COMPANY TAXATION.

New Zealand Herald, Volume LVIII, Issue 17872, 29 August 1921, Page 7

COMPANY TAXATION.

UfO CHANGE OF INCIDENCE.

WARTIME INCREASES.

STATEMENT BY SIR p. KELL

In U>« course nf y n interview on the o; taxation in New Zealand Sr rrunc,., T-11 , a id:-One r , int ia the n "" n , s ..f Saturday seamed to loud to a . wrong impression. The article «ys thai when tho problem of "' nDa f\ *'* s considered "the Govern. -ueni solved the difficulty of collection by making the companies responsible. ' lTwt would be interpreted as -meanm-, that the Government then changed the mcidenrc of taxation, which, of course «* not the ca*e~and equally, of course' fhal is not what was meant.

The income tax was during the war (a) increased very largely i u ra te, and (b) was graduated £ by £. so that the rate up to £6000 increased with the income. That was equally the case for individuals ~. for companies. But from the initiation of tho income tax in 1891 o r 1892 tho income tax cm company profits has been paid by tho companies and not individually by shareholders. And as there was a difference always between the rate for small incomes and the rate for large incomes it was always tho case that a iwnall shareholder (or was as earned to pay) more through the com pany s tax than he would if taxed separately-and it was always the case trom Ida* that company managers wanted the tax to be shifted from the company to the shareholders, in order that the company s net profits might appear larger on their balance-sheets—and always the rase that they used the illustration of the affect on the small shareholder as the argument to gain their object. But tcey always failed, with Mr. Seddon as with Mr. Massey. It is the company that makes the profit on which tho 'tax is levied; it is not the shareholder who makes tho profit; and therefore tho in cjdence on the company has always been riefensible on principle as well as on the ground of the ease of collection. It is easy to see that the revenues would have to be augmented by increase of rate of tax on the shareholders if the method of taxing the aggregate concern which earns the profit were abandoned. It is the new graduated rate of taxation for war purposes which has caused the present agitation for a change of the incidence. No change of incidence, or shift of the burden, has occurred before, during, or since the wa?, except a minor provision in favour of tho small shareholder.

FBISENT SYSTEM CBTTCCISED. BURDEN OF MORATORIUM. Company income taxation and the moratorium were the subject of some remarks on Saturday by Mr. C. E. Statham, MP., leader of the New Zealand Progressive and Moderate Labour Party. Mr. Statham eaid that he had consistently advocated a change" in the incidence of company taxation, by placing it upon the individuals who should contribute to the revenue of the country according to their income. The present tax, he said, bore equally upon the poor and the wealthy shareholders, and this was obviously uniust. This was recognised by Sir Joseph Ward when he was Minister for Finance in the National Cabinet, and a rather clumsy provision was made bv which a shareholder whose total income did not exceed £400 a year, might receive a refund of the proportion of the tax paid by him through a company. The present system, eaid Mr. Statham, had been well described as a grinding, crippling tax, calculated to completely destroy all incentive to enterprise. Mr. McKenna. in the British House of Commons, once said -that heavy taxation restricted industry, and," observed Mr. Statham, that was emphasised to a msrked decree in the Dominion at present, when the countiry was passing through a period of depression. He said that every effort should be made to increase and encourage production, but the present method of raising revenue was having a disastrous effect upon industry. The position had now become so hopeless that he believed the Government would be compelled to bring down legisJation to give relief to many who were now suffering under the burden imposed upon them. The Government had turned a deaf ear to those wno had advocated a change in the incidence, and the only reply had been that under .the present system it was easier to collect the money. * Regarding the moratorium, Mr. Statham said he believed that amending legislation would be brought down during next session. The present position was that local were holding sums of money deposited with them by the public, and the banks refused to give credit so that they might refund these deposits. The only alternative that depositors had was to apply to the Court and endeavour to show to the satisfaction of the Court that they are suffering hardship, in which case an order may be made ordering a refund. This scheme had worked out most unfairly for the reason that even though the depositors received an extra 1 per cent, on the original rate agreed upon, they were faced with the fact that if they" had to borrow money to replace the amounts deposited they lost from 2 per cent, to 3 per cent, on the transaction. Mr. Statham said the position at present was most unsatisfactory and the Government would have to face it without delay. The question was whether Parliament would grant those institutions receiving money on deposit further protection and allow the depositor to continue to suffer an injustice, or deal with the pioblem in a manner satisfactory to those chiefly concerned.