TAXATION PROPOSALS.

New Zealand Herald, Volume LXVI, Issue 20323, 2 August 1929, Page 15

TAXATION PROPOSALS.

"LARGE FARMING INCOMES" ALTERNATIVE METHODS. LOWER MORTGAGE EXEMPTION. PRIMAGE DUTY TO BE DOUBLED. [BY TELEGRAPH. —SPECIAL REPORTER.] WELLINGTON. Thursday. New taxation proposals are the principal features of the Financial Statement delivered in the House of Representatives this evening by Sir Joseph Ward, Prime Minister and Minister of Finance. They were announced at the conclusion of his speech which, in the printed document, extended to 28 pages, as compared with 17 pages in last year's Budget. "In view of the deficit last year and the general position of the country's finances when the Government assumed office, thero is no practicable option but to face the facts and obtain additional revenue from taxation if the Budget for this year is to be balanced —and that, of course, is essential," said the Prime Minister. "In determining how the additional revenue required may best be obtained, I have endeavoured to make a virtue of necessitv, and, while adjusting taxation on an equitable basis, place the added burden in such a way as to assist the Government's land-settlement policy. At the same time I have had regard to tho desirability of creating as little disturbance as pqssible in business and trade, in order that the economic progress of the Dominion may not be hindered. Large Tarming Incomes. "Attention was first given to the large farming incomes, which I consider have not borne their fair share of taxation in recent years. Accordingly, to adjust this inequity and assist in bringing about the cutting-np of large estates, it is proposed, in tho case of farming lands of an unimproved value in excess of £12,500, that the amount of land tax assessed on the present graduated scale shall be increased by a supertax calculated on a graduated percentage basis rising 1 per cent, for each £SO of • unimproved valuo above £i2,SCO on which such land tax is assossed, until for an unimproved valueof £15,000 the supertax will be 50 per cent, of tho land tax on the present basis. Thereafter the rate of supertax will continue to increase 1 per cent, for every £3OO of unimproved value on which land tax is based,, until for an unimproved value of £30,000 the supertax will be 100 per cent. Above £30,000 thei supertax will bo at a fiat rate of 100 per cent, of tho land tax as assessed under the present scale." The following examples were given to show the effect of the proposals:— Unim- lncreaso proved Present With j , er Value. Tax, Supertax. Increase. Cent. £ £ 8. d. •£ S. (I. s. b. d. io 550 78 7 5 79 ,'i 1 015 H ' 14,000 91 8 0 118 17 1 '27 8 7 30 35.000 100 18 9 151 8 1 ™ 18.000 131 If. 3 210 18 0 ■> } f £0 °1 000 106 5 0 282 12 0 110 / " iU ao.'ooo '290,13 9 581 IT 0 290 IB 0 100 "It is further proposed," the Minister continued, "that the mortgage exemption allowed in assessing land tax shall be reduced to £SOOO, disappearing £!. for every £1 of unimproved value in excess cif £SOOO. The present exemption is £IO,OOO, disappearing £2 for every £1 of unimproved valuo in excess of £IO,OOO. It is n fact that at present, owing to exemptions, manv farmers with an unimproved value up to £IO,OOO pay neither land nor income tax. Greater of Taxes to bo Paid. "In addition if is intended to amend the law to make all farmers, including farming partnerships, with holdings (whether owned or leased) of an unimproved value of £12,500 and over at any time during the yeai ended March 31, 1929,. assessable with income-tax on their farming income, but subject to a sot-off of the actual amount paid in land-tax on tho land used for farming. In effect, this means the payment of land-tax or incometax, whichever is the greater. In such cases, however, the 5 per cent of the capital value of land otherwise deductible from assessable income derived from such land will not be allowed, as normally this is intended to cover land-tax paid. This proposal is intended to ensure that the large farming incomes will contribute to the national revenue in the same ratio as the incomes from other occupations, which is only just and equitable. New Levy on All Imports.

