AN INCOME TAX DISPUTE.

Hawera & Normanby Star, Volume XLII, Issue 7380, 5 February 1902, Page 2

AN INCOME TAX DISPUTE.

The point in the dispute, referred to in a telegram , yesterday, between cne or mote persons and the Income Tax Department in referenda to taxing contributions to the Patriotic Fund is simple. The objector holds that having in response to an appeal from the Government of the colony, and in the spirit of a true patriot, given a sum of money to the fund referred to, he should be allowed to deduct such amount as an outgoing or expense of business and 80 escape taxation in respect of it. The Commissioner of Taxea say?, "No." The objector retorts, "A handsome and really liberal way of encouraging similar contributions." 11 The gibeg of the Germans," he says, " "will be mild compared with the gibes which will be levele d at you when this becomes known." Then the Commissioner explains — " Donations whether to the patriotic fund or any other fund, being a disposition of the income and not an expense incurred in its production, cannot by the provisions of the Assessment. Act be allowed as deductions." We would much rather support the taxpayer than the taxgatherer, but we are afraid the latter has the better of the argument in this case, tt is the income which is taxed, and the manner in which the income is subsequently spent has, it seems to us, little to do with the question of taxation. If people were taxed or let off according to the manner in which they disposed of their taxable income, very curious complications would soon arise. While on the subject, we may suggest other more vulnerable points of attack in respect of the income tax. For instance, the Tax Department, we gather, still levies taxation on the " profit " of co-operative dairy companies in breach of the principle of our taxing system which aims at taxing land but exempting from taxation the products of the land. It also presents the inconsistency of penalising co-operation in production which the Agricultural Department teaches is essential to the proper development of the export trade. If a man converts milk into butter and cheese on his own iarm he escapes a I tax which falls on him if he joins with others to do the converting at a faotory. So much for the farmer, The business man feels an injustice ! in the incidence of the income tax i when he finds that he has to pay on a profit which appears on his books, in a given year, but which through ! the fluctuations of trade may never be realised. A man using machinery is incensed when he finds that the Tax Department will allow him to deduct only 2| per cent for depreciation on machinery, whereas it is common knowledge that ■it is wholly inadequate. Another inequality is that if a man give a goodwill for a lease which is decreasing in value year by year as it runs out he is not allowed any deduction, though obviously the annual exhaustion of the goodwill is an expense of business just as rent is. These are points of more importance, we venture to think, than the questi6n which has been raised, because, as to donations, a man can at least protect himself by giving less, owing to the Income Tax he has to pay, whereas, from the other objectionable features there is no I escape.