LAND AND INCOME TAX

New Zealand Times, Volume XLVI, Issue 10689, 8 September 1920, Page 6

LAND AND INCOME TAX

GOVERNMENT PROPOSALS DETAILED TO HOUSE

MR MASSEY ON "'MORTGAGE TAX GRIEVANGE" . THE TAXATION OF UNIMPROVED LAND OPPOSITION PROTEST AT GOVERNMENT BY COMMITTEE

The Houso of representatives met at 2.30 p.m. yesterday. Preliminary business {dealt with elsewhere) was completed,at 3 p.m. : Sir 11. H. Ehodes introduced the Mount Hutt County Bill (No. 2), which was read a first time, and referred to the liocal Bills Committee.

lengthy discussions on the amount of liquor taken into and the convictions in no-license districts and on pensions and superannuation, reported' in another column., .occupied the Houso till the dinner adjournment." • On the House resuming at 7.30-,-pm. the■ „Lnncl and Income Tax Asessament; Act, '1915, Amendment Bill, was'introduced'by Administrator's message •■• PRIME MINISTER EXPLAINS. LESS "TAXATION ON DEBTS." In reply to Mr T. M. "Wilford (Hutt), the Prime Minister said he propos-ed 6om« important changes in regard to the la'iid alid'irfcome tax. Anion? the more important of these we>je the provision in clause.. 3 relieving the mortgagoi to _ a certain extent of the mortgage tax grievance. It did not relieve hiur. altogether. Ho could not go as far as he would-have liked, -but- the bill relieved him-ioL.a certain.extent of the grievance that he had t opay taxation on his debts. Under the present Act mortgagors 'were completely exempt up to =£lsoo from mortgage- tax, snd the exemption • expired at .£3OOO. TJnder the bill complete exemption would be given up to £4£CQ, and tin exemption disappeared on a sliding scale at .fSOCO. Hehad gone as far as the department, himoelf, and the Finance Committee thought inadvisable to:go. 50 JrEB CENT. MORE ON BIG UN- — --.. IMFKOVED AREAS. In different parts of Neiv Zealand there were large blocks of land in an unimproved state, which ought to be improved. (Hear, hoar.) Clause 6 aimed at stirring uptite owners oi this land. The. Government was telling them' that they would have to pay 50 per cent, more tha ntha "'ordinary'tax if they did not improve such iand. (Hear, hear) Mr G. Witty (Eiccarton): Hake them produce. Mr Massey: That is our object. Thu present exemption, under the income tax, of, #S„.for each child .under . the„-aj;o of 18, was to be increased to ; .650./-(Hear, hear.) . An exemption of £SO was also allowed in the case of a man maintaining: his mother, and there were exempfor 'superannuation, etc. (Hear, hear.) •' "EARNED AND UNEARNED ... ~ INCOMES. ...Clause 15 made a difference between earned and unearned incomes, but the relief in the- case of earned incomes disappeared at .£2OOO. After that both earned and unearned incomes were treated alike.' Clause 18 brought in shipowners, who had hitherto' escaped to a certain extent. If a shimiinjr company, with- headquarters in New Zealandheld ships trading to other countries they had been exempt up to the pres'entr'but' the bill brought them in. (Hear, hear.) It was New Zealand capital the? wero working on-, and the Government thought tho.. income ought to be taxed. There was a further pro■vision in regard to incomes from debentures, which the Government held had been escaping their fair share, of taxation. Tho present tax was Is in the £. ■with a-waV tax of Is 6d in the.£. He did not see why the holder of debenturea should not pay income tax on the gam© basis as any other member of the community. ' HIGHEST LAND TAX, lOiff.'" " Under the existing land tax, up to £IOOO taxable value—which, .with the .£SOO exemption, meant an unimproved value, meant ,£lsoo—the land tax was Id iti the £, rising by one 2O,Cooth of a penny for every £ "n excess of that amount, with a maximum of 7 17-20 d To that maximum the bill added 33 1-3 per cent., making it about 10i-d. Mr W. A; Veitch (Wanganui); Is that estimated to increase the total amount of revenue. ' Mr Massey: Yes. The highest rate of tax. he added, applied under the present'Act to land of an unimproved value of ,£192,000. That limit the Government had reduced bv .£54,000, making the highest rate of taxation under the bill applv to land of an unimproved value of .£138.000. That very con. siderably increased the tax on the larger estates; but the taxation on the smaller blocks of land would be easier than at present " ' - . . ,' Mr "Witty: Ut> to a eiven point. Mr Massey •- Up to .£IO.OOO. Up to '.£9000 there will be a slight increase in the land tax, and at .£IO,OOO it was about equal to the old scale. There would be no serious increase until .£30,000; and that exempted tho ordinary farmer from the burstimr up tax. which was not apnlied till after .£30,000. • Colonel Mitchell (Wellington South): Will the larger amount apply to many people? Mr Massev: Yes. There was no doubt that applying the hicrhpst rate of tax—lOJd in the .£— to .£133.000 unimproved value, instead of X 192.000. would verv greatly ..increase the number of blockr of land to which it annlied GRADUATED INCOME! TAX. The alte'ration in the income tax wa l also very important, he added- Thp higher rates of taxation now stopped at JJ6400 Under thp bill the araduat'on would stop at .£10,000: while 20 per cent, was to bo added to tbp nigh*si tax: o. 7s in the £,, but 10 per cent, was to come off that in the. case of earned income. Those were the main proposals of the bill; and he thought they would commend themselves to most lion, members and to the great majority of thp the country. The bill did away with a certain number of anomalies; but tbfv bad not gone in for increasing to any great extent the revenue to be derived from the land .and income tax. They had. however, taken caro to bo on the right side, and there would be no loss of revenue. His object was to remedy anomalies and apol* the bursting-lip .tax where the Govern, ment thoU7ht it ought to be applied. Ar alteration had been made in regard to the trading concerns of local authorities. Thoy would in future have U pay inrome tnx in the same wav nn t-h" businesses with which thcr competed. (Hear, hear.) "•"COMMUNITY-CHEATED VALUE." Mr J. McCombs (Lyttelton) regretted that an exemption was to be made to a certain extent to tho mortgagor. It was Just aa wrong, he maintained, a* foi a ratepayer to claim to.' -b* rated only on his equitv in tho iand, not on the total value. . The landowner, whether mortgaged or not. stood to cain all the unearned increment oil the property. He

