COMPANY TAXATION

Evening Star, Issue 23100, 28 October 1938, Page 12

COMPANY TAXATION

9/11 IN £ D.I.G. CHAIRMAN ISSUES WARNING A suggestion that the Government might very well adopt the English method of taxing the individual shareholders on their dividends and make the companies responsible for the collection of the tax was advanced by Mr P. L. Halsted, chairman of directors of the Drapery and General Importing Company of New Zealand Ltd. (D.1.C.), at the annual meeting this afternoon. Observing that of the company’s net profits arrived at after making all the necessary provisions for depreciation, but before providing for taxation, 9s lid in the £ went to the Government, Mr Halsted issued a warning as to the serious repercussions such a drain might have on the finances of all large companies. “During the year we have paid to the Government in direct and indirect taxation—namely, land and income taxes, Customs duty, and sales taxno Jess a sum than £85,874, also a very largo amount for sales tax on everything purchased in New Zealand; we are unable to estimate how much, as it is collected from the suppliers and charged by them to us. Wo purchased in Now Zealand from local manufacturers and traders goods to the value of £339,955, and from England and overseas £228,156 (at landed cost in New Zealand currency); thus of our total purchases 59.3 per cent, were made locally and 40.2 per cent, overseas—or put another way, we purchased in New Zealand _ practically 50 per cent, more than we imported. “ Of our net profits, arrived at after making all the necessary provisions for depreciation, but before providing for taxation, 9s lid in every £ goes to the Government, shareholders receive 7s Id in the £, and 3s in the £ is retained in the business for the purpose of expansion and stabilisation,” said Mr Halsted. “ These figures demonstrate clearly the support given to local industries and traders, the very large amount we contribute to the revenue of the Government, and the very moderate return received by shareholders, who take all the risk and supply the capital. “ There is one other matter to which I would call the attention of shareholders and members of the Government, particularly the Minister of Finance, viz., the serious effect on companies such as this of having to withdraw large sume in payment of in-, come tax, which might otherwise be used for expansion, thereby creating more employment in the building and allied trades, as well as local factories. For the year ended August, 1938, the D.I.C. has to pay 7s 6d in the £ income tax on all profits earned, and in the future, after, the Social Security Act comes into force, it will have to pay an additional Is in the £, making 8s 6d in all. You can judge for yourselves what a drain these payments are on the finances of all large companies, particularly expanding ones with building programmes or extensive renovations in prospect. “ I understand that a revision of taxation is proposed in the near future. Might I suggest to the Government that this would be an opportune time to correct the system they inherited from, their predecessors and adopt the English one of taxing the individual shareholders on their dividends, but making the companies responsible for the collection of the tax. Companies would then only be charged income tax on the amount. of undivided profit. Such a system has the advantage ot letting shareholders know_ exactly how much they are paying individually and also enables small shareholders to apply for and receive refunds of tax, when they are entitled to it owing to their incomes being only liable for taxation at a lower rate than that which has been paid by the company on their behalf.”