WAR TAXATION

Feilding Star, Volume XII, Issue 3023, 18 August 1916, Page 4

WAR TAXATION

THE NEW LEGISLATION

ITS OPERATION FURTHER

EXPLAINED

(from the Evening Post.) Following the the second article, dealing wim other phases ol the new taxation: — ... In any case where the Commissioner ~s safisued that the computation oldie .standard income by any ot tlie methods (A), (R), (0), (D), outlined vesterilay would entail serious liaru;uip on'any taxpayer by reason oi the recent: commencement oi tlie misiness of such taxpayer, or by reason of the fact that the amount ot capital actually employed by the taxpayer iv hl.s business i.s, owing to the nature of that business, small compared with the capital necessarily at stake for that business, the Commissioner may compute the standard .income- in such a manner as, having regard to all the circumstances ot the case, he deems just and reasonable. The Commissioner may also allow time for payment of the excess profits duty if he considers that serious hardship would be entailed by payment on tho date fixed. Provision is made for the hearing of objections to assessments of excess profits duty, at the election of the taxpayer either by a Magistrate's Court", under the Lund and Income Tax Act. 1910 or a. special board of appeal constituted by the Finance Act, 1910. Returns land ktatemenits required for the purpose of assessing tho excess profits duty : — . A taxpayer who elects under (A), (B), or (O.'is required to furnish (unless he has already done so) a return or returns of income for the year or years which he elects to take, and also a statement of assets and liabilities as at April 1, 1915, and as at the commencing date of the year or years to which hi's election relates. That is, if lie elects to take the year eliding March 31, 1914, as the standard, a. return will bo required for that year (if ho has not already forwarded one), and also a. statement of assets and liabilities at at April 1, 191.5 (the commencement of the income year), and as at April 1, 1913 (the commencement of tho standard year). A taxpayer who elects under (D), or whose first year in business terminates during the year ending March 31, 1910, is required to furnish (unless he has already done so), a return for tho year ended March 31, 1910, or date of completion of first year's business, as the case may be, and also a statement of assets and liabilities as at April 1, 1915, or the date of commencement of business, as the case may be. For instance: If a taxpayer commenced business on January 1, 1915, ho. should furnish a return for the year ending December 31, 1915 (if he has not already done so), and a- statement of assets and liabilities as at January 1, 1915. Where annual balance-sheets and profit and loss accounts have been prepared, a copy of the same will be accepted in lieu of tho aforementioned returns and statements. In cases where the taxpayer has furnished all the. returns and statements .required he need only notify the- Commissioner of his election. Every taxpayer who has derived excess profits is required to notify the Commissioner of his election as to standard income. Forms, of return, notification of election, and statement of assets and liabilities, will shortly be obtainable at all postal money order offices in the Dominion. In addition to tho ordinary income tax, the Finance Act, 1916, provides for a special tax on all assessable income over £300. Up to £900 the rate is 2. per cent. (6d in the £). Over £900 the rate is 5 per cent. (Is in the £) —e.g., (1) Jf a taxpayer has an assessable income of £500 he will pay on £200 at 6d in the £," equals £5; (2) If a taxpayer has an assessable income of £1201, ho will pay on £901 at Is in the £, equals £45 Is. AA'herc excess profits duty is payable, the duty is allowed as a deduction in arriving at the taxable balance for ordinary income tax, and also for special income tax." The following is a typical assessment: A taxpayers assessable income for tho income year is £1200 and his standard income is £900. lie pays £40 per annum in life insurance premiums, and owns his business premises of which the Government valuation'is £2000. £ s d Excess Profits Duty: — Assessable income, £1200; standard income, £900; excess profits, £300 — Duty afc 45 per cent 135 0 0 Special Income Tax: — Assessable. i n <*,o m c, £1200; less £300 and excess profits duty £135, £435; taxable balance, £765 —£705 at 6d in- the £ 19 2 G Ordinary Income Tax: — Assessable inco m c, £1200; less excess profits duty £135, special (exemptions £300, life insurance premiums £40, 5 per cent. on Government valuation busi nc s s premises (£2000), £100; £575—Taxable balance, £625 at 7 11-10 din £ 20 0.4 Super tax, 33_ per cent. - 6 13 5 Total tax £180 16 3 By reason of the special exemptions being deductible in arriving at the ordinary income tax and not in arriving at,the other duties a taxpayer may bo liable for the latter-and not for the former. That is: A taxpayer has an income of £400 and a standard income of £350. He pays £40 per annum in life insurance premiums and has two children under sixteen years of age dependent on him. His' assessment would be as follows: —■ £ s d Excess profits duty: — Assessable income £400, , standard income £350, excess profits £50, ditto duty 45 per cent. 22 10 0 Special Income Tax : — Assessable income, £400, less Lspecial exemption £300, less excess profits duty £22 10s, £322 10s, taxable balance £77 10s; £77 10s at 6d in the £ ... 1 18 9 Ordinary Graduated Income Tax: — Assessable income, £400, less excess profits duty £22 10s, special exemptions £300, life insurance premium £40, 2 children at £25, £50; £412 10s; taxable balance, nil. Total tax £24 8 9 In a similar way, after the excess profits duty is deducted, the balance may be under £300; consequently neither of the income taxes would be payable.