THE BUDGET FOR 1936

Nelson Evening Mail, Volume LXX, 3 October 1936, Page 7

THE BUDGET FOR 1936

NEW HIGH TAXATION RECORDS CHAMBER OF COMMERCE SURVEY The budget results for 1935-36 show a surplus for the second year in succession, states the latest economic bulletin of the Canterbury Chamber of Commerce. Coming after four successive years of heavy deficits, this is welcome evidence of improvement in the Dominion’s affairs. Over the last two years, without increases in tax rates, the yield of taxation has increased by 26 per cent, which indicates the measure of expansion in the sources from which taxation is drawn. The improvement in the budget is due, not to reduction in expenditure, which has increased by £N.Z.I.7m. since 1929, nor to other government revenue, which has fallen, but solely to increased taxation. • x

Since the depression began, the new taxes imposed include the unemployment tsx, the sales tax, the gold export duty, and the film hire tax. Heavy additions in rates have also been imposed in the case of customs,income tax, and stamp duties, etc. A flat tax was substituted for the graduated land tax. It is by means of M

this increased burden on taxpayers that the budget had been balanced, for the country’s income in 1935-36 was substantially less than in 1928-29.

BRIGHT PROSPECTS The budget prospects for 1936-37 were brighter than at any time since the onset of depression, for export receipts had risen appreciably, and the increase in income was stimulating recovery in business and employment. In these conditions, some relief from the heavy emergency taxation imposed during the depression might have been expected. But the Government’s proposals for expenditure not only absorbed the increased yield expected from existing taxes, but required additional taxation as well. Restored salaries and shorter hours in the public service, increased departmental expenditure, and increased pensions raise total expenditure by £N.Z.4.91m. This allows only for a period of nine months or less. In a full year, the new commitments may raise budget expenditure to £N.Z.32m., or one-third more than in 1928-29. The chief increase is in social services, which are now to cost £N.Z.10.3m., or £N.Z.4m. more than before the depression. To meet the increased expenditure, £N.Z.4.9m. more revenue is required Other revenue is to provide less than £N.Z.Jm of this, and nearly £N.Z.4Jm is to come from taxation It is anticipated that existing taxes will yield £N.Z.3.76m. more than last year, and a further £N.Z.I.Bm. is to be raised by increasing the income tax. The income tax is to be raised to a maximum of 7s 6d in the £1 on earned incomes, and 10s on unearned incomes. These rates must seriously restrict company enterprises, which must now earn 8 per cent, in order to pay 5, where the full tax of threeeighths has to be paid on net profits. The graduated land tax, too, discriminates heavily against large enterprises, whether farming or business and must, retard or prevent the large scale use of the country’s resources.

PUBLIC WORKS Public works expenditure is also to be restored to pre-depression levels, and • the budget proposals total £ N.Z.10.45m., of which £N.Z 4.51 m. is to be found from sources such as the highways and unemployment funds, and £N.Z.5.94m. borrowed, but without the issue of a public loan. While the budget relieved fears that unsound financial methods might be adopted, it created new high records for both expenditure and taxation in the Dominion. State taxation, including unemployment tax, is, now nearly 70 per cent, higher than in 1928-29 and equals £N.Z.I9 a head of population and 25 per,, cent, of the total value of production. Under the present policy of increasing expenditure on social services and public works, it appears more likely to , increase than diminish. Since there is no large wealthy class from which to exact a large yield of direct tax, most of the taxation is indirect arid is passed on in higher costs and prices. This increases costs of production and of living, restricts enterprise, and promotes unemployment,; ‘ and hence tends to increase the difficulties which public policy is required to remedy.