TAXATION PROPOSALS.

New Zealand Herald, Volume LXVIII, Issue 20821, 13 March 1931, Page 10

TAXATION PROPOSALS.

The additional taxation contemplated by the Government is to be imposed principally on incomes, according to the Prime Minister's statement published yesterday, as he considers this the most equitable source of additional revenue because it has the least effect on working costs. Mr. Forbes puts forward this economic fallacy with all the valour of ignorance, strengthened by a confident expectation of applauso from his friends in the Labour Party. He is utterly unfitted for the office of Minister of Finance if he docs not know that any increase in taxation of incomes directly increases working costs, and that it is as prejudicial to primary producers and business generally as .additional customs taxation. Has any officer of the Treasury or any member of the Government studied .the income statistics of recent years'! If Mr. Forbes will examine the figures for 1926-27. and 1929-30 in the latest issue of the Year Book, he will find that the aggregate amount of assessable incomes returned increased in three years by nearly £11,000,000, but the total for the commerce and manufacture classes declined from £19,820,000 to £18,899,000. In the same period the total amount of tax assessed increased by £IOO,OOO, but the. taxation payable by commerce and industry declined by £120,000. Until recently those two classes paid nearly 70 per cent, of the total income tax : their contribution dropped to 66 per cent, in 1926-27, and three years later, owing to the contraction of their gross income, they were assessed for only 60 per cent, of the whole taxation. Is it not obvious that, as successive Governments have been repeatedly warned, excessive taxation has produced stagnation in industry and commerce and that their natural expansion has been prevented by the paralysing effects of constantly increased demands by the tax collector'! Commerce and industry paid over £2,000,000 in income tax in 1929-30, on a shrunken income, although economic conditions during the year in which it was earned were booming. In the following year, when depression was developing, their earnings declined further, and to maintain its revenue the Government added 10 per cent to its levies. The higher rate of taxation has just been paid when Mr. Forbes announces a still further increase to be paid on incomes diminished by depression prevailing throughout the full year. He ignores or is incapable of understanding that constant increases in taxation have been one of the principal causes of the increasing unemployment and that his present proposals will further aggravate that problem. He is equally indifferent to the obvious fact that the rate of income tax has a direct bearing on the rate of interest for mortgages, so that the policy now advanced represents another blow at the primary producer. Industry was never less able to bear increased taxation of any kind than at present, and enforcement, of the Government's proposals will indefinitely postpone any hope of recovery.

THE COST OF GOVERNMENT

The relief to the Budget that would be secured by a reduction of 10 per cent, in salaries and wages was stated by Mr. Forbes a month ago to be £1,500,000. This figure included the railways and the postal and telegraph services, although the former is nominally and the latter actually independent of the Budget accounts. It also included salaries of teachers, which arc covered in the Budget by grants to local education authorities. Attention was immediately directed to the fact that the estimate, indicating a salary list of • £15,000,000, exclusive of amounts paid from capital and other separate accounts, disclosed the cost of government to be enormously disproportionate to the needs or the capacity of the country. The estimate has been revised in a statement presented to the House of Representatives last evening by Mr. Ransom. The total of salaries and wages is now presented as £13,916,910. Excluding the railways total of £4,095,000 and the post office £1,808,000, there is a sum of over £8,000,000 for salaries and wages directly payable from the Budget. Now that the subject has been brought under review, a complete explanation of that huge amount should be given. The Government has evidently been furnished with elaborate statistics, since Mr. Ransom was able to estimate the saving so precisely. From them it should be able to present exact information regarding the numbers and the cost of staffs in the various departments, and,- perhaps, by thoroughly examining the position, discover means of effecting further economy by retrenchment of superfluous personnel. At least, if the information is compiled in an instructive form, and made the basis for an annual return, it will for the first time be possible, to determine exactly the size and the growth of the Public Service.