INCOME TAX MANQEUVRES.

New Zealand Herald, Volume LX, Issue 18334, 26 February 1923, Page 5

INCOME TAX MANQEUVRES.

; Sir,—As a taxpayer and in} » small way, I 'would!*! like' to know |v whereV; '■ '■-. local 5f per cent, can he bought as per ; !Mr.: A. S. Trower'e, letter. .This campaigning against the;£ existing taxation is •■ very well in its way, ■<• ;■'-' but it is becoming too brazen and too inaccurate to carry conviction. Another example. AJ. Wellington delegate is re- ;•;;.. ported:.' to have said to the Minister for Customs that English capitalists would not send capital to New Zealand if they had to pay 7s 4d in the £ " before getting any thin g "themselves." What extravagant nonsense! To put the.matter bluntly. one feels that some of the people who are malting most noise about taxation do not care how other people's shoes pinch to long as their own are comfortable. Equitt* Sir,—ln order to point out the danger of resorting to one of the modes by which Mr. : Trower contends income tax can be evaded, i.e., . investment -in •■• shares of companies, I would point out that most companies are " hard hit'' by the present heavy taxation and other aftermath of war conditions, with the result "that many companies have not for some years past paid any dividend . whatever, ' notwithstanding the prevalent . contention that losses in this respect are passed on to tho consumer. I may say that prior to the war I invested a considerable sum (hardearned savings) in four different companies, all in a nourishing condition at the time, but' for some years now none of them have been in a position to pay any dividend whatever. I do not blame tne Government, as many unfair . and prejudiced people do, who wish to discredit Mr. Massey and his party, but honestly blame the Germans, who forced us to increase our national debt to aid Britain "i defending the Empire. I would like to know where tax-free war loan stock can be bought at a price to return £4 17s 6d per cent, as stated by Mr. Trower. The Stock Exchange reports:— £97, sellers £97 ss. At £97 the return is £4 ;?s 9d per cent., and this is without allowing for broker's commission o a the purchase. : 1 Britisher. Sir,—Your . correspondent Mr. A. S. Trower has quoted a passage which broadly speaking is correct. But surely he must admit Mr. Wilford's remarks are entirely different from the case cited in the document quoted. In each instance the taxpayer is assumed to enjoy an annual income of £10,000. My contention is that unless this income is derived from investments free of income tax or subject, to a reduced rate, the taxpayer cannot "avoid paying tax at the rate specified by Statute . namely 7s 4d in the £. The document Mr, Trower. quotes from says " Suppose he puts one-fourth of his capital in taxfree war loan stock etc. The effect of this change is that he has reduced his taxable income from £10,000 to £7500." That is correct in. the 'main only if the £10 ; 000 has accrued from investments not free of tax yielding the same rate of interest as the War Lean Stock viz 4£ per cent. Mr. Wilford, however, referring to the taxpayer is reported . as having said: "He put his first £2500 • into Government . debentures, free .of income tax, which ; . . '■■„ because it took £2500 off his taxable income.*' , Mr. Wilford proceeded to show how " the next £2500 and " the third £2500-", were to be invested so " that the £10,000 a year man paid income tax on only £2500." Reverting again to our friend qUoted in the document, an annual income of £10,000 derived; from tax-free: debentures at 4£ per cent, implies a capital of over £222,000. Were ,hei to invest this sum at 7£ per cent. thing he should not find a difficult matter— annual ' inCome Would amount to £16,650. Deducting income tax at the rate of 7s 4d in the £ he is left with an income (tax-paid) of £10,645. So why this pother . . ,; ..' > DoDGtau-t.-