TRADE AND COMMERCE

Hawera Star, Volume XLVI, 21 August 1926, Page 6

TRADE AND COMMERCE

INTERNATIONAL DEPRESSION,

RESULT OF PERVERTED PATRIOTISM!.

Patriotism: is the. most respectable of jirejudices, and, when it stimulates its possessors to noble action in times of crisis, rises to the dignity of a splendid virtue. All the more- disastrous .are its effects when it warps -people’s minds into doing things which arei silly from a mistaken belief that they are conducive to the good of their country. When once this! process starts, it. is difficult to stop. , Argument, is unheeded, 'because anyone who attempts to .protest is thereby, convicted of -being unpatriotic and therefore out of court; and the only hope for a remedy is for the disease to' burn itself out, or to produce so much pain that, it kills- itself.

At the present moment perverted patriotism of this kind is largely responsible for the depression of international trade, which is holding back the recovery of Europe, and most of the other economic areas, on the prosperity of which we are all more or less dependent. The war made nearly everybody patriotic in the countries that were directly or indirectly (affected; during the war period this patriotism was generally magnificent, especially in the early period, before the Governments, but inflationary finance, had encouraged those who stayed at home to enrich themselves at tire expense of those who were facing death and incredible hardships at- the front. Since the- war patriotism has degenerated from the splendid spirit which made men willing to give life and fortune for tlieir country into a chattering bogey which tells us that- it is wrong to buy foreign goods, and so prevents us from getting back to tlr-e old system by which the interchange of goods between nations enriched all the -countries of the. earth. Even before the war the interua'tional division of labour was obstructed! by plenty of obstacles, but their number and obstruct-iveness have been enormously increased by the craving for economic -self-efficiency developed •by the new States 1 that have come into being-, -and by the increased anxiety, of the older States to tie trade up in red tape band®, so that it may . run, not along the through which it would bo directed by the convenience of producers and consumers, but- into little stagnant pools, dug by politicians -and bureaucrats. When we consider what a -disastrous -muddle these well meaning gentlemen have lately made of their real job—which is providing us with peacei abroad ,and security and well-ordered life at home — their -increased attention to commercial questions does not promise hopefully for the growth of wealth and prosperity. Wealth, and prosperity have been shown, both iby theory and practical •experience., to depend largely on getting things made by the people -best qualified to produce- them. This statement is so platitudinous that one would hesitate to waste paper •by repeating it were it not' that it is ignored bv the present policy of. most nations ‘with regard to foreign trade. The principle which it sets forth is followed; as a matter of course by every individual. , -Some few people sometime® .try to- do things for themselves which could 1 be better done by others, usually paying heavily for the mistake. It is a common saying that a man who is his own doctor, has a fool for, liis patient, and it is still -more obvious that a man who is his own tailor, or builder, or plumber has a fool for his customer. The same principle applies with at least equal truth to- the nations, but is consistently ignored among them. Countries which used to buy, for example, textile goods fr.om -abroad now obstruct their entry by high Customs duties andl by the extension, of the vexatious- Customs formalities which are .almost equally obstructive, so tlia-t a textile industry, artificially fostered, and consequently expensive and probably inefficient, may bo developed at home. The result is that- the local population pays high prices for an inferior article, and the goods which the) restricting country used formerly to export have more difficulty iir finding ,ai market. A few spoon-fed manufacturers make comfortable profits, the consumer—that is, the unfortunate man in the street, who is probably already fleeced to the bone by the tax-gatherer—has his cost of living screwed up, and the real staple industries of the country, which used to sell abroad 1 the goods that it was best qualified to produce, in -exchange for textiles, languish because their market is narrowed.

'Such a policy, carried to its present height, is patriotism gone’ made; and the delusion on which it is based has already appeared. This is the belief, which seems to be cherished by those who obstruct foreign trade, that- foreign goods come: in. to be given away and consequently cause unemployment. In fact, of course, every pennyworth of them lias to be paid for by an equivalent export, produced by the workers of the country which buys. When an Englishman buys foreign goods the foreign seller gets a sterling credit, and it is bound, ultimately (perhaps after travelling round the world in the exchange market), to be spent in England on something produced there. lie is thus giving employment at home just as much as if he bought British goods directly, and) at the same time, he is helping his- country’s export, trade, and, incidentally, increasing the volume of international trade .and so promoting the interests of the sorely depressed shipping and shipbuilding industries.

Fortunately, the policy of obstruction has its limits. America is preeminent among the. countries which put high duties on imported goods, and justifies her policy on the ground of the high standard of life enjoyed by her working classes, which would be imperilled)—so. it is argued—by the competition of cheap goods from Europe., Nevertheless, not only do imported 1 goods climb in over the- tariff wall, but thousands of American tourists flock every year to Europe, and spend there on travelling, hotel bills, and other forms of expenditure sums that are estimated l to aggregate over *IOO million pounds .a year.—Hartley Withers, in Christchurch Press.

