TAXATION BURDEN

Greymouth Evening Star, 29 May 1937, Page 12

TAXATION BURDEN

benefits must be paid for

Some excellent political medicine was administered the ActingPrime Minister and Minister of Education, Hon. P. Fraser, in addressing the New Zealand Educational Institute the other day, when he reminded listeners of the simple but largely unappreciated fact tnat public services have to be paid for, says a, statement by the Associated Chambers of Commerce of New Zealand. In view .of the fact that the Government increased taxation very heavily last year on top of greatly improved revenues from old taxes, it js highly gratifying to ' s'cc that it is now tempering with caution its expressions with regard to anv additional expenditure commitments anil is seeking to explain taxation in the only way in which it can be explained —namely, by pointing to Government expenditure.

In a nutshell, the Government undertook for 1936-37 an expenditure (excluding Unemployment Fund expenditure? and expenditure of _ loan money on public works) of £a.164,060 more than was spent in the previous year, and it necessarily aiianged that taxation should bring in an additional £4,460,000 over the previous year so as to meet that expenditure— the balance being made up by increased interest and other receipts. For 1936-37 net expenditure on education was advanced from £2,891,000 to £3,553,000 —an increase of £662,000, or 22 per cent, over the previous year; expenditure on all social services was advanced from £7,894,00u to £10,621,000— an increase of £2,727,000 or 34 per cent.; expenditine on the devedopment of primary and secondary industries was advanced from £1,021,000 to £1,424,000 —an increase of £403,000 or 39 per cent.; expenditure on defence was advanced from £1,014,000 to £1,283,000 an increase of £269,000, or 26 per etiic.; expenditure on law and order was advanced from £711,000 to £779,000 —an increase of £68,000, or 9 per cent.; expenditure on all other Government departments and general administration (excluding debt service and other permanent charges) was advanced from £1,624,742 to £3.246,782 —an increase of £1,622,040 or 99 per cent..

These .arc in the main heavy .increases. and it is very timely that the Acting-Prime. Minister should start reminding the people that as regards taxation and’ expenditure, they cannot eat the cake and have it, too. There is a limit to the amount of the national income which can safely be taken by taxation and applied to social benefits. All sorts of new public services, and extensions of existing services and benefits may be desirable, but can the country afford them? lu 1936-37, £9,228,926 had to go toward service of the public debt, while other permanent charges took another £4,555,234’, making a total of £13,784,000 —or 52 per cent, of the whole of the estimated revenue, from ordinary taxation —which had to be put aside before the Government could provide for domestic administration, or start distributing benefits.

TAXING HIGHER' INCOMES. It the Dominoin did not have such very large overseas commitments, then the present social services and general administration costs could be carried without taxation being so excessive and burdensome as it is today. But that £9,000/000 debt payment is on account o.£ the benefits the country has given itself in the past out of borrowed money, and what it has had it must pay lor. Notwithstanding, the country is still trying to go on living and spending as if it had never incurred a gross debt of £282,000,000 —and living'up to a past standard which was a false one because it was largely based on borrowed money, not income. It is an eloquent tact that on only three occasions in the history of New Zeland has a reduction in the gross public debt been effected during a financial year.

There are those who advocate that additional public services’ and benefits could be made possible by the simple process of taxing the higher incomes more heavily. However, examination reveals that there is no reservoir there. The_report of the 1924 Royal Commission on Land and Income Taxation, says: “Of the total individual assessable income of New Zealand, less than 11 per cent, is held in incomes of over £2OOO a year, and less than 11 per cent, in incomes of over £lO,OOO a year. Any system of income tax will have to obtain the bulk of its return where assessable income is—that is, from the incomes under £2OOO a year.’ By comparison, Government statistics show that, for the tax year 1935-36, only 4.8 per cent, of individual assessable income is new held in incomes of £20.00 and over, and only .OS per cent, in incomes of £9OOO and over. The truth is that wealth is distributed in New Zealand to a degree of evenness which is extraordinary. As lor companies, the rate of tax on company incomes was increased last year to the very heavy maximum of 7/6 in the .£l—and for the 1935-36 tax year companies paid 65 per cent, of the total yield from income tax.

“There is a point." says the Taxation Commission, "beyond which income tax upon individual incomes cannot be' pushed without reducing its productiveness through capital leaving the country. A rate inducing an inflow of capital would produce a larger revenue to the State than otherwise would be obtained.” Ways should therefore be sought for reducing taxation, not increasing it. The weight of taxation, as the Taxation Commission itself remarks, is most important, and it is essential in the interests of the future stability and prosperity of the Dominion that the weight ol taxation should be reduced as rapidly as possible.