THE FINANCE BILL

New Zealand Herald, Volume LV, Issue 16823, 13 April 1918, Page 6

THE FINANCE BILL

I It appears from the reports of Par- ) liament that the Finance Bill may 1 become law before the close of the present week. Some portions of it are being subjected to considerable I criticism, but on the whole the dis- • position appears to be to hurry the ' measure through and end the session. ' It was a wise stipulation that tho session should be wholly 1 devoted to emergency business, but no good , purposo is served by lushing that t business through at break-neck i speed. The adoption of this courso ? seems likely to result in the passing of an Act which will need drastic . revision when Parliament meets , again six months hence. Several . important Issues are involved in tho t Bill. There is the flotation of loans r free of incomo tax. The danger of ) .this course has been pointed out over ' and over again, but so far as can . bo judged at present it is to be coni tinued without any adequate discus- ! aion on tho principle involved. Other : questions of importance are raised ) by the insertion of new and unox- • pected provisions in the Bill. One ■ of them is tho alteration in the i method of assessing compulsory sub- ■ scriptions to tho war loan. The clauses _ which gavo'to the taxpayer 1 an indication of the sum he was ' expected to subscribe have been 1 withdrawn, and in their place is a 1 genoral authority to tho Commissioner of Taxes to fix tho subscription. This \p open to serious ' objection, and it is not easy to see ' how it facilitates tho en'orce lent of compulsion against thoso who are '• oyading their financial responsibili--1 ties. Another objectionable feature is introduced in tho clause legalising ; a moratorium for the loans of local bodies. In the present condition of the money market local bod ; os aro 1 entitled^to protection against having 1 to raise money for tho purpose of redemptions. Thus far tin new legislation is sound, but to effect a 1 good purpose it is proposed to do injustice to the bondholders by limiting them to tho old rato of interest ' after their bonds have matured. Tho local bodies are to get the continued use of tho money at less than current values and the bondholders have to accept interest in many cases much below pre-war rates Many of tho loans falling due were floated at 4 per cent. It cannot bo contended that any local body is Entitled to continue this rate of payment after tho expiry of the period of the loan. Take the effect of it upon tho bondholder. If he is a non-taxpayer a local body is authorised to hold, at 4 per cent., monej which in the terms of his bond ho would be entitled to draw, and which he could invest in Covcrn merit war loan at 5 per cent. If ho ! is a taxpayer he could invest in war • loan at 4j per cent, free of income I j tax, but the Biii now before the j House would compel him to accept | 4 per cent, and pay income tax upon J , the proceeds. In the case of a tax- I payer on the highest scale the tax al j 7 s 6d in the ii would be .El IDs, reducing the actual interest to 2.' per cent. When the matter is fully considered .it will be found that justice can only be done by providing that loans affected by the mora torium should on maturity be made to bear tho rate of interest now I current on such securities. When the Mortgages Extension Act was j I passed in 1914 its provisions were j similar to those now proposed for ' local body loans, but in the following yea; 1 power was given to the Court , to fix a fair and equitable rate of interest upon mortgages affected by ( the moratorium. Local bodies should also be under the obligation of paying a rate of interest which is fair and equitable. It is evident from these examples that if the Bill is passed in its present form its pro- ; visions must be subjected to searching review whenever! Parliament i meets again. 1 A