DIRECT OR INDIRECT?

Grey River Argus, 23 July 1926, Page 8

DIRECT OR INDIRECT?

Tin: QUESTION OF TAXATION. In his opening remarks on the Bud get, Mr 11. E. Holland (Leader of the Opposition) saiu:— We have liabilities, a very great portion of which has come to us from the I War and the post-war conditions, and! some of it as a direct result of the i Government’s policy. Some of it belongs to the past, and conies down to us in the ordinary way. Those liabili-l ties have to be met —we all recognise | that —and the only question is, by whom must the liabilities be met? Taxation must be imposed if they are to be met, because they can only be discharged, in the last analysis, through revenue procured by means of taxation, and, since taxation must be imposed, the further question again arises as to on whom shall the obligation be placed of paying the taxes. The business of Parliament should be to place this bur-, ilen on the shoulders of those best able to bear it. Those best able to carry the burden arc the wealthier citizens of New Zealand. May I remind the House—and the House has been reminded of it many times in the past — of the immense increase in the accumulated privately-owned wealth of this country since the immediate pre-war years. On a computation made covering the 1908-1914 period, in 19.14 our accumulated privately-owned wealth stood at 2851- millions, in round figures. In 1924, according to the latest figures which I have at hand, it stood at 794| millions —an increase of considerably over 500 millions during that period, with, of course, a correspondingly vast increase in the assessable incomes. There is no question about it that the wealth is here in New Zealand, and it is from that source the taxes must be

drawn. I think it is possible to show that the burden of taxation has not been placed, by the present Government, or by its predecessors of the Reform Party, on the shoulders of those best abjc to bear it. I shall endeavour to show that as I go along. I wish first to make some reference to the Public Debt, which, of course, is almost the central feature of the Budget. The Minister in his statement says: “By the repayment of the Public Debt Act, 1925, means are provided whereby the whole of the public debt, other than those portions for which separate sinking funds exist, will be extinguished in approximately sixty years from the time of coming under the Provisions of the Act.” May I remind the House that while the Minister makes that statement, this year our net increase in the public debt has been over £11,000,000, and if wc go on at that rate we shall probably have the Minister of Finance sixty years hence telling the people that in sixty years from that time the existing debts will be wiped out. He will probably have an accumulation of debt amounting to about £600,000,000 by then, judging by the rate at which we are proceeding now. Lot us look at the position in regard to the public debt. On March 31, 1926, the gross public debt was £238,855,478. May Ibe permitted to repeat what I mentioned in a previous debate with respect to the increase in the public debt since the Reform Party came into office. In 1912 the public debt stood at £84,353,913; to-day it

stands at the figures I have just mentioned. The war portion of the debt, if we include the money allocated for Discharged Soldiers’ Settlement, stands at £153,763,894. Eliminating the war debt, which, as I have said, included Discharged Soldiers’ Settlement money, the increase in 14 years, based on the budget figures, is £69,409,981, and wc arc in this position that it takes nearly £10,000,000 a year to provide interest and sinking fund charges. The Minister estimates next year’s revenue at about £24,000,000, so that on that basis it is taking nearly half’of one year’s revenue to pay the interest and sinking fund charges in connection with the national debt. Coming back to the past year, the budget shows that wc paid off loans amounting to £2,333,708, and have incurred additional debts amounting to £13,374,539, a net increase, as I have

said, of over £11,000,000. And then wc read in the budget: “In addition to the above transactions, securities to the amount of £5,266,476 were renewed, £453,250 converted, and £17,786,565, debentures and inscribed stock and £6,500,000 Treasury bills were redeemed, in each case by the issue of new. securities of an equal face value.” We have paid some of our debts by borrowing some more money.

