INCOME TAX

Greymouth Evening Star, 27 June 1934, Page 10

INCOME TAX

■HOW IT IS GATHERED. Some of the technicalities of the gathering of income tax in New Zealand were explained by the Commissioner of Taxes. Mr C. E. bowland, in ah address at a Ing gathering of members of the Auckland branch of the New Zealand Society of Accountants. ■Mr Dowland explained that the New Zealand system provided that whether a person derived his income from within New Zealand or not, provided it 'had not already been taxed in another part of the British Empire, it was taxable. Visitors to New Zealand who made an income here were taxed on it, this applying to such people as wrestlers, singers, ana evangelists, who were taxed on their takings, less travelling expenses. There was no definition of income in the Act, bu,t it was regarded literally as something that came in. Earned income embraced income from a business, of which he enumerated a number of interesting definitions which had been decided by lawsuits. Ji or instance, there was the “Capo Brandy’’ case, in which a number of people imported a single consignment’ of brandy sold it, and were deemed to be assessable on the profits. Business involved dealing or speculating in land—even if there was but one speculation—when the person made the purchase as a money-making idea. In respect to a single speculation, the Commissioner was subsequently questioned whether if a loss was made on the transaction it could be deducted. He replied adroitly: i “Yes, but you would have great diffi- : unity in proving that you bought it < with tbe intention of selling at a < loss.”

Income from farming was not taxI able unless the unimproved value of the land from which the nrofit was derived was £3OO or over. That did not. mean that land of over that value had to be individually owned. If it belonged to a partnership, then the partners were taxed. Live-stock Was treated as a floating asset, and profits made from the sale of stock were assessable. A club was not assessable if the income! and subscriptions were used for the benefit of members, but if the income was derived from outside sources then the club was treated as a business. Dealing with income from dividends, Mr Dowland said that the shareholder was not taxed, as the company paid tax, but the income was added to the earned income, to increase the taxable rate of it.

BOOKMAKERS’ RETURNS. Under the heading of assessable income was included that of a bookmaker. The Commissioner reminded his audience that whenever he spoke f of this subject he got the Government into trouble, for people would say that if the Department knew that these people existed and were carrying on an. illegitimate business tiie police ought to be informed so that they could be cleaned up. “All our information is confidential, and I could no more tell the police that a[ man was a bookmaker than I could fly,” he emphasised. There were a great number of bookmakers who

made returns and were taxed. A punter was not taxable on his profits but fortunately he could not deduct his losses.

i Dealing with deductible items, Mr Dow land stated that repairs made to business premises which were purchased were treated as part of the capital outlay, but repairs could be added to the purchase price and be included in the annual depreciation. Earthquake repairs had greatly worried Die Department. Legally the Department could not allow the making good of damage in the Murchison and Napier earthquakes. They were a special and not a normal loss. At Napier the amount obtained for temporary premises, when they were pulled down and sold, was allowed on the Basis of their value as discarded material.

jv/p Dowland then mentioned a. case which ho said was to he the subject ci' legal interpretation. That was where trustees borrowed money from the bank to pay duties. The point at issue was whether the interest on the borrowed money was a charge against tile income derived from the assets? Mr Dowland mentioned that the Department. was not compelled by law to semi out a demand to a taxpayer, tilt it had become an established custom, ami the taxpayer now expected a demand.

r l he Commissioner went, on to explain that he had almost arbitrary powers, and was able to call for any Looks and papers concerning a business, or go on the premises whenever be desired. The inspectors, he added, were considerate, and gave notice of any intended visit.

Dealing with the hardship section, -■the most popular one in rhe Act— Mr Dowland stated that serious hardship was not. what a man had lost but what he had left. In the .Napier earthquake, for instance a man lost £L>,OOO worth of shares and pleaded that he had only £5OOO left. T will have some of that,’ was my reply to him,” said Mr Dowland.