GROWING SHORTAGE OF “CALL HONEY” IN CITY FINANCE

Evening Star, Issue 26184, 20 August 1947, Page 4

GROWING SHORTAGE OF “CALL HONEY” IN CITY FINANCE

A shortage of “ call money ’—the temporary finance of industry; and local bodies—has developed in Dunedin within recent months. This finance is ' Used for very .short periods to meet commitments or to provide working capital until such time as revenue regains its periodical buoyancy. Some concerns requiring to meet drafts or • make payments, use *“ call money,” which cariies a low-rate ofinterest, in - m-eference to overdraft finance. Firms with large balances on current account at tlietrading banks were once willing to lend part of their credits to others on “ call;” for which they received- interest at, the rate of H per. cent, annually, or. if the borrowing organisation was a local body, a. rate of 1 per cent. The morfey was also Repayable on demand. The net effect was - that the surplus' funds were forking,” or earning solne interest,, while remaining available for use. INCOME TAX REPAYMENTS. The popular explanation in financial circles for the drop in-the amount of call money offering is that many of the » larger business houses are ...applying their surplus credits to prepayment of, income tax. Moneys deposited for'thisu purpose earn an interest rate of lj) per cent, until February .6, whteh is two days before income tax payments are normally due. Concerns which adopt this practice admittedly. -sacrifice a measure of liquidity, for tax prepayments’ cannot ibe withdrawn. ' Since, the. Income Tax Departmentintroduced the ’prepayment, system, an, - increasing number of taxpayers'! have used the facilities. Bv far the greatest,. 'number of .individual accounts, it is., understood, lire’? assignments -of famiGv benefit payments.- . It is-not "enerallv known that these credits, as . vi-ith other- accounts, earn the Lf per cent, interest. ■ : ’ - . ■ The biggest contributions; come from city firms, some of which have made, large' deposits, thus spreading . the charge for income tax payments through the earning year. • . . ’.