FRAME'S FINANCIAL TROUBLES

Lake Wakatip Mail, Issue 3717, 2 November 1926, Page 7

FRAME'S FINANCIAL TROUBLES

HCW THE PEOPLE EVADE TAXATION France presents the. anomalous spectacle of a wealthy country on the verge of bankruptcy. Business is thriving, am! the farmers and peasants, who represent bs per cent, of the population, are remarkably prosperous. But the industrial workers and the middle classes in the towns have been impoverished by the high cost of living, wbicli is now nearly Jive times greater than before the war. Despite /ever-increasing taxation to balance the national budget, q has never been balanced for the past ten years, because the continuous fail of the franc increases national expenditure and lessens i be value of the revenue collected. The Bank of France has a gold leserve ol I J(),!.'0i),()(.lU, wbicli is almost as large as t.be gold reserve of Great Britain in the bands of the Bank of England; but France Ims not been able to stabilise her currency and place if on a gold basis. A solmd monetary policy which inspired confidence at home and abroad would enable this to be done, but this confidence lias been lacking. The main causes oi the financial I roubles wbicli confront France are well known. in the first place the French people, misled by their statesmen, believed tbai Hie cost of the war could be extracted Irom Germany. Successive Governments in France failed to impose sufficient taxation to balance the Budget after Hie war ended, became they believed that the deficits would soon be wiped out by reparations from Germany. It was particularly repugnant to national feeling Unit Hie cost of restoiing the devastated areas of France, which German armies had occupied should he paid by victorious France. Therefore no provision was made to meet by increased taxation the interest on the large loans raised for the purpose of restoring these areas. When at length it was realised that Hie expectation of obtaining a bilge indemnity from Germany was illusory, French political parties quarrelled among themselves as to which section of the people should hear the greater share ol the additional taxation necessary to balance the Budget. During the past two years there has been a bewildering succession of Governments in France, because no Government inis been able to secure the support of a parliamentary majority for its financial policy. In the meanlime the franc has continued to fall, and the financial situation has become more acute. A few weeks ago, when lb.-; country seemed about to plunge into 1 be abyss of bankruptcy, M. Poincare tormed a ■ Government composed of all parties in the expectation that they would sink their differences and combine for the purpose of saving the country from rum. It remains to he seen whether the realisation of the national danger is sufficiently acute to keep all parlies united In an effort to place tlie finances of the nation on a sound looting, in any ease tin’s will be a long and difficult task, and will involve harilsiiips and sacrifices on Hie, nation as a whole. But differences among French p<’ : - lii'itl groups arc only one of the in n causes that have brought the nation •<> the verge of bankrnptiy. AnoF r cause is that no Frenchman will pay his taxes if lie can possibly avoid doing so. The French have become a nation of {ax dodgers. They have an intense love of country, which has won for them the reputation of being the most patriotic people in Lite world. Their patriotism was expressed during four years of colossal conflict in deeds of heroism that are unsurpassed in the annals of history. But though the French have always been willing to shed their blood to save their country from the enemy, they are not willing to pay taxes to save it from ruin. The French icmperaimsnt is decidedly secretive in money matters. The average Frenchman due- not keep a banking account because be dislikes the idea of a banker knowing bow much be caiiis. am' bow much he is worth. The average Frenchman, and particnlaily Hie French fanner and peasant, I keeps bis money and securities hidden in his house—in a box under the bed, in a bole in the mattress, or under a hoard in the floor. Because of the Frenchman’s secrei ivcncss in money matters, the income tax lias always been unpopular in France. The Frenchman bates the idea ol Hie tax collector or any other Government official knowing what lie earns and what be is worth. For this reason France has always favored indirect taxation instead of the income tax. But the necessity ol heavy taxation to meet Hie cost ol the war eventually compelled the Government to tax incomes. But the Government, knowing the unpopularity of such a tax, has provided facilities for its wholesale evasion. M. Briat.d, during one of his recent terms as Prime Minister, complained that. although there are ofil.OUO privately-owned motor cars in France, only 205t,7.!7 persons filled in income tax returns showing incomes in excess of lit).dUO francs a year. At the present lini.c, owing to the deprocia- ( Hon oi the iranc, an income of 150,000 francs is less than £2OO. The reason why wholesale evasion or income tax is possible is that in the case of non-commcrcial professions tiie tax collector lias no power to examine Hie tax;layer’s books. The lawyer, the doctor, and Hie sharebroker arc protected by law from producing their books. The tax collector can ask to be allowed to examine the books, lint the laxpaver can refuse, on flic ground 11 1 a I examination of bis books would reveal snnel iiing about the affairs of hi., clients, ami therefore would be a. violation of the etiquette ol his profession. A spceial correspondent ol the London ' .Morning IfiM. who has been louring France lor I he purpose ol invesligaiing the cause of France’s i i 1 1 a 111 - i ; ■ I Iron hies, writes; “ Men j 11 mm coiimieicia 1 prolessions are expected to make a return once a year ~| i heir earnings in the preceding war. fill i In v seldom declare higher ,i ~11! Hian i be most bumble work- ,,!■ <; < • \ i ■ r i; 11 ic 11 ( servant, despite ill,. 1. licit (bey have high rents to ..a! I bat I bey keep servants, and ■ •ciieralß ou n a motor car. For Hie war !I>2l nilv eleven doctors in (be ■ ~ i Paris declared earnings of pH),non franc', and in nearly ~ase Hieir declarations should Pave’ multiplied by a high figure ~, make Hiem accurate. To make an ex a m pie which proves that these taxes . in , ..,) | ol v paid 'voluntarily, a doctor ~.i v ji:., a rent of Id. ooo francs, and ; nci si-cvanis and a car, can . . 1 a a I. a a I rear's earnings ot 3b,- (■(,.) pain in ali'f.' the lax collector, w rn-i iot - be reall \ earns at least l.’iiinni! francs a year. Due of I Im well ■ known Baris lawyers

