ESCAPING TAXATION

Northern Advocate, 16 October 1931, Page 6

ESCAPING TAXATION

MUNICIPAL TRADING CONCERNS PROTEST BY GAS INDUSTRY. DEPUTATION’S VIEWS. (Per Press Association. —Copyright.) WELLINGTON, This Day. The position in which the private trader is placed because of the nontaxation of Government and municipal trading concerns was brought to the notice of the Prime Minister, the Ri Hon. G. W. Forbes, and the Minister of Finance, the Rt. Hon. W. Downie Stewart, last evening by a deputation fiom the Gas Companies’ Association, the Associated Chambers of Commerce and the N.Z. Employers’ Federation. Speakers claimed that there was no reason for this differential treatment, and said that such conditions were illogical and unfair. Dr. C. P. Knight, of Wellington, said that in 1930 the Wellington Gas Company paid in land and income tax, £14,095, the Auckland Gas Company £20,889, and the Christchurch Gas Company £12,505 (in the last case including debenture tax). Under the 20 per cent surtax imposed by the 1931 Budget, these three companies would l e called upon to pay an additional £8458 per annum. Power boards, on the other hand, paid nothing. The present statement of affairs meant that the burden had to bo carried by the private trader. Since the Government and municipal activities were being extended, the burden would increase and might become unbearable. “If there is one thing that saps the vitality of a nation more than another,” said Dr. Knight, “it is paternalism in Government. It puts a break on the •wheels of industry and it closes the door on individual effort, jjnless some Government some day awakens to the futility of this communistic dream it can only be a question of time until certain large eoncorns, "apart altogether from the gas industry will be forced seriously to consider closing the New Zealand portion of their businesses.” Fair Field Wanted. The gas industry, he continued, had not the special privileges enjoyed by power boards and State electrical enterprises, such as exemption from taxation, exemption from stamp duty, special railway freights, subsidies on the cost of coal, and, as far as the Government was concerned, exemption from Customs tariffs and exemption of interest on capital cost of uncompleted works. Such interest in the case of uncompleted hydro-electric works was charged to the Consolidated Fund. All the Gas Association asked for was a fair field and no favour, a condition which seemed so far to be unattainable, notwithstanding the strqng recommendations in favour of equality of taxation and privileges by Royal commissions, by economic committees of the League of Nations and by the Associated Chambers of Commerce.

'• It was stated by Mr F. E. Graham, a of Christchurch, that tho question of s taxation of State and municipal trade ing undertakings had been, brought - before Prime Ministers for the last • 20 years, and they had invariably ap--1 proved the principle, but it had been 3 shelved on the ground of expediency. \ The more the arguments were analys- ; ed, the more clear it became that there was absolutely no reason for (Uifefontia! treatment. For every £IOO,OOO of capital employed, eleetriciiy required the labour of 11.3 men j and paid £2803 in "wages, but in the gas industry every £IOO,OOO of capital employed 3;j.5 men and paid £8771 in wages, or three limes as much as the | electrical industry, and this was not allowing for the wages paid in mining coal or wages paid by the Railway Department in transporting it. Inequitable Incidence. “?here is no reason why State and municipal trading enterprises and also power boards in the Dominion should not pay income tax on their net profits after the payment of interest and also on amounts ‘ set aside for sinking fund,” said Mr James Lowe of Auckland. “The gross scandal perpetrated by the Auckland Power Board is an illustration of our views. With immunity from taxation, it has erected a palatial building in Queen Street out cf its non-taxed profits. These premises are largely used for letting purposes and not for its own use. It pays no land or income tax.” Mr Lowe said that a few years ago 1 practically no fuel oil came into the : country, proving that New Zealand could get on quite well Avithout it. A i vast quantity was now imported, chief- 1 ly from a country which imposed high - tariff barriers against New Zealand < products, and had largely increased ] unemployment by displacing labour in < the coal and gas industries. Petrol, 1 for which New Zealand has no substi- < lute, paid a duty of 6d a gallon, while < fuel oil, for which coal, coke, gas and electricity were substitutes, paid no a duty . t Cheap Current. ; t Tho Prime Minister said that the i difficulty of taxing municipal electric t light undertakings was that the Gov- o eminent had undertaken a policy of cl hydro-electric installation, and that p when it reached the point of delivery t in bulk it came to the conclusion that o it was able to carry reticulation. Power boards were set up to do the work and were in tho nature of scmi-Gov-ornment bodies. It was not •expected r( that they would be trading concerns, u

but would distribute current and make a certain amount of revenue for working expenses and sinking fund. To ascertain the profits of a concern like a power board was an elusive matter. It was felt that if taxation wore imposed there would bo no profits and that prices would be made lower. If that were done the boards would come into even closer competition with private c'oncerns than over. If power boards operated according to the spirit in winch they were established, there .should be no profits and current should be supplied at practically cost price. Time Inopportune. Mr Forbes said he would admit that, with heavy increases of taxation on industry, the position between private concerns and municipal and Government concerns became more accentuated. It was not tho policy of the Government to extend the .field of municipal and State enterprises; there was no disposition on the part of the Government to encourage inroads into the trading field. .At present the Government was leaning very much cn bodies in respect to relief of unemployment, and it was not the most opportune time to impose taxation on them, although there was a good deal of justice in what the deputation had said.

Mr Forbes thought the deputation would admit that the great bulk of the oil fuel that came to New Zealand was used in steamers, and he thought that to put on a duty and discourage its use would be hampering something that was a considerable advance. In conclusion, Mr Forbes said he would discuss the representations of the deputation with the Minister of Finance to see if it were possible to meet some of the difficulties referred to.