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New Zealand Herald, Volume XVI, Issue 5634, 6 December 1879, Page 4

! On; representatives are now busily employed discussing the Properly Tax Bill. 1 As may be supposed, the attack is vehement and forcible, while the 1 defence is weak and apologetic. In [ moving the second reading of the ' Bill, the Colonial Treasurer took care 1 to leave himself free to make con- " siderable amendments in committee. | Still, he made no sign that he was about ' to withdraw the tax altogether till next ' year, as has been rumoured in Wellington for several days. Indeed, we cannot believo that the Government would take that course, as it would lay them open to very sliarp attack. It would be said, These I Ministers took office with the expressed opinion that n financial crisis had arrived, and that they must take extreme measures to save the country from bankruptcy. They made it appear that there was an enormous deficit, which was daily increasing, and which must be tilled up without an hour's delay. If that were not done, our credit would be gone, and the country would be insolvent. They propose enormous additional taxation, adding greatly both to our direct and our indirect burdens. And yet, after all this outcry on their part, they propose not to go on with the measure under which threefourths of the additional taxation is to be levied. Surely, they were needless alarmists. All these things would be said, and further, it would be shown that they had withdrawn tlw direct tax, affecting chiedy and immediately the propertied classes, while they had piled on crushing taxation on the customs revenue, taxing the s r afF of life and even salt—a tax on which, even in early ages, was thought to be almost a badge of slavery. The Government could hardly endure beiug put in such a position, and for this reason we cannot credit the statements made that they are about to abandon the property tax. But the objections to it are certainly many, and hare been forcibly put forward by newspapers in all parts of the colony. The tax will certainly discourage investment in directions where immediate return cannot be expected. For instance, we know of one gentlemau, lately from England, who invested £7,000 in native land in the North, and tho only way in which ho will obtain a return from his investment will be by spending a large amount of money on the land, extending that expenditure over a serie3 of years, and possibly ho may resell portions as he can liiid purchasers But in the meanwhile, and for some considerable time, he can obtain no income from the land, but will have to pay Id in the pound upon the value and upon all improvements made, though these may not be productive for a considerable time. We have already pointed out how tho tax would affect public companies, and we observe that some of our contemporaries have also taken up this subject. Eacli banking company is to be assessed on the amount of its capital, consisting of the amount actually paid up, with tho undivided profits. The l/>.iir!;i;'tt Buy Herald points out that, as one bank j pays 15 percent, dividend, and another 8 per cent., in one case the tax amounts to 3 per cent, on the dividend .main the other to 51 per cent. The Ota<f> Daily Times, also dealing with the maimer in which tho tax will affect companies, says :—" It lias been rightfully provided that people should not pay tax twice over, but when men have paid £'20 for shares that are nominally worth only £10 in tiie books of the concern, the company will only pay tho tax on tho nominal, not the market value, and therefore the shareholder will be indirectly taxed on only half the amount of money he invested on them. The converse is true when a man has invested in shares below par; ho is then indirectly taxed on a greater amount than the capital ho invested." The same paper has the following on the case of some companies

These companies lend perhaps ton times as rancli as tlieir paid-up capital, obtaining the mouey in the English market by nieaus of debentures, and paying the debenture-holders, say 5 per cent, per annum; the security to the latter being the uncalled capital. The profit of these companies consists in the difference between the debenture rate and the 8 or 9 per ceufc. they obtain from the borrowers, and all their expenses have to be deducted before any dividend can be declared to the shareholders. But according to the Government proposals

these companies, besides paying ft stamp duty of £200, will have to pay Id in the pound on the whole amount of money invested through their agency, and they cannot recover from the borrower. For example, suppose a company has £600,000 invested at an average of 7J per cent., £50,000 of which ia their own capital, and £550,000 the proceeds of debentures. Their contribution to the taxation will be Id in the pound on £600,000, or £2500, plus the £200 stamp duty, or £2,700 in all. The not result to the company, after paying the interest to the debentureholders, will be a return of £17,500 per annum, on which they will bo charged the monstrous amount of £2700 for property tax and stamp duty. Now, they can charge no portion of this to the debenture-holders in England, and are thus placed in a most unfair position.

We make these extracts to show that tho measure can hardly pass as it at present stands. It is desirable that property should bear its fair share of the burdens of the country, but care must bo taken that no palpable injustice is done, and that no discouragement is offered to the investment of foreign capital.