INCOME TAX

Hokitika Guardian, 20 August 1927, Page 1

INCOME TAX

11A PH ASAP, D DISTRIBUTION. PENALISING THRIFT. 1 (By TAXPAYER.) “ For the convenience of honour- , able members I have printed as an appendix (Table No. 25) a comparative table, showing the scale of income tax in various countries, which makes it abundantly clear that our scale is a great deal lower than in the other states and countries shown in the list.” This is the wording of the concise paragraph in which the Minister of Finance in the Budget he submitted to the House of Representatives a fortnight ago drew the attention of members to a table lie had prepared purporting to show the rates of income tax levied in New Zealand, in four of the States of Australia and in Great Britain. The table sets out in due order the amount of taxation imposed in each of these countries upon incomes running from £4OO a year to Elo,oßo. It is claimed that in New Zealand the recipient of an income of C-100 a year pays i;•_> R’s (id: in Victoria, L'3 17s fid: in New South Wales, (Jo Ss !)d ; in (Queensland, E(> 11s 2d; in South Australia, £8 lis 3d. and in Great Britain £lO 17s Id. The corresponding payments u]xni incomes of £IO,OOO in the countries mentioned are stated as inflows:—New Zealand £2,171 os ; Victoria £2.2-17 : New South Wales £2.G-15 15s; Great Britain £2.950, and South Australia £2.080. The figures for the Australian States include the Commonwealth tax as well as the State tax. and there is no need to question the accuracy of either the units or the totals. That much may he conceded at once. All the same, there is a “catch” in the Minister’s table. HAPIIAZAB f) ASSESSMENT. The income tax collected in the Dominion last, year amounted to £3,442,21(1 and the .Minister estimates this year it will reach £3,4-12,21 (i. Of the total amount filli'v fiO per cent is paid by companies and the balance by Individuals. This means, of course, that many small and moderate investors hi companies pay at a much higher rate than do many individuals with incomes of several thousands a year. In all equity it is the size of the income, not

determine the rate at which it should ho taxed. But company taxation, as it exists in this country at, the present time, pays no heed at all to this cardinal principle. It takes its levy, usually the maximum of 4s Gd in the pound, from the company’s profits for the year and leaves the company, in effect, to collect the amount at the same rate from the individual shareholder whether iiis dividend be £lO or £IO,OOO, the princinple of graduation being entirely ignored. In the Australian States company taxation rests on a different basis, ft is fixed on a flat rate, varying from Is 4d in the pound in Victoria to 2s Gd in the pound in New South Wales, and the shareholders are left to pay the ordinary income tax on Hit dividends they actually receive. NO EQUITY OF SACRIFICE.

The Minister in the table he has prepared with a view to making it “abundantly clear that our scale of income is a great deal lower than in other States and countries shown in the list ” absolutely ignores tlio existence of the system of company taxation from which lie derives more than GO per cent of his income tax revenue. The accuracy of the figures lie does present, affecting less than 40 per cent of his revenue from this course, nVfead.v lias been acknowledged; but standing as they do they justify much less than half his contention. It cannot he the case tiuiL lie is unacquainted with the realities of tlio position, hut one if tempted to offer a simple illustration of the operation of the company tax for his serious consideration. A person enjoying an income of £IOO a year in New Zealand, one half earned by his own efforts and the other half derived from company investments, would pay £ls a year in income tax. A person under the same conditions in Victoria would pay £27 3s; in South Australia, £27 lfis 3d ; in Queensland, £3l los; and in New South Wales, £3B 10s. On doubling tlio income in equal proportions from the two sources mentioned (lie margins bet ween New Zealand and the Australian States would l/e lessened by the more generous allowances and the exemptions in tlio Dominion ; hut the figures still would fall very far short of upholding the Minister's content ions. The tax on the £BOO income in New Zealand would ho £92 12s Gd ; in Victoria, £7fi Ss 2d ; in South Australia, £B2 Gs 3d; in Queensland, £IOO

(is 9d ; and in New South Wales, £lO3 Is lid. MINISTER’S OWN CONFESSION. If any further indication of the inequitable operation of tho company tax were required it would bo supplied by the Hon. Downie Stewart’s own brief allusion to tho subject in tho Budget. “The 1924 Commission,” the Minister said, “ recommended that data be obtained relative to an important change in the basis of company taxation. This information has now been obtained and examined, and it appears that a complete change would involve a loss of revenue of about £1,000,000 per annum. For fiscal reasons, therefore, apart from other considerations, the proposal can,, not he entertained at present.” This surely is an admission that many people wlio have invested their money with companies in this country are hearing a very heavy load of taxation which should be borne by the whole community in equitable proportion. As a matter of expediency as well as a matter of justice it is of tlio first importance that this pernicious discrimination should bo discontinued. The principle underlying the company tax as it persists in New Zealand has been, roundly denounced by all the parties at Home. Conservative, Liberal and Labour alike, and the only conceivable excuse for its retention here is that it saves the Taxation Department a deni of trouble. The suggestion that the “change over” from company taxation to individual taxation would necessarily involve the country in a loss of £1,000,000 is utterly unfounded. Tlio Commission of 1924, whose report was quoted by Mr Stewart in tho Budget, pointed out specifically how any loss of revenue could he avoided in the adjustment of taxation to the needs of the country.