INCOME TAX. EXPLAINED BY DEPARTMENTAL INSPECTOR. The formidable looking schedules issued by the Income Tax Department have been devised to elicit in the simplest form possible the information

sought by the department (says tlie Auckland Star). In addition there are explanatory notes, but the unfortunate net result As that taxpayers are. more bewildered than enlightened when they gaze upon the various sheets, with varied types of printing, and mysterious looking tabular forms which comprise the income tax form. With a view to clarifying many points in reg'ard to the payment of income tax, Air 11. H. Young, inspector of the department', recently delivered an address to members of the Karangaliape Road Business Men’s Promotion League. At the outset he emphasised that there was an obligation on the part of all wage or salary earners to send, in a return if their income exceeded £250 a .year, and upon .all persons in business whatever their income. The fact that a wage earner might not be liable for tax, or that tho operations of the business man had resulted in a loss did not affect this obligation.

“Income in it-s general application meant all money that, came in, but it did not include an increment to property. If a firm sold its business premises for a thousand pounds more than they had cost, tho increment thus secured was looked upon as an addition to his capital, not. as a portion of the profits, and was therefore not taxable. On the. other hand, if a company was reconstructed with a larger capital than before the increase in stock in trade was looked upon as profits that were taxable. Gratuities as such, were not subject, to tax, but tips to waiters had in England been held toi bo revenue received for services rendered, and similarly clergymen in New Zealand who received ivliat was known as Easter offerings were taxed upon those amounts, which were considered perquisities of office. Bonuses or other allowances made to- employees were taxable.. Income received from direct cultivation of land was non-taxable. This relieved tlie fanner, -but did not exempt from taxation persons who dealt in primary products, s-ueh as stock dealers; etc. Dividends from limited companies were exempt from taxation, although this information was sought for statistical purposes. It was sometimes thought that because the department disallowed items which were recognised! commercially as legitimate debits to as profit and loss account, they were adopting a pinpricking attitude for the purpose of securing a few extra, pounds, but this was not the- case. The officials were sinpply administering a clause of the Act. which followed on similar lines to those in operation in Victoria and in England. Thus legal expenses in buying a property, in floating new capital for a company., donations, the tax itself, though debited to profit and loss accounts, was considered by the department as a capital expenses, or a disposition of income,, and not an expense in earning income. Exceptionally heavy damage to business .premises, such as might be caused by a land-slide, -co-uldl not be wholly allowed! for in one year’s returns, as the" amount- thus represented was abnormal, and not an average annual loss. The position in regard to general depreciation and bad debts was detailed, and Air Young mentioned that losses sustained in an unfortunate speculation outside, a business men’s ordinary occupation was not a deductable item. Husband and wife arrangements- are keenly scrutinised by the department. Wages paid from one to the other - are not allowable as' expense items, a 114 the same remark applies in regard to interest on- money that may be loaned •from one to- the other.

.Where the taxpayer resides on his business premises it is necessary to disallow front business expenses a proportionate amount, of the rent and rates paid., Ait important point- emphasised by the speaker was that where a. person or firm had different, assessable sources of Income, loss from one source could be set off' against the profits obtained , in others during ther-same period. An important concession made in 1923 was that whereby a loss sustained over one business year c-ould be used as. a setoff against subsequnt profits during the ensuing three years. It may be added that- the rates of taxation this year are the same as for the previous term. BUSINESS IN U.S.A. Although domestic, trading conditions in the United States continue fairlv satisfactory a decrease in foreign’trade is causing Americans some anxiety- The exports for May totalled 356 million dollars, compared with 371 million dollars for May, 1925. Imports for the same month were 318 million ( \ dollars, 10 millions less than the fig I nre& for May. 1925. Commenting ’on . / the returns,' John Dunn, Son and Co., of New r York, state: — The volume of foreign trade for the month of May, 1926, declined sharply from that of the previous month bothas to. exports and imports. Owing to the very large ’ decrease in the value of imports, the balance of trade js again favourable to this country, which, has not been the case during anv previous month of the present year. Not since last July, excepting in the short month of has the value of exports been so low, and the volume of imports was the smallest since November,, 1924. The showing is most unsatisfactory from, all viewpoints, and statistics covering, the present month will be awaited with much interest. The value of exports was affected to some extent by lower prices for cotton; while, in the ease of imports. lower prices and smaller receipts of rubber must be considered as well as a sharp falling off in the quantities, of coffee, jute and burlap brought fnto this country. The international movement of gold during the month of May was of small proportions, exports having been some nine million dollars, while imports amounted to only about- three million dollars.