THE BUDGET PROPOSALS

New Zealand Herald, Volume LIII, Issue 16259, 19 June 1916, Page 7

THE BUDGET PROPOSALS

TAX ON WAR PROFITS.

BASIS OF ASSESSMENT.

AVERAGE NOT APPROVED.

ALLOWANCE FOR DONATIONS.

The definition of " excess profits " in the Bill which will be necessary to enforce Sir Joseph Ward's proposal of a tax of 45 per cent, on war profits will be awaited with considerable interest. In his Budget speech the Minister for Finance stated that he proposed to levy this duty on the excess profits earned during the last year, and explained that "this will be ascertained by taking the average profits realised for each of the three years previous to the war, and comparing this average with the returns made since the war I commenced."

Discussing the proposal on Saturday, the principal of a leading firm in the city expressed the opinion that the proposed basis of a three years' average would be unfair. In a progressive city there were many businesses whose profit| in normal times showed an annual increase, so that an average of the three years before the | war would be less than the amount of profits earned in the last year of the period. A firm, which had maintained its business during the past year at the level reached before the war would be held to have made "war profits," while in a case where the business had expanded the amount upon which the new tax would be levied would be greater than was reasonable. The following figures illustrated the contention:—

Thre« Years' Aver- War TaxProfits, age. year. Excess able. £££££££ 40.000 45.000 60,000 45.000 50,000 Nil. 5,000 40,000 45,000 50,000 45,000 60,000 10,000 15.000 Such a ratio of increase was quite normal in many businesses, in Auckland and other progressive centres of the North Island, though it might be typical of only a few in the South Island, where commercial development had not been so rapid. Taxation on such a basis would: amount almost to confiscation, but the pro- ! posed tax might be fairly assessed on the ! excess of profits above the largest amount, realised in any of the three years before ; the war. It would not be unreasonable, in the case of .a firm which had increased, its profits from £50,000 to £60,000, to» levy the tax on the full amount of the r??c B^ SB ' but ** was not l uit,e fait to ta * £15,000 to the extent of 45 per cent. A further suggestion was made that in assessing the "war profits," consideration should be given for donations to the patriotic funds. The Government had announced that no allowance could be made for patriotic contributions in assessments; lor ordinary income tax, but some deduction might be made from the "war profits, where the firm or the individual had subscribed a portion, or even the wholei amount, of any extra profits realised!' through war conditions. Where this had' been done, it would be manifestly unfair to levy a heavy tax in respect of a sum. which had been voluntarily relinquished' | for the benefit of the State.

VARIED VIEWS OP MEMBERS.

THE TAX ON WAR PROFITS. » DISSATISFACTION EXPRESSED. [by TELEGRAPHSPECIAL correspondent Wellington, Sunday. Amongst a House of 70 private membeira it is natural that there should be a variety of views regarding the Budget proposals!. Members of moderate views are, generally speaking, satisfied. Labour members, as might be expected, are not satisfied. Labour members say that 45 per cen't. is not sufficient tax on war profits, and some advocate that it should have been 70 or 75 per cent. These critics also express the opinion that the proposed impost on war profits should embrace the whole war period, and not merely last year. They assert that in many cases the greatest war profits were those made during the first few montlhs of hostilities, and that, therefore, retrospective action of the proposal should extend back to August, 1914. Those who talk in this strain also express disappointment that, apart from the quitstion of rent, there is no proposal for iieducing the cost of living. They likewise ask whether anything will be done to prevent those whose war profits are made by the sale of commodities within the Dominion passing on the new taxation to consumers.

# "How will war profits be computed?" is a question that is exercising th ß minds, not only of Labour members, but of many others. The Government's proposals in this regard will be embodied in a BiP.l which will be introduced after the financial debate has been disposed of. Some members, whilst supporting tAje Proposed increases in taxation, criticise the Budget on account of the absence of provision for further taxation of luxuriies. They state that totalisators and races sports, picture shows, and other amusements might have been called upon to provide some of the extra revenue needed. One member in discussing what he termed SmStiT gets " sins °" oimss 'on " said • What about more duty on motor-cars and other luxuries?" A second member advocated a tax on beer. To this a third remarked: "That might have provided more. These are some views which afford indication that criticism is likelv to be expressed during the coming financial debate. Another point upon which a great deal of criticism is likely to be expressed in the debate is the proposed pavment of the war bonus to members of the Civil Services earning up to £315. The opinion is expressed that the £400,000 proposed to be expended m this way might be used in more deserving directions. Other proposals appear to meet witfi general support. The reduction in the public works expenditure, which was regarded as a foregone conclusion, arouses but little comment. The debate on the Budget -will open on Tuesday, and will probably occupy the greater part of a fortnight. "WELL RECEIVED BY PUBLIC" STATEMENT BY PRIME MINISTER. [BY TELEGRAPH.— SPECIAL CORRESPONDENT.]

Wellington-, Sunday.

The' Prime Minister, in course of conversation to-day, said: "As far as I am able to judge, the Budget has been very well received by the public. This in an indication' that there is a general recognition_ for the need of a special effort, financial and otherwise, to meet the necessities of the times."