BANK TAXATION

Northern Advocate, 19 June 1926, Page 5

BANK TAXATION

BURDEN CRITICISED. The chairman of directors of the Bank of New Zealand spoke as follows .in the course of his annual report:— The burden of taxation is still very severe, and there does not appear to be any early prospect of a substantial reduction. Taxpayers will always grumble, but provided prudence and economy are exercised by the Government in its administration, we should all accept the position with as good a grace as possible, never forgetting that we are still paying the price, and must for many years continue to pay the price, of freedom from foreign domination.

We do, however, feel the competition that banks have to face from Government departments, which pay only trifling taxation, or no taxation at all, in connection with their activities. For instance, the average amount of loans current in the Government Advances Department for the year ended March 31, 1925, was approximately £21,000,000. The income tax paid by the department was £4757, whereas, on a similar amount of advances, any bank trading in the Dominion would require to pay income tax amounting to £70,875.

Another instance—The Post Office Savings Bank has deposits of over £47,000,000, on which no income tax whatever is paid. If any Joint Stock Bank had such an amount on deposit, it would have to pay annually about £300,000 in income tax alone. It is no argument to say that it would merely be taking money out of one Government pocket and putting it into another for the Post Office Savings Bank to pa'/ taxes in the same proportion as the Joint Stock Banks. That is not the case. The real effeet wonld be that the Ravings Bank would have to pay its depositors almost 3 per cent, less interest than it does at present; or, looking at the matter from another point of view, by reason of the non-payment of income tax, the Savings Bank can afford to pay 3 per cent, more for its deposits than a Joint Stock Bank can afford.

Probably nowherS else in the Eng-lish-speaking world does a Government compete with the banks on such lines as in this country. The function of a Government Savings Bank is to encourage thrift amongst the poorer classes of the community by providing undoubted security for the investment of their savings. In Great Britain no depositor can pay in to the Post Office Savings Bank more than £SOO in any one year, on which sum he is allowed interest at the rate of 21 per cent, per annum; in the United States the limit of a deposit account is 2500 dollars, and the rate of interest 2 per cent, per annum. In Hew Zealand the limit is £SOOO, and interest at the rate of 4 per cent, is paid on the first £SOO and 3} per cent is paid on- the balance. If the Post Office Savings Bank deposits were in the hands of the Banks, they would be employed in the development of the pastoral, agricultural and industrial interests; as it is, they are used by the Government, and are diverted from the channels in which they could most usefullv be employed.

In 1915 the Post Office Savings Bank had on deposit £22,160,365, in 1924 £46.948,628. In 1915 the Joint Stock Banks had on deposit £31,433,653, and in 1924 £49.502,499.

These figures speak for themselves and completely disprove the allegation of certain critics who declare that the Government favours the banks.