BUDGET PROSPECTS

Manawatu Standard, Volume LIX, Issue 205, 31 July 1939, Page 8

BUDGET PROSPECTS

heavier taxes expected. CLOSING THE GAP. WELLINGTON, July 31. Increased taxation on higher mcome levels is expected to be announced in this year's Budget, winch will be presented in the House ot Representatives to-morrow night. Since the all-round increases made bj the Labour Government during its hrst year of office, the rates of taxation have remained unchanged, but liidications are that certain classes of taxpayers will be faced with heavier demands from the State during the coining year. There has leer, no official intimation of what may be expected in the way of taxing proposals, but in a recent public debate in Wellington a Government member, Dr. D. G. McMillan (Dunedin West) made the significant statement that the Government intended to raise the tax on higher incomes and to greatly increase death I duties. Eyen if this year’s expenditure is to remain the same as last, year, it seems that increased taxation vdl necessary to compensate for the drop in Customs revenue which may be expected to follow the restrictions on imports. Some members of the Goveminent haye claimed, it is true, that, the control which has been exercised will not diminish the actual volume of imports, but the terms of the^ conversion loan announced in London last week appear to indicate that drastic restriction of imports wdl he necessary to build up the Dominion’s overseas resources sufficiently to finance the repayment of the loan in the time stipulated. Though exchange control and import restriction actually operated over the last three months of the past financial year, the effect of this policy had not then had time to he reflected in the Customs revenue for that period, and, in addition the measure of restriction is now considerably more severe than during the first six months of its operation. CONTRASTING FACTORS. On the other hand, factors which are in the Government’s favour are the surplus of £BIO,OOO carried over from last year, and the £4,500,000 or more recently raised by the internal loan, while consideration must also bo given to the export credits totalling £9.000 000 granted by the British Government. Against these, however, is the expected deficit of approximately £2,000,000 on this year's operation of the guaranteed price scheme, in relation to which the recent report of the directors of the Reserve Bank has some significant passages. The. directors pointed out- that such deficits as these represented the creation of credit beyond the equivalent of commodities produced, and they considered it important that the inflationary tendency of such accommodation should not. he overlooked. Though the Government, may find it possible to reduce some of the departmental votes, it seems certain that a larger appropriation will he necessary for defence. It is likely that the greater part of the export credit of £5 000 000 granted by Britain for Government purchases will be expended on defence equipment, hut apart, altogether from tint, the expansion of the Territorial Forces, and other branches of the fighting services will involve heavier charges on the Consolidated Fund. PUBLIC WORKS EXPENDITURE. It will be interesting when the Budget is presented, to sec whether the Government intends to make any concession to the popular demand lor * reduction in public works expenditure. So far uo indication has been given ol what may be expected in this direction, apart from the tact that several large .State building projects, which are likely to make a heavy drain on this year’s public works vote, have recently lieen begun or are planned to start in the near future. In addition, the Government is committed to the completion of two major railway construction works, as well as other substantial undertakings. It appears that the bulk of the internal loan will bo devoted to public works expenditure. The effect of the social security .scheme on the budgetary position remains obscure. While the full taxation of Is in the pound has been collected since the scheme was inaugurated on April 1. the medical service involved in the whole scheme is still far from complete, with a resultant financial benefit to the Government With tile scheme in full operation social security taxation alone would be insufficient to finance it, and the deficiency would have to he met from the Consolidated Fund There have been frequent rumours of an increase in the tax, but this seems highly improbable this year, any way. in view of the fact that only a partial medical service is being provided.