The Times SATURDAY, SEPTEMBER 28, 1940. Just Another Tax

Manawatu Times, Volume 65, Issue 230, 28 September 1940, Page 6

The Times SATURDAY, SEPTEMBER 28, 1940. Just Another Tax

The terms of the War Loan, 1953, colloquially termed the (< Compulsory Loan,” arc unfortunate. And this for two majoi reasons, one moral and one practical. When the effects of those terms are examined, it is found that for a majority perhaps ox those called upon to subscribe this is just another tax, and, furthermore, it is one that must be contemplated as working very inequitably. „ ' . . . All realise, or should do so, that war effort is costly, ana that it is to be desired that the rate of interest burden on inevitable war loans should be as low as possible, consistent with sound financing of the nation. And in this regard must, of course, be paid to the normal enterprises of the country as well as the convenience of a Minister of Finance. Whether the civil expenditure of the Government be reasonable or extravagant is not to be discussed here. Wliat is of sole present concern is tlie securing of «oney for war purposes. And on these grounds it is assumed that the minimum of £8,000,000 demanded is of necessity required. That, therefore, to be considered is the propriety and practical good sense of the means now adopted. These may bo first called to question upon moral grounds. Why was not an opportunity given citizens to subscribe voluntarily to a true war loan before the compulsory method was brought forward? Mr. Nash’s policy in this is, to us, utterly incomprehensible. It would almost appear that he was more concerned with means than with results, that he fulfilled an ardent wish to exert dictatorial power, even where this was not proved needful or even desirable. Was it a deep urge to compel that brought such terms? And, again, has not the introduction at this stage of such a loan been like a slap in the face to the patriotic spirit of our people? That spirit has been short-circuited. Finally, why was not this loan proposal placed before Parliament? There is not a valid excuse for not doing so. There is one invalid excuse: that criticism was feared, that the Minister of Finance “couldn’t take it.” ,

So much for moral and propriety factors. Let some of the practical ill-consequences of the terms of this war loan now be considered. How many of all those called upon to subscribe will have ready at hand idle cash to invest? For the minority so placed the terms arc not over serious. The loan is just “a poor investment.” But for the majority it will be a case of borrowing to invest. They will have to secure on overdraft at 4J per cent, the funds to be invested; or else draw money from their businesses that is urgently required therein. In either case, the bulk of holders will shortly bo offering their holdings so as to secure cash. They will be “cutting the loss.” ( . The terms of the loan demand free use of the citizen’s money for three years and that he then must accept but 2-J per cent., so that overall the effective rate is but 2 per cent. This at a time when the country’s standard rate for Government bonds is 3J per cent. Such being the case, those who must, sell this compulsory War Loan stock will have to accept a heavy discount—at an approximate estimate 20 per cent. If this proves to be so, then the loss suffered amounts to just another tax, a 20 per cent, addition to the income tax already levied, and that was loaded with 15 per cent, on account of war requirements.

The socalled War Loan is a hybrid creature —a loan for some, a tax for others. And for those taxed, a very crude way of raising money. The terms of the loan have been condemned on moral grounds and upon grounds of its effects upon the enterprises of our national life. There is a yet further ill-effect to be considered, one affecting the State’s own finances. Of inescapable moral necessity, the Minister of Finance was compelled to provide for those who had lent free-of-interest sums to the war fund or given outright donations thereto. Yet in so doing it seems that he has “punished” these patriotic citizens along with those less generous or less fortunately placed. Finally; the non-payment of interest on the loan for three years will reduce incomes; and so in turn reduce the State’s revenue from income tax, surtax, social security tax (2s in the £), and from countless indirect taxes. All taxes considered, the Treasury will lose about 50 per cent, of its interest savings.

Of constructive criticism, this could be offered. There should have been a nation-wide war loan drive with subscriptions taken by voluntary contribution only in small sums and large, and a fair rate»of interest, say 3 per cent., paid upon all received—a finance measure compatible with both patriotic feelings and the practical needs of the Dominion. Bv comparison, what a puling infant is this brain-child brought forth by the Minister of Finance.