate continuing to .tax a company’s profits as a whole, and those who would have the undivided profits and the dividends taxed separately, the company paying on {jie former and the shareholders on the latter, are agreed that the maximum rate on. The graduated scale should bo pulled down from 8s 9gd to 5s in the £l. Under the present system it is only a few fortunate'companies able to pass on taxation who can build up their reserves after paying something approaching half their total profits to the Government and then making a modest distribution among shareholders. And, despite what revolutionary political economists preach, fresh capital has to be continually introduced into a business unless it is to stand still and bo left behind, just as much as capital is needed for the establisliment of a new business. Tho constriction of business enterprise through the depletion of reserves is rightly enough stressed; but there are some who, would urge that another somewhat cognate matter has been overlooked, except for the laying down of tho postulate that “ the tax must as far as possible lie put where it will stay.” That is tho point. Does it stay? It is very doubtful in some cases. The cost of living, despite very reduced returns to producers of primary products, suggests that there is a good deal of passing on to small income tax payers and those who are in the exempted class. The committee, though it does not recommend lowering tho exemption, which it paints out is higher than elsewhere in the Empire, only refrains from doing so because the cost of collecting with a very small mesh net would exceed the amount of tho additional catch. Being-chiefly concerned with direct taxation, the committee perhaps overlooked the indirect taxation to which tho poorest as well as tho richest are subject, both by the State and by the State’s deputy collectors, in the way above indicated. This recommendation as to the £3OO exemption is better than- the reasons given for it. Nothing is said about those who are exempt thoucrh they have no right to be, tboUgh this, perhaps, hardly came within tho committee’s scope. It is rather tho Commissioner’s concern. ..There are fish \k r 3%T0 escape through the gresenjt

mesh which have never been caught, simply because their habitat is outside tho accustomed fishing ground. 'Cost of collection ia hero 1 no excuse for not mailing a more comprehensive sweep.