DAIRY COMPANY TAXATION.

Hawera Star, Volume XLV, 1 June 1925, Page 4

DAIRY COMPANY TAXATION.

UNFORTENATE CONSEQUENCES

THE! CASE! FOR RELIEF. At a. recent meeting of the executive of the Federation, of ’Taranaki Co-oper-ative Dairy Companies- the question of income tax levied on co-operative dairy cjo-.npa.niev>' wa-s discussed. At the present time income tax i s levied on dairy companies; on the- following items-: (a.) Any balance of undivided income. ,(b) Any - inn retained from divisable income and credited to reserve account. (o) Interest paid on share capital. (el) Any amount of depreciation written off in excess of the allowance made by the commissioner.

The federation executive considers that the principle o>f exception of dairy farmers from income ta-x should extend to and include the operations of cooperative dairy factories, which do not exist for profit making jurposes, but simply carry out the function of manufacturing into- butter and cheese the dairy farmers-’ milk supply. The amount collected by means of the tax on co-operative dairy companies is nob large, but the opinion was expressed that the levying of the tax leads to a very serious result, namely, that co-operative dairy companies, in order to. avoid- the tax; pay out to '.their suppliers the. utmost limit and do not reserve from, the divisable income sufficient sums each year to. keep the dairy companies in a sound financial position, it is known that in many cases, where co-operative dairy companies are increasing their supply, the capital expenditure each year in buildings and plant to- cope with the extra supply is in excess of the capital ingathered from the shareholders. It will be seen therefore that unless sums are retained from the divisable income a.Tid placed to re*serve account to make up the discrepancy the "co-operative dairy companies gradually drift further into the debt of their particular banker. 4,5. has been- pointed out. the unsatisfactory position, j list 'Stated is in many cases a direct result of a misguided desire on the- part of the companies to avoid taxation by paying out to their suppliers each year the full amount of net income available.

Lb is known that dairy companies right throughout the country are aware of the unsatisfactory position; created by the levying of this tax, and t-lie federation executive considers that if representations were made an unanswerable case could be made out for the discontinuance of th.i.s. tax upon the principle of exemption of daily farmers from taxation which is already in operation. The executive got- into touch with the local members of Parliament, and the Prime Minister in reply stated tha,t the matter was being fully investigated. The assistance of the newly formed Wairara.pa, Federated Dairies was invited and it is expected that something might be done at next ses»sio.n of Parliament.