ADDITIONAL TAXATION

Hawera Star, Volume LII, 28 January 1933, Page 5

ADDITIONAL TAXATION

Vr Forecast of Minister SUM OF £2,400,000 SOUGHT REDUCING BUDGET DEFICIT DESIRED SAFETY MARGIN (Government Memorandum.) WELLINGTON, Jan. 27. “To bring the prospective deficiency down to, say, what may be regarded as a safe amount, I am afraid there will be no alternative but to have further recourse to additional taxation,” stated the Minister of Finance (the Rt. Hon. J. G. Coates) in the course of his statement to the House of Representatives to-day. “Details of this cannot be given at present as the proposals have not yet been finalised, but J. think it will be necessary to find ways and means of raising up to £2,400,000, which with the other items X have mentioned will be sufficient to bring the deficit down to about £4,500,000. This will mean increasing our floating debt by that amount, but against that it should not be overlooked that the expenditure will include provision for £1,400,000 under the statutory debt repayment scheme. “This will mean that- the net increase in .debt as a result of the prospective shortage will not be much in excess of

£3,000,000, which amount may be considered as safe. That is to say, it. will Jk not be large enough to in any way endanger the financial stability ol the country, which must be safeguarded at all, costs. “The Government has felt obliged m the general interest of the Dominion to take a course of action of an unprecedented character. This has been done with a clear realisation of the implications and of the difficulties in the way. We are confident that the country* will recognise as the days pass that the decision made is amply justified. “Tho various proposals outlined wifi for the most part accentuate rather than relieve the budgetary position, but talcing a broader view it cannot be gain-said that if we fail to take steps to enable out primary industries to cany on and to maintain a high state of efficiency our budgetary position will before long be still more seriously affected. Adready the shrinkage in the national income has been such, as seriously to diminish the taxable capacity of the country. EXCHANGE RATE JUSTIFIED “A justification of the increased..exchange rate- from the viewpoint of tho Government’s Budget is that the increase which this action should produce in our national income as measured in New- Zealand money must later strengthen also, our taxable capacity. The budgetary situation for the current financial year may be regarded as satisfactory in that in general the estimated results for the year will be fairly closely realised. The* position will be reviewed in more detail later when the figures tor the first nine months of the year have been audited and are available for publication. In the meantime X say that our expectation is that with the utilisation of reserves amounting to £2,500,000 the year will close with a deficit in the vicinity of £700,000. V— “For the next financial year, if the i revenue and the expenditure were the same as i-s now anticipated for this year, w© would, of course, come out with a deficit of a similar amount. Unfortunately our problem is not as simple as that, and to obtain the prospective shortage we Ii;lv-o ix? add t>o t-li is. £/00,000 the further anticipated shrinkages in the revenue, and any unavoidable increases in expenditure. “While the raising of the exchange rates will be of immediate benefit to the primary producers, it will be some time before the beneficial reaction can be felt by the rest of the community or be reflected in the Budget. In fact, it is anticipated that the immediate effect on the Budget will be an adverse one pfmdmg the time when business generally can be adjusted to the changed conditions. Accordingly, so far as next financial year is concerned, it is considered advisable to allow for a further falling off in revenue, and particularly in Customs revenue. “In addition to the effects-of the increase in the exchange rates and the other proposals' which I have already outlined, the revenue would ' inevitably have been further affected by the continuance of the slump conditions, the effects tending to be cumulative. In addition, in estimating the customs revenue we have also to allow for the fact that the concessions given following the Ottawa. Conference will be operative for tihe full year. Apart from* all these special considerations the difficulty of forecasting the budgetary position for 1933-34 is increased by many uncertain factors over which we have no control —for instance, the trend of overseas prices for primary products—and any steps that may be taken following the world economic conference mav "materially affect our estimates.”