declared last year under 80,000 francs, whereas it is no secret that he is paid a. minimum of 40,000 francs for an important !aw‘snit, and earns on an average rather more than 1,500,000 francs a year. Exactly the same remarks apply to tlie medical profession, and there have been some startling revelations lately in this respect. A certain Paris doctor declared about 50.000 francs for his year’s earnings. The local tax collector had a relation who was operated on by this doctor during the preceding year. The patient paid 25.000 I nines for the operation. It was thcretorc «piite obvious that, as this doctor had carried out at least fifty operations during the year, the figure he returned was very far from being accurate.”

France is a country of small landholders, and more than half the population is engaged in agricultural par- ! suits. Therefore every French Government takes tender care of the man on the land, because of the voting strength of the agricultural industry. The farmer pays three forms of taxes, two of which are based on the rental value of the land he owns, and the third on the earnings of himself and his family. But since 1912 land values have been only once increased officially for taxation purposes, tins increase being 75 per coni, in 1925. But the value of land has increased enormously in comparison with the value ol the frane, which has been falling continuously. At the present time land values are about nine times greater than in 1912. The taxation of land is on a sliding scale, but in most cases it is below 5 per cent, of the annual rental value. Although the agricultural classes comprise 58 per cent, of the population, they contribute only onehundredth part of the revenue of the country derived from taxation. The small trader also is almost exempt from taxation. Any owner ol a business whose annual turnover is less than 200,000 francs a year is taxed on what he earned in 192-1. 'As the Government officials have no means ot ascertaining what he earned in 1921, the taxpayer assesses himself at an absurdly low figure. With the professional classes evading taxation, and the agricultural classes and the small traders almost exempt, it follows that crushing taxation lias to ho imposed on the big industries. “The industrialist.” states the special correspondent of the ‘ Morning dost, “ is taxed to the hilt, and lias often to hand over from 80 to 90 per cent. of Ids profits to the Government .so that business becomes impossible. Ihe shopkeeper has also to pay heavy taxes, but be is able to pass it on to (he customer by increasing his prices. In fact lie is always increasing his prices in order to keep pace with the fall in the franc. . . To ji large extent the financial troubles of France are due to the fact that although income tax is imposed it is not collected, owing to the facilities provided for its evasion. If has been estimated that whereas the im-mne tax yields onlv. £50.000.000 a year, it would yield, if properly enforced. as much as the income tax in Great fintain. which brings to the national Treasury over .£500.01 ifl.ooo a \eai.