INCOME TAX

Hawera Star, Volume XLVII, 2 September 1927, Page 5

INCOME TAX

ALTERING THE INCIDENCE GRADUATION RE-ADJUSTMENTS. MINISTER S EXPLANATION. I.UV TELEGRAPH—PRESS association.; WELLINGTON, Sept. 1. In moving tne second loading of the Land and income lax (annual) Rill, m the House ol Representatives toil lgnt, the Hon. W . Hmvnie Stewart said that except with -lespect to paragraph 3 ot part 2 of the schedule the iiill was m the same terms as the Annual 'taxing Act passed last session. the paragraph above referred to fixes rates of income tax payable on income derived otherwise than from debentures. In last year’s Act the minimum tax on such income- was fixed at 7cl in the £, and the maximum tax at 4s 6d in the £. Between these extremes a graduated -scale increased for every £1 of income was fixed. The present Bill preserves the same limits of 7d and 4s- Gd- respectively, but provides a series of finer graduations in the- .scale between those limits. In the Budget it was pointed out that the scale of income tax was not on a proper basis and that the increases made during the war and various subsequent decreases since 1921 had upset seriously the fairness of the graduation. Some incomes are actually paying a less rate now than they did liefore the war, while other incomes pay over 209 per cent more than pre-waT. The schedule has therefore been recast this year in order to put matters on a proper basis. It- has also boen necessary to -alt-er* the Land and Income Tax Act as well as the Annual Taxing Bill. As pointed •out in the explanatory' memorandum the minimum rate, of 7d in the £ at £3OO, and the maximum rate of 4js 6d in the £ at £B7OO, are still the same as last year. The regrading, therefore, does not impose any extra burden on the small man, nor does it in the meantime afford any relief to the individual or company on the higher grades, hut between these two a moreuniform graduation has been int-ro-dired in order to provide, for a. more equitable scale of taxation. The Minister had. no in ted 1 out recentIv in connection with land tax that of 85.000 farmers in New Zealand more than 59.000 paid no land tax at all. and in the same way as regards income- tax. The graduation became .so out of .step that the position is most inequitable, although the new scale does not make any alteration on incomes between £3OO and £4OO. COMPARISONS WITH ENGLAND. It is interesting to note that the assessable incomes returned in this class aggregate £7,197,140, yet when allowances and reductions have been made the net taxable balance left of this £7,000,000 is only £382,432, and income tax paid only amounts- to £10,656. Notwithstanding this- remarkable position- the proposed regrading does not affect the man with £4OO a year, who -still pays no extra, taxation. “If we take the next group between £4OO and £SOO, the a,ssessabe- income comes to over £5,000,000, and yet the exemptions- are -such that the taxable balance is reduced to £882,000, and the total collected amounts to £24.000,’’ continued the Minister. “Even here under the new scale the man with £450 .still pays no extra taxation. Again between £SOO and £6OO the assessable income is £3,500,000, and yet the taxable balance is- only £1,000,000, and the actual tax paid from the whole of this £3.500,000 is only £28,000. As the -scale* ascends, of course, the taxable balance more closely approximates to the assessable income until practically the whole of the assess abe incomeis taxable. “The new rates will affect -someclasses of income, but still leave them far behind what is paid in the Australian States. In fact, in most cases the increase is very .slight. For example, the man with £BOO a year and no children goes up from £25 to £2B. whereas- in Queensland lie- would lie paying £sl and in Engamd £65. If he has two children his tax goes up only about £2, and if he- lias three, children it goes up only about 30s. “The advantage of this regrading is that i-s a necessary' preliminary to any consideration of reductions- in taxation. Otherwise any attempt to reduce- taxation on the present regrading scale will only create still further anomalies. If it is suggested that the result of this regrading is to increase- taxation, my answer is that that is not. the object of the Bill, but merely- an incidental effect of it, and no one can suggest that it is fair or reasonable that some- classes should be- paying far more than prewar taxes while others are actually paying less. A further consideration- is that, this readjustment should- be considered in conjunction with a revision of the tariff, where I hope to effect concessions to a greater extent than anv incidental increases in reveiiue t.hat will result from this regrading of the income tax.”

The Minister then .proceeded to reply to a numbor of critics who had 1 questioned the wisdom of some of the details of his proposals. Mr. McCombs said, the Bill was very disappointing, .seeing that the Governmetn had promised year afteT year that there was to he a comprehensive readjustment of taxation. Our present system of company taxation resulted in a large number of tax-free, individuals, while at the same time we were seeking to get rid of tax-free debentures.

Mr, W. D. Lyisnar protested that the preference given to local body debentures was telling against the prosnect of the man on the land getting loans of necessary money.

Mr. M. J. Savage said thev were beginning at the wrong end. They were taking something from the. man at.the bottom instead of tackling the. man at the top. He advocated Setting up a parliamentary romjuittee to go into the o nest ion of taxation, ms they could do it better than any commission. The Bill was read a second time, and the House rose at. 1.25 a.m.