TAXATION AND LOSSES.

New Zealand Herald, Volume LIX, Issue 18210, 2 October 1922, Page 6

TAXATION AND LOSSES.

A new principle in New Zealand taxation has been introduced in the Land and Income Tax Amendment Bill in the provision for setting losses incurred in business against profits earned within the three following years. The essential portion of the section proposes that:

Any taxpayer who satisfies the CJommissioner that he has in any year in* curred p loss in any business carried on by him shall be entitled to claim that such loss be carried forward, and,, so far as may be, deducted from or set off against his assessable income lor the three following years: i Provided that any relief under this section shall be given, so far as possible, from the first assessment within the aforesaid period of three years, and, so far as it cannot then be given, shall be given for the next assessment, and so on.

The intention of the latter clause is apparently that if the losses in the first year exceed the profits of the next, the debit balance may be set against the proSts of the third, and any balance against those of the fourth. To this extent the Bill adopts the Tecoramendation of the Taxation Committeq, which did E.ot favour the English system of averaging results, but proposed the adoption of a system that is in operation in the United States, though the relsef is there apparently restricted to two years following that in which the losses were incurred. But while the Taxation Committee asked for this relief in respect of assessments for the current year, the Bill does not apply to any loss incurred prior to April 1, 1923. With this qualification/the practical benefit of the measure cannot be gained earlier than the tax-collections of February, 1926, and only then by taxpayers who are so unfortunate as to incur losses in 1923-24. .. Hence objection has been made that the Bill does not afford relief to traders ,iFrom the embarrassment of recent losses. It is, however, hardly possible to do anything for those, who made losses in 1921-22, since they will not' have any taxes to meet at'the beginning of next year. ' The claim is presumably for consideration to those whose results for the current year will be profits on which taxes will be due early in 1924. By conceding so much, virtually the same as the Taxation Committee proposed, Mr. Massey would inevitably cut heavily into the Budget of 1923-24, and his explanation will no doubt be that he cannot afford to sacrifice so large a proportion of the taxation due under the existing law on the trading profits of the current year. Since it is to be hoped, and reasonably to be expected, that by April, 1923, recovery to a profit-earning condition will be general, the Bill is in this respect merely an acknowledgment of a principle, the practical application of which" may ! long be postponed. »