INCIDENCE OF TAXATION.

New Zealand Mail, Issue 933, 17 January 1890, Page 28

INCIDENCE OF TAXATION.

With reference to the probability of a substantial surplus being available for treatment in

the next Budget, let us consider the possibility that occasion may be taken, when the question of reducing certain taxes is under consideration, to review the whole subject of the incidence of taxation. We do not purpose undertaking so large a task in the present article. We prefer merely to indicate certain, pro positions which must almost infallibly force themselves upon public and Parliamentary and Ministerial attention whenever the main question of taxation comes once more to be exhaustively discussed. The old battle of Direct versus Indirect Taxation will doubtless be fought over again. Shall taxes be exacted chiefly from those who are best able to pay them —as under the Direct system —or from everybody alike, whether able or not, as under the Indirect plan ? That is the issue which seems to possess perpetual life and vigour. Once the decision was almost entirely infavour of an indirect method. Then Direct, taxation asserted itself, and our present system is a compromise between the two plans. Now, if the looked-for surplus should prove to be as large as it is generally expected to be, one proposal respecting the modification of taxation might be to take off tbe tea or sugar duty, or both—respectively involving the sacrifice of LBO,OOO, LIOO,OOO, or LISO.OOO of revenue raised through these indirect taxes. It seems to us feasible that the reasons given by the Colonial Treasurer in 1888 for not doubling the sugar duty may be applied with equal force this year to a proposal for its removal, provided the surplus be sufficient to bear this sacrifice. On that occasion Sir Harry Atkinson said “ Tho Government do not propose to put any additional duty on sugar. The reasons which led them to this determination are briefly these : Sugar may fairly be called a necessary article of food, the most widely and largely used of any food imported ; it is extensively used in our manufactures, and it will always be available if at some future time, and upon some unforeseen contingency, a need for some additional revenue should arise ; and it will moreover be available with the least possible disturbance of trade.” If the sugar duty, and indeed the tea duty too, could be taken off, the Government could always hold them in reserve —in fact, would be compelled to do so—and thus if the popular voice should again unhappily be raised with irresistible force in favour of borrowing, and a Ministry should be in office weak-kneed enough to give in to the objectionable demand, it would be necessary to tell the would-be-borrowers plainly :—“ Understand distinctly that if any more money is borrowed Aye put on the tea and duties again to provide for the interest !” That would be a wholesome cheek. It might not be an effective one" Still it would be a help in the right direction. There is another possibility, however, which has to be taken into account. It may be urged that even if the surplus should not be sufficient in itself to permit the abolition of the te# and sugar duties, this might yet be rendered practicable by a modification of th.e existing system of direct taxation. There has always been a strong feeling in some quarters that the Property - tax exemption is needlessly large, and might advantageously be reduced or abolished altogether. Without, at the present stage, expressing

any opinion upon this point, which must of necessity be subject to various collateral considerations, it may be interesting to see what would be its practical effects. It would be a double-barrelled shot. In the first place, it would render every person who now pays Property-tax liable to pay on an additional £SOO, if the exemption wholly ceased. Secondly, it would bring under the operation of. the tax a numerous body who now escape it altogether. It is of course known absolutely how many persons there are in the first class and how much they would have to pay. It is only necessary to count the number of persons who now pay Property-tax, and the sum is the number of persons who, Jailing the exemption', would have to pay five hundred pence apiece. What they would pay in the aggregate is, in round numbers, £56,000. flow many would be in the Becond cla-s, and how much they would have to pay, no Jiving soul knows. Even a theoretically approximate estimate must be mere guess-work. It is mipposed, however, that from £IO,OOO to £15.000 would be collected from the class who do not now pay any Property-tax. The extra revenue derived from abolishing the exemption might be put down at £70,000. Now it would be too much to expect people to be desirous or even willing to pay the extra taxation, but if it were skilfully shown to them—what is in fact the truth —that they would get more than an equivalent in the relief from a like amount of duty on tea or sugar—because in the latter case they have to pay the importers’ and retailers’ profit on the duty as well—it is quite conceivable that the unpopularity of such a proposal might be mitigated, if not removed. And there are other sources from which financial experts believe that aid to revenue might be obtained without hardship. We believe that there is a discrepancy of some six millions between the bank deposits, as returned by the taxpayers aud as declared by the various banks. That is to say, the banks are more honest than the depositors, and admit that their customers’ deposits amount to a sum which is larger by six millions than those customers will plead guilty to in their statements to the Property-tax Department. If the Department were empowered to tax the genuine deposits (aa Btated by the bankers), instead of the relatively fictitious ones reported by their owners, the revenue would benefit by L 25.000. So here we have nearly another LIOO,OOO which could be raised by direct taxation, without any increased cost or any enlargement of the existing machinery, to be balanced by a proportionate reduction in the indirect taxes on the necessaries of life. It is just as well that all these possibilities should be duly weighed and exhaustively discussed bv the public before the whole question comes before Parliament for its decision. There are several other methods by which revenue might be raised without undue pressure on any class in order to relieve the burdens now resting on necessaries of daily domestic use, and without involving any revival of the Protection-Freetrade dispute; but the review of these we must postpone to a future article.