An Hon Member: Like Micawber. Mr Holland: Micawber could never have risen to the occasion like the present Government have done in this connection. In addition we are told that the conversion scheme inaugurated in September, 1922, by which lenders were given the opportunity of converting free-of-incomc tax securities into in scribed stock not free of income tax has not been rushed. It is set forth in the Budget that the conversion scheme has only been availed of to the extent of £3,128,450, leaving a total of £38,307,334 still under the operation of the intercst-frce-of-income-tax principle. And there is a good reason why that scheme has not been rushed, because of the past policy of the Govern; ment. May I say here that from whatever attack I make in this connection 1 exonerate the Minister of Mines and Pensions. 1 recollect with a good deal of gratitude that when we made an allnight fight on the Budget against this principle, he, with some other members, assisted the Labour Party against this proposal of a Tory and reactionary Government. An Hon Member: Who did that? Mr Holland: The honourable the Minister of Mines and Pensions. He was the one member of the Government Party who was far-seeing at that particular time, as far as T remember, and his example is a very good one for the honourable member who has just interjected to follow. As T was saying, there was a good reason for the conversion scheme not being rushed. Hon members will recollect that when the Union Steamship Company loaned its £250,000 under the interest-free-of-in- ]. come-tax principle, it was £5OOO a year - l-Bler off than if it had loaned its.

money at 5 per cent undci the pre-war conditions; and, the £250,000 which 'the Company loaned we had previously made it a present of, as I think the honourable member for Invercargill will say when he speaks. Sir Joseph Ward: Oh, no.

Mr Holland: I am surprised to hear the Rt. hon. gentleman say that, because I have a recollection that when he, as Minister of Finance in the National Government, was being pressed to take over the company’s fleet, he said that you could build a better fleet than that for a million pounds; and later a colleague of his told a deputa tion that up to March 31st, 1917, we had paid the Union Company £3,353,000 for the use—for the mere loan—of some of the boats which the Rt. hon. gentleman had said were not worth £1,000,000. However, that by the way. Coming back to the paragraph I was quoting, the Finance Minister says:— “This sum, together with renewals and redemptions, has accounted for a reduction of £13,426,071, the total outstanding at the 31st March, 1926, be ing £38,307,334.” This means that we arc paying interest amounting to, at least which is free of income tax. That frec-of-income-tax principle is the most pernicious that was ever introduced into the finance system of any country. I want to ask the Minister of Finance, or the Postmaster-General when he is replying to me, to say what is the amount of revenue that is being lost because of this system. 1 think the House and the Country are entitled to know that. I want to ask the Finance Minister, or some other Minister, to enlighten us to that extent. Again, will cither the Minister of Finance or the honourable gentleman who will follow me tell us what amount was made the subject of redemption, and what amount was renewed, and on what terms were the renewals and redemptions made, particularly the renewals. The Minister of Finance, in his statement, makes reference to the maturing loans. He also refers to the increased price at which fresh capital can only be obtained. He says: “It must not be forgotten that a large part of the loan capital raised in the. past at low rates will fall due in the next few years and have to be renewed at current rates of interest.” The amount that will fall due within the next seven years —-Jn the 1927-1933 period—will be 94A millions in round figures. This means that 40 per cent of the total of our indebtedness will fall due within the next seven years, and wc are entitled to ask, What is the Finance Minister going to do about it? What arc the Government going to do about it? Mr Lysnar: What would you do about it?

Mr Holland: Unfortunately for the honourable gentleman it is not what J 1 would do about it, because I have not , any opportunity to do anything about . it. What we want to know is, What arc the Government going to do about it? I ask the Minister, Does he propose as each loan falls due to rush oil to the London market to borrow sufficient money at heavily increased rates of interest to pay off the matured debt? We have no definite statement ■ about it at present. But what is clear is that the Government are not balancing the ledger at the present. It ’ seems to me that this Cabin ea is like an amazing company bankrupt Micawbers whom an avalanche of debt threatens to overwhelm and who can only think of opposing a barrage ol newly-written I.O.U’s to the aval , an oho. That is the policy they are following at the prcseih time. If they resolved upon a wholesale borrowing policy ± would ask the Minister to tell us to what extent will the necessary charges be a drain on the annual rc venue. Again, will not the fact of this drain make increased taxation inevit-| able? It is obvious that if we inereas' our interest bill wc render increased taxation inevitable, and if increased taxation becomes inevitable the qncs /tion that has to he faced is from what /form is that taxation going to takei Will the Minister have recourse to di ’root taxation or indirect taxation? •