MORTGAGE TAX

New Zealand Times, Volume XXXIII, Issue 7853, 15 July 1911, Page 4

MORTGAGE TAX

PROPOSED SUBSTITUTION OF INCOME TAX. VIEWS ON THE SUGGESTION. A loading officer of one of the lirgcst private lending institutions in New Aoaxand, discussing a suggestion that tne mortgage tax anould be abolished in order to substitute the income tax as the means of taxation of income derived irom mortgages, was asked by a ‘’New Zealand Times" representative if such a orange wouri bo a good thing for the country generally, or any improvement on existing conditions to lenders or oorrowers. “it would be difiicuit to suggest any benefit to be derived from such a topsy-turvy system as that,” replied the financial authority. “The mortgage tax b a fiat rate, imposed equally on every mortgage, but the income fax has many variations, from bixpcnce up to la 3d in the £l. Supposing the rrc-rtgf go mx disappeared, our con cern woild pay la 2d in the £1 on incom, which would be very much higher, seriously prejudicing the borrower—who always pays m the end—not so much because of that, however, but because the method. would directly discourage lending other than trilling sums. Tne lender who pays 6d in the £1 income tax would nave leas tax deducted from his 'interest than the one who £aid oh a higher rate. Everyone would ay3 a different basis of operations, and the whole business would bo thrown into confusion.”

The position was farther analysed by another authority, who pointed out that the result of transferring the mortgage tax to income tax would be to do away with the £SOO exemption on mortgage tax, unless the lender was not in receipt of an income of ,£3OO per annum—a very unlikely contingency if lie had money to invest in mortgages. If his capital out at 5 per rent, interest reached /6DOO, he would then suddenly have to pay taxation on the whole amount. The proposal had been put forward lightly, without thought as to how it could be equitably worked.