EARLY REACTION

New Zealand Herald, Volume LXXV, Issue 23134, 5 September 1938, Page 11

EARLY REACTION

DROP IN SHAPE VALUES GOVERNMENT'S LATE MOVE STOCK EXCHANGE PROTEST [BY TELEGRAPH —PRESS ASSOCIATION*] CHRISTCHURCH, Saturday That stock exchange values had fallen appreciably immediately on receipt of the news of the amendments Whs claimed by Mr. H. Kitson, chairman of the Stock Exchange Association of New Zealand, when commenting on amendments which bring companies into the scope ' of the social security taxation. Mr. Kitson, who said that he had the unanimous support of the stock exchanges of New Zealand in his attitude, protested strongly against the Government masking its intentions to bring companies into the taxation until the third reading of the Social Security Hill.

"This practically prevents company executives from placing before the Government their representations about the effect of the amendments," Mr. Kitson said. "Of all the increases that have been made in company taxation, I do not think that any has come with practically no warning, as in this case. It is all the more disturbing, since the Government had so many opportunities of advising the commercial community of its intentions.

Payment without Benefit "It ought also to bo realised that in these amendments the Government is departing entirely from the essence of its justification for social security—that is, that those who pay the taxa-' tion should receive the benefits, medical and financial," Mr. Kitson added. "No company wants medical attention and none will get financial assistance. "The heavy increase in taxation must mean that the commercial expansion of companies in New Zealand will be seriously retarded. In some cases this taxation may be passed on in higher prices for manufactured goods, thus increasing the cost of living. The contraction of national wealth must also be very considerable if this new provision is persisted in. The adverse effect on companies has already been shown by a serious drop in prices on the markets, not only in companies directly affected by the new taxation, but also in bank shares, which are exempt from this particular tax, but which naturally suffer from any repercussion on other companies. A Typical Case

" The effect of the taxation on one particular company whose figures 1 took out to-day will show the general effect," Mr. Kitson said. "On its figures for the last year this new taxation will involve the payment of approximately £4500. ]f the taxation was on the basis of individual shareholders and their dividends the payment would be £693. I would suggest that when companies send dividend statements to their shareholders in future they should show the amounts that have been deducted by the Government for taxation, so that the small shareholders would realise the amount of taxation they are paying. " One of the features of this new taxation is that it will hit the medium to small shareholder harder than large companies. Then, what is going to be the ultimate fate of those superannuation funds already existing and being generously subsidised by companies? And what about future investments in sound enterprises? Stock exchanges throughout New Zealand have used every endeavour to guide investors into New Zealand controlled and owned companies, and this additional taxation will make it exceedingly difficult for them to justify continuing to do so. Further, it will frighten away any capital at all inclined to invest in New Zealand securities."

PASSING ON THE BURDEN . INCREASE IN RETAIL PRICES [by teleghaph—OWN correspondent] WELLINGTON. Saturday •Managers of large wholesale and retail firms in Wellington, when interviewed, stated that the extra cost that the new tax on companies would represent would certainly have to be passed on to the public in the form of increased prices. "The proposal to make companies liable for contribution toward the social security fund is iniquitous in every sense," said the manager of a largo importing and retail store. "The additional tax must result in an increase in retail prices if wo are to carry on at all. The announcement of

the proposal has created a tremendous stir in business circles in the city and must have the gravest repercussions against the Government."

The managing-director of another establishment said that the proposal would result in adding still more lo the difficulties that business firms had had to contend with through the general rise in costs that had taker; place d'iring the Inst three years. Retail turnover had failed to keep pace with the increase in costs.

Retail business was just beginning to experience a very welcome boom, with figures increasing every week, up to the time of the last general election, he stated, but since then it hrnd become increasingly difficult to carry on. let alone make a reasonable margin of profit.