WHEN DO WE PAY?

Evening Star, Issue 25619, 20 October 1945, Page 6

WHEN DO WE PAY?

HIGHER INCOME TAXES EFFECT OF UNIVERSAL CHILD ALLOWANCE PAY-AS-YOU-GO TAXATION POSSIBLE Although the universal child. allowance, - provided for in the Social. Security Amendment Bill*’ now before Parliament, will come'into force next April, it has not yet been made clear when taxpayers will begin to pay higher income tax as a result of the abolition of exemption for children. Unless some other system is adopted, taxpayers could not normally be expected to feel the added impost of taxation before the beginning, of 1948, nearly two years after the introduction of the benefit. It is possible, however, that the Government may' introduce pay-as-yoit-go taxation at an earlier date, in which case. the higher scale of taxation could take effect when the family benefit began. Under the. present system the average individual does not pay . income tax on a year’s earnings until nearly 12 months after the end of that year. The child allowance is scheduled to start at the beginning of the next financial year, and taxpayers will not, under the existing system, furnish returns on that year’s earnings until June, 1947, ot pay tax due until early in 1948,. by which time the parents of children will have been drawing the allowance for nearly two years. • If the exemption from tax on account of dependent children is abolished next year, and the higher rate of income tax charged at the beginning of 1947, taxpayers will feel reasonably aggrieved because they will have been deprived of exemption for their children on their earnings in a year in which they did not receive the benefit. This ; point will require official elucidation. The possibility of pay-as-you-go taxation being introduced has been' suggested by statements of the Minister of Finance, the Hon. W. Nash, that such a system could not be contemplated while, the Income Tax Department was centralised in Wellington. The decentralisation of the department has now been carried out, and it is possible that a pay-as-you-go system of taxation is now under consideration. If such a scheme was proposed, it would be most suitable for it to be introduced from April 1 next to coincide with the beginning of the universal ’child allowance and the ret moval of. the special exemptions. Legislation for such a scheme has not so far been indicated for the present session of Parliament, however, and it is not thought likely that the scheme could be adopted from April 1 next unless the legislation was passed this year. • LOSS OF EXEMPTION.

Another aspect of the child allowance which has received some attention from parents is that the allowance for children is to be given only up to 16 years, whereas the exemption front income tax has been allowed up to 18 years. The effect appears-to be that a parent will lose the allowance on children when they, reach 16 years of age, and if the children proceed with their. education and live at the expense of their parents no allowance will be made. As most parents consider that children are _ most expensive to keep during their 'teen ages, the loss of the allowance on the income tax exemption two years earlier than has been the practice in the past will cause some concern. It is possible that this question has not received official attention yet, and some' means of dealing with it may be devised.