EFFECT OF NEW TAXES.

New Zealand Herald, Volume LXIV, Issue 19736, 8 September 1927, Page 12

EFFECT OF NEW TAXES.

OFFICIAL ILLUSTRATION.

THE ALLEGED ANOMALIES.

ERROR IN COMPARISONS.

CHANGE IN LAW OVERLOOKED. A copy has been received of the explanatory tables in illustration of the income tax proposals presented to the House, of Representatives on Tuesday. They disclose for the first time the meaning of tho several statements by tho Minister of Finance that "some incomes are actually paying less now than they did before tho war." That contention, as well as his description of the increases arising from the proposed new scale, is based upon an erroneous and misleading comparison of taxation in 1914 and at present. The first table sets out the taxation of "actual incomes" from £350 to £6OO for taxpayers with noae, one, two, or three children in 1914, 1926 and as proposed, the taxes being those for earned income. The rates shown are correctly calculated with proper allowance for variation in the £3OO exemption. The table shows that all such taxpayers, without children, paid more under tho 1926 Act than before tho war, and that the taxation of "actual incomes" above £450 would be increased by the proposed scale. The exemption for children brings the taxation of incomes in these groups below the pre-war rates in most of tho cases illustrated, butthat exemption has nothing to do with the question. In any event, it does not dispose of the increases over last year's scale. Actual and Taxable Income. The second table gives an entirely wrong impression. It sets forth the taxes under tho three schedules —1914, 1926 and that proposed—not on actual but or taxable incomes. As a footnote explains the "taxable income represents the balance remaining after the deduction of all exemptions; and since only one ol these—called the "special oxemption" in the statutes —is affected by the bills before Parliament, tho method adopted in the table illustrates neither the comparison with pre-war rates nor the efiect of tho proposed alterations. Unless the Minister proposes to review exemptions for childis*., insurance premiums, superannuation and pension payments, aud tho rebate for earned income, the only intelligible basis of examination is the taxation without reference to such personal exemptions. The gravest mistake in the table is that it ignores the change in the lawregarding the "special exemption." Until 1917, the full sum of £3OO was deducted iroin the income oi every taxpayer other than a company. That exemption has been subject to various modifications. As the law now stands } it is withdrawn be tween £6OO and £900; the Minister proposes to withdraw it between £450 and £9OO. Yet by ignoring that important change in the basis of taxation, the Minister has in effect made comparisons between different incomes and he has aggravated tho mistake by showing the rates for earned income against the pre-war rate, when there was no such rebate. Basis o! Minister's Case. The Minister's table is as follows:

The five examples marked with asterisks ( # ) are underlined in the table to indicate that they axe the incomes paying less taxation than before the war. But £llOO to £ISOO in 1914 represented the taxable balances of incomes of £I4OO to £IBOO. as they received the full exemption of £3OO The true comparison is therefore between, "for instance, the 1914 taxation of an actualincome of £I4OO and the 1926 taxation of an actual income of £llOO, and so on. Moreover, the rates shown for 1926 and as proposed are those for earned income. Since there has not been any direct suggestion of attacking that rebate, why should such a comparison be made ? If the. full rate for £llOO is taken, i.e., £56 10s 7d, it is actually higher than the 1914 tax on £llOO (or £I4OO of actual income). Taxes on Actual Incomes. To illustrate the actual operation of the present and the proposed taxes and the chnjnges in the £3OO exemption, the following table has been prepared for the incomes selected by the Minister For each amount of assessable income are shown tlie respective taxable balances in 1914, 1926, and as proposed with the corresponding rates and amounts of taxes:—

This table shows how far taxation has risen above the pre-war level, and illustrates how much further the Minister proposes to raise it.

Taxable Income. 1914 Tax. 1926 Tax. Proposed. £ £ s. d. £ 8. d. £ s. d. 100 2 10 0 2 12 6 2 12 f 200 . . 5 0 0 5 5 0 5 5. 0 800 7 10 0 7 17 6 7 17 6 400 10 0 0 11 9 11 12 0 n 500 H 1 3 15 12 6 16 17 fi coo 18 1 5 20 fi 0 22 10 0 10) 24 1 3 • 25 7 6 28 17 fi eo) 30 0 0 31 0 0 36 0 0 soo 36 11 3 37 2 6 43 17 rt V'O-> 43 15 0 43 15 0 52 10 0 1)00 *51 11 3 *50 17 6 61 17 6 1500 ' . *60 0 0 *58 10 0 72 0 0 1"00 *69 1 3 *66 12 6 82 17 6 I'Ol *78 15 0 *75 5 0 94 10 0 15^0 *85 18 9 *84 7 6 106 17 6 1609 93 6 8 94 0 0 118 10 0 ? f, 00 125 6 0 137 10 0 170 12 6 40"0 266 13 4 501 7 9 593 15 0 CWl 400 0 0 1087 10 0 1141 17 6 0000 600 0 0 1980 0 0 1980 0 0

Assessable Taxable Tax . Amount Income. Income. Rate. of tax. £ £ 8 d £ s d 400 1914 100 0 6 2 10 0 192G 100 0 7 2 18 4 1927 100 0 7 2 18 4 500 1914 200 0 6 5 0 0 1926 200 0 7 5 16 8 1927 225 0 7 6 11 3 TOO 3914 300 0 6 7 10 0 1928 300 0 7 8 15 0 1227 375 0 7i 12 2 2 700 3914 400 0 6 10 0 0 1920 500 0 8 J 17 7 2 1927 595 0 91 20 4 8 SCO 19M 500 0 63 14 1 3 192G 700 0 91 28 3 10 1927 700 0 11 32 1 8 900 191.1 C.00 0 71 18 1 5 1926 900 0 11 41 5 0 1927 900 1 1 48 15 0 1000 1914 700 0 8} 24 1 s 1925 1000 0 11} . 48 12 2 1927 1000 2 58 6 8 1100 1914 800 0 9 30 0 0 1926 1100 1 Oi 56 10 7 ' 1027 1100 1 3 OS 15 0 1200 1914 900 0 9} 36 11 3 192(5 1200 1 1 65 0 0 1927 1200 . 1 4 80 0 0 1300 1934 1000 0 104 43 15 0 1920S 1300 1 13 74 0 7 1927 1300 1 5 92 1 s 1400 1914 1100 0 Hi 51 11. 3 1920 1400 1 21 83 12 3 1S27 MOO 1 6 105 0 0 1500 1914 1200 1 0 60 0 0 1928 1500 1 3 93 15 0 1927 1500 1 7 118 15 0 . 1600 1914 1300 1 05 3 j 69 1 3 1926 1600 104 8 11 . 1927 1G00 1 7 J 131 13 4 1700 1914 3400 1 H 78 15 0 1920 1700 1 4! 115 13 11 1927 1700 1 81 145 4 2 1800 1914 1500 1 U 85 18 9 1926 1800 1 5 127 10 0 1927 1800 1 91 159 7 6 1900 1914 1600 2 93 6 8 1926 1900 1 55 139 17 3 1926 1900 1 10 174 3 4 2300 1914 QOOO 1 3 125 0 0 1926 2300 1 8} 194 17 3 1927 2300 1 239 11 8 1300 1914 4000 1 4 266 13 4 1926 4300 9! 603 3 11 1927 4300 3 698 15 0 6300 1914 6000 4 400 0 0 1926 6300 3 10 1207 10 0 1927 6300 4 0 1260 0 0 9300 1914 0000 1 4 600 0 0 1926 9300 4 6 2092 10 0 1927 9300 4 G 2092 10 0