INTEREST REDUCTION.

New Zealand Herald, Volume LXIX, Issue 21130, 12 March 1932, Page 10

INTEREST REDUCTION.

In striking contrast to the attitude of the Economists Committee upon the interest reduction question are the recommendations of the National Expenditure Commission. The committee, taking up a doctrinaire line of argument, suggested a general reduction of 20 per cent, without allowance for varying circumstances, without examination of factors which might conflict with equity, and without any proposals as to the machinery to be employed in bringing its ideas into effect. The commission, on the other hand, gives recognition to all these questions and, by its stamp duty scheme, offers the most practical method so far devised of spreading the burden to public investment income. The stamp duty proposed would be paid upon the interest earned by every State and public body bond held internally. The levy would have to be paid by all holders of bonds whether income tax payers or not. But this would not mean any departure from (he principle of equality of sacrifice, seeing that income taxation already lays a heavy discriminating hand upon the investment earnings of all income tax payers. The stamp duty scheme would have the advantage of speed and economy in operation, and would better serve its purpose as a temporary measure than the voluntary conversion scheme which the commission outlines without any evidence of enthusiasm as a possible alternative or complementary plan. Although a reduction of 15 per cent, on all public interest at \\ per cent, and over is suggested as the objective should a voluntary conversion be launched—an economy that is estimated at 1)564,000—it is to be noted that the commission does not give a, definite recommcndation as (o what the stamp duty should be. It merely states that the amount should be "commensurate with the sacrifices demanded of other classes of income." Hence it can make no estimate of the return which would have to He added to the total of £2,070,262 of proposed economies. Although the commission considers that the question of interest on private investments is outside the scope of its order nf reference, it regards it a duty to urge that, adjustments in harmony with the general economic, trend should be made and expedited by the establishment of a, special court of equity. Rut what is in effect a, court of equity with very wide powers exists under the Mortgagors belief Act, and the Adjustment' Commissions, set up under the amendment of last year to assist the court and encourage voluntary settlements between mortgagor and mortgagee, greatly facilitate the working of the Act. The fact that there lias been no rush of applications under this legislation suggests that the present machinery is adequate for the need. It is common knowledge that adjustments have been widely effected without the aid of the court.