Mr J. G. Smith (Taranaki) seconded the amendment, charging' that the Government committed a breach of iVith by not revising both indirect and direct taxation this -year. , Mr Massey said that the head of the Treasury Department had informed hinthat it was quite impossible to make tha proposed changes in the land and incomp tax in time for this year's collection of revenue. At-the end of the year the accumulated _ surpluses, he hoped, would total 20 million pounds, which would be invested in land for soldier settlement—a very good investment, too. The increase in Customs revenue .was very largely due to the increase in our trade since the war. For the first time in five »year»"the -value of our imports exceeded the value of exports.

TARIFF REDUCTION NEXT YEAR? Next year, he hoped to be able to reduce taxation. Ho would like, for example, to do away with t ne primage duty and with the duty on. tea. They could not revise the tariff this year, unless they were prepared to stay there till Christmas. Were hon. members prepared to do so? Mr Veitch •. You and I will stop here and do it. (Laughter.) Many people, contended Mr Massey, were already paying in taxation as much as they could; and if prices came down theyi would-be in a very difficult position. Mr Witty: They have paid too much for the land. Mr Massey said that he did not agree with tho very high, prices that had beon paid for land. The purchasers, unless they' had paid cash down, would, ho thought, find out their mistake. As to Customs taxes, ho added, he was not p protectionist,' but a preferential tariff man. He hoped that as a result of lh. revision of the Customs tariff next yeawe should have a much better prcforop tial tariff. He wanted to see our trad'i with Britain and other Ijarts of the Empire increase. Mr D Jones (Kaiapoi) contended that the taxes on lnnd were already rmi'. heavy enough. Next year the farmer* would also have to pay five millions moro in freight on their produce. Colonel Mitchell (Wellington South) said that the British people would have to pay it. Mr .Tones: No; the prices of wool, etc., are falling. Mr McCombs maintained that it would be ouite possible for the Government to do this vear, without a complete revision of the tariff, what the Prime Ministeisafd should bo done next year. The Government could this session abolish tho primago duty and the tea duty; and thev miorht also remit the duty on piece cotton goods. WOOLLEN COMPANIES AND TARIFFS. Mr Jonca challenged tho Opposition speakers to sav on what lines the tariff should be reduced they reducethe tariff on woollen goods? When tho tariff on woollen goods was 15 per cent, thf- woollen companies could not pn-v- a dividend and paid very low wages. Now the duty was 25 per cent., however, they paid good wages; a number of com- | panies wore ja euccessful operation, and

f was not surprised, however, that the Government had given wav; to that extent to the landowners; but others would have to pay more to make it up. Mr Massev: No. we are getting more out of the landlords than beiore. Mr McCombs objected to the exemption of land .from taxation;- as it was the onlv commoditv cp the market that attracted to itself * the communitycreated value. He asked if there was a provision -to relievo ttie landlords ot paving land and income tax. Mr Massey: No. Mr Wilfcrd said that he would deter his remarks on the bill until he had bad an opportunity of studying tho bill. (Hear, hoar.) • . 'Mr Massey contended that the whole principle of taxing a man en bis debts was absolutely wrong. But the bill did not go far in the direction of relieving him. Mr McCombs: Not on his debts, but on tho land ho holds. Mr Massey: No; on his debts. The higher rates of taxation, he addod, should not apply to 'anl and were not intended to apply, except for bursting purposes; and bursting up should not commence until we got beyond the ordinarv farmer. That was the object ox the provision in the bill. He had not been able to relieve the mortgagor as much as he would have liked, because of the need of lerenus. But he thought it would have been wrong not to take the opportunity of relieving the smaller men as far as- possible. Thg bill was read a first time. THE ANNUAL TAX. SECOND BEADING DEBATE. ,*„• CUSTOMS,- REVISION URGED. , „ £j ■■ *-; l*'- .' • ■■ . '"' 'j>.' »* Mi Massey then moved the second reading of the Land and Income Tax (annual) Bill. Tha measure, he stated, had already been discussed-at some length, and he would only formally move the second reading." Mr Veitch contended that instead of levying the land and income tay this year on the same basis as last, the Government should have the incidence of taxation this year. While there was to be no gTeat increase in -the revenuo yielded by tha land