TAXATION

Hawke's Bay Tribune, Volume XVIII, Issue 201, 8 August 1928, Page 7

TAXATION

NOT UNDULY HEAVY IN N.Z.

REDUCTION AT PRESENT IMPRACTICABLE.

MINISTER CONFIDENT OF THE FUTURE.

Dealing with the question of taxa tion m the course of his Financial Statement presented in the House of Representatives last evening, the Minister of Finance, the Hon. W. Downie Stewart, said:—

‘‘On questions of taxation and its incidence I endeavour to give careful consideration to the various views and criticisms put forward by chambers of commerce, farmers’ unions, and other organisations whose members are brought into close and constant contact with the effect of taxation on business and enterprise. During the recess I discussed publicly the allegation that taxation in New Zealand is unduly heavy. I contend that, jn comparison with other countries, this is not ao, except in the cases I shall mention hereafter. In my opinion, it is fallacious to divide the total tax revenue by the population, and draw my inference thareirom as to whether taxation per head is high or low. We have a large Customs revenue in New Zealand, but Customs taxation is not highin fact, our rates of Customs taxation are moderate compared with most countries. The large revenue is due to large importations, and not to high rates of duty, “Turning to direct taxation, ths income-tax on the individual in New Zealand is, admittedly, one of the lowest in the w-orld. On the other hand, the company income-tax is high, and I am of opinion that when the state of national revenue warrants a general reduction in taxation this fact should not be lost sight of. LAND TAX. “The graduated land-tax is high, but that is for the express purpose of preventing aggregation and enforcing subdivision. In other respects, however, the land-tax is by no means burdensome, as is evidenced, by the fact that 55,000 farmers out of 80,000 pay none at all. In one respect the graduated land-tax often operates harshly—namely, where a business has branches in many urban centres. All its sites are aggregated for land-tax, although there is no real aggregation, and in each centre that business has to compete with local rivals who pay no graduated land-tax.

“But in the two chief sources of revenue, which are also the ones most frequently criticised—namely, Customs and income-tax (apart from company tax)—in my opinion, taxation in New Zealand is low compared with most countries at a similar stage of development. The concessions of Customs duties last year represented a very large sum, affecting items of household use, such as crockery, china, linen, linoleums, cotton goods, and other items. In addition to this, the duty on corrugated iron and British-made silks was removed. Concessions were also made on various classes of industrial machinery and appliances. From the Customs returns during the first few months of this year it would appear that the effect of these concessions in depressing the revenue has been more marked than was anticipated ; in fact, there has been a heavy fall in the revenue.

“It must be remembered that, so far, not only has the revenue from Customs fallen substantially, but re ceipts from income-tax are estimated to show relatively little increase over last year; and, therefore, the improved conditions tn trade and commerce will not reflect themselves to the extent that might be expected in this year’s public finances. The liabilities on account of unemployment have also to be taken into account.

“I agree with those who contend that taxation-reduction is one effective method of checking inordinate demands for more expenditure by the Government; but even after the utmost curtailment of departmental estimates and refusing many urgent and reasonable public requests for further- expenditure, I can find no sufficient margin that would render a tax-reduction for this year either practicable or safe.

"On a review of the whole position, I am convinced that we may look forward with confidence to increasing prosperity. That prosperity will reflect itself in the public revenues. These increased revenues should enable a reduction in taxatlbn to be made in the near future.

NET CHARGES ON TAXPAYER.

“The 1926 Budget contained a statement setting out the net charges on taxation for the various services provided for ou of the Consolidated Fund in 1925-26, compared with the charges in 1914, after the figures for the latter had been adjusted to a comparable basis. Bringing the table up to date the allocation per head of the taxation receipts for 192728, amounting to £16,484,788, compare as follows :— Allocation of Taxation Receipts per Head of Mean Population. 1913-14. (Adjusted to a 1927-28. comparable basis).

“In the first place, it will be noticed that war pensions and wardebt charges absorb about a third of the present taxation receipts, and account for the whole of the increase in the taxation burden since 1914. Relief can only be obtained by repayment of the war debt, hence my anxiety to concentrate oil this matter. As already stated, we have paid (Continued op foot next column.)

off about £10,000,000 in six years. “Social services, including health and hospitals, pensions and education, absorb at least another onethird of the State’s annual revenue from taxation. These services must expand automatically as the population grows, and, except in so far as the national wealth grows proportionately, further extensions of these services can only be met by diving deeper into the pockets of taxpayers. “The remaining third of the taxation receipts is expended on ordinary debt charges, defence, and general and administrative charges. The relative burden of these items has decreased by £1 per head in comparison with 1914. “It was advocated by the late Lord Oxford and others in England that the Treasury should ration the Departments of State; in other words, should decide the maximum revenue to be raised and apportion it as equitably as possible. To a great extent this is already done in New Zealand, but if we are to call a halt in the growth of national expenditure, are wa to tell the Education Department and the school dental services and other similar beneficent activities that they are not to expand? Ido no think this is the wish of the public or the taxpayers. All that they ask of the Government is to see that these services are efficiently and economically administered. NO PROMISES OF GREAT ECONOMIES.

“I am therefore averse to making any promises of great economies, as I cannot see how any substantial savings can be effected while the demand for increased social services is so insistent. It is not the extravagance of the Government that is at fault, but the almost universal elief that the resources of the Treasury are bottomless. For example, there is a widespread demand for invalidity and pension -insurance schemes, and these have the strong sympathy of the Government. Rut it has often been pointed out that a wise expenditure on such social services should follow a revival of national prosperity, and not, precede it. Otherwise the country, is being made to spend tqoney which does not exist within its current resources, and this can result only in an increased burden of debt or taxation, and an aggravation of the position which such expenditure is mistakenly designed to remedy. For this reason the Government has been compelled to postpone consideration of invaldity insurance this year, as the excellent recovery in Dominion tppde and finance is not yet reflected in the public revenues.’’.

£ s. d. £ s. d. War tensions and war* lebt charges 3 7 10 Other debt charges 1 17 8 i 7 8 Social services (health and hospitals, pensions, and education) . 2 16 6' 4 2 8 Defence (1 a n d, sea, and air) .. 0 14 5 0 14 8 Other charges (general and administrative) .. 2 3 7 1 13 1 Surplus for year 0 10 9 0 2 6 8 2 6 11 8 6