TAXATION THEORIES AND FACTS.

Lyttelton Times, Volume CXVII, Issue 17287, 30 September 1916, Page 8

TAXATION THEORIES AND FACTS.

Wf, venture to hope that- Dr Right’s review, wliicU will be found on another page, of letters that have appeared in the “Lyttelton Times” on the' tariff question will be helpful to all students of this very largo and important subject. Dr ,Right has not taken sides. He has devoted himself to an impartial review of tho assertions and arguments advanced by tho various correspondents and has crystallised the trend of the discussion in a very able manner. As a professor of economics Dr light was bound to discover some defective argument in the mass of- material under review, and we think the correspondents and tho public will appreciate the necessity which the reviewer emphasises of clear thinking and deductive reasoning. It is not enough to say that this or that State is prosperous under frectrade while another with a protective policy has a larger proportion of indigent people—or vice versa. Arguments of that sort arc sound only if adequate allowance is made for other circumstances • and 5 factors. Every country experiences fluctuations in commercial activity, which frequently are very acute, without any change jin its fiscal policy, and if a good' period in ono case is taken casually against a bad period in another and the contrast held up as a test of fiscal theories,' the result may be nothing but confusion. We think it would he advantageous if the participants in this highly interesting controversy could agree upon a common basis of discussion. Is the one side endeavouring to support protection as it exists in New Zealand or advocating higher protection? And if the latter, how much higher? Do the writers on tho other side want the Customs tariff abolished, or only the protective riuiies, or are they rather protesting against further increases? Wc suppose the proposition is difficult, but if •the two groups of disputants would give their respective definitions of a “ scientific ” tariff the futuro discussion of tho subject would be clarified and simplified. Tho present tariff is unscientific enough in all conscience, and ' tho departmental “ decisions ” that are periodically announced must bo as harassing to business people as they are unintelligible to tho general public. Apart altogether from the merits or demerits of protection, we arc confident that the Customs tariff is in great n.eed of amendment both in detail and principle. Wo do not like indirect taxation, for several reasons. One is that it invariably takes very much more from tho community than reaches the'Treasury, thus violating one of the first rules of scientific taxation. Another reason is that the taxpayer does not .realise how, when and what lie is paying, which induces lpm to take a duller interest in the subject than is desirable, for tlie purposes of sound national government. A further and more cogent objection is that indirect taxes levy a toll upon income in inverse ratio to the ability of the individual to pay. . Take the tobacco tax, for example. e will suppose a man with £IOO a year income •and ono with £2OOO a year each contributes a shilling a. week to the national revenue through this tax. The poor man’s contribution is equal, to an income tax of over sixpence in the pound; the rich man, who should pay relatively more, gets off at a fraction

over a farthing in tho pound. Wo take the tobacco tax merely as on illustration of the principle involved, and examples could easily be multiplied, but it is not out of place to mention that in 1914, the latest period for which analysis is given in tho Year Book, the duties collected on tobacco were in the neighbourhood qf £600,000 and accounted for nearly a fifth of tho total Customs revenue. Wo may bo t-old that tobacco is a luxury and ought therefore to bo taxed. People who advocate the taxation of luxuries aro very numinous and generally honest. They base thoir case on ethics and urge that people who can afford to live expensively ought to bo taxed upon their luxuries so that tho requirements of tho masses may bo eased of taxation. But this, in our opinion, is a popular fallacy. In any case, such a. scheme affects only imported luxuries, and as to these it tends to put them out of the reach of working peoplo. If an individual ,should have his requirements? or his luxuries, taxed through file Customs according to his income, that is a complete confcsson that the income tax schedules aro awry; and incidentally tho flat tax, working out as we have illustrated in respect of tobacco, is a fraud if regarded as a luxury tax, because it hits the poor man hard and makes no impression upon tho rich man's income. Protection or freetrado apart', a sensible policy would enormously reduce the volume of indirect- taxation and make good tho deficiency in’ the revenue by direct means, according to a man’s incomo and also according to what ho has left after the tax-collector has finished with him. Wo have been led into this digression by Dr Eight’s, plea for closer study of the subject of taxation, which is suro to become in the near future one of the most vital of political issues.