"As i do not anticipate that these land and income-tax proposals will produce emugh additional revenue to ensure a balanced Budget for this financial year, it is pioposed to move a resolution tonight increasing the primage duty on impor's from 1 per cont. to 2 per cent. Primage is purely a revenuo duty imposed

upon practically all imports, whether dutiable or not, and to obtain tho additional revenue required in the manner indicated will not affect any particular industry or class of goods. The duty is so small and so universal in its application that the proposed increase wili be the least felt of any possible increase in indirect taxation. Further, as soon as the Budget balance is stabilised, this additional duty can be taken off without disturbing the tariff in any way. "To remedy a cause of hardship under the present income-tax provisions relating to children's exemption, it is proposed that the present age-limit of 18 years shall not apply in cases where the Commissioner of Taxes is satisfied that a child, owing to mental or physical incapacity of a permanent nature, is unable to earn his or her own living. Further, it is proposed to provide that the exemption on account of children under 18 years of age shall be apportionable over the 12 months in cases where a child is born or attains the age-limit for exemption during the income-tax year. At present, if a child is horn on March 31, the full exemption is allowed, and if a child dies or attains the age of 18 on March 30, the exemption for that year is lost. Uncertain Results of Proposals.

"The available data in connection with farming incomes is meagre, as income-tax returns have not been made by farmers since 1923," Sir Joseph Ward added. "Moreover, the elTect of the steeper landfax as a set-off against income-tax cannot be readily arrived at. For these reasons it is difficult to estimate how much additional revenue will be derived from the proposals. The matter is further complicated by some uncertainty as to the extent of the increase in imports that will result from (he present large favourable balance of trade. The direct cause of the deficit last year was the failure of the revenue from taxation to come up to expectations, and I want to ensure that tho same thing does not happen this year. However, after careful consideration of all the circumstances, I am of opinion that the new proposals should produce the additional revenue required."

The Prime Minister also stated that, in order to place the State trading departments on a basis more comparable with outside organisations, he had decided that the State Fire Insurance Office and the Public Trust Office shall be called upon to pay land-tax. In addition, as the Post and Telegraph accounts have been separated from the Consolidated Fund and placed upon a commercial basis, it is proposed that this department shall be charged with customs duty on its imports.

PROFIT ON LAST LOAN.

TEMPORARY INVESTMENT. DOMESTIC BORROWING. [BY TELEGRAPH. —SPECIAL REPORTER.] WELLINGTON. Thursday. The reasons for issuing the £7,000.000 loan in January instead of about May were recapitulated by Sir Joseph Ward, who added that although the money was not required until this financial year there was no loss to the taxpayer. The net, cost of the loan was £5 0s Id per cent., and ho had heen able to invest the proceeds in the short-loan market at an average rate of approximately £5 3s 9d per cent., with the most satisfactory result that a profit had been made on the money for the period during which they had been held. Apart from the £7.000.000 loan, (he addition to the debt during the last financial year was £10.650,750, of which £743.293 was due to increase through conversion operations and the balance to new borrowing. Of the latter £5,409.547 was raised in London, and £4.497.910 came from the proceeds of local issues.

MATURING CONSOLS

CONVERSION OPERATIONS. LARGE AMOUNT PAID OFF. [by telegraph.—special reporter.] WE L LIN GTO N, Thurs da y. The position in regard to the 4 per cent, consolidated stock debt maturing on November 1 was set forth by Sir Joseph Ward. The amount was originally £29,490,852, and of this thero. now remains £11,274,356 to bo dealt witli A total of £17,331,496 has been converted into per cent, stock maturing in 1947 or 1948-58 £5,000,000 in May, 1928, £11,729,496 in January, and £602,000' subsequently. In addition £502,500 has been repaid by the Public Debt Redemption Act, while the Treasury holds £382,500 as an investment, awaiting cancellation. Sir Joseph Ward said he was hopeful of still further reducing the amount before the maturity date. "In fact, as local money is relatively plentiful at present," ho remarked, "I am raising some of tho funds-in New Zealand for redemption of this stock, and, including the cancellation of the £382,500 of stock held by the Treasury, have already disposed of some £860,000 of it in this manner. The effect is to transfer so much of the debt to New Zealand, which will be a sound proposition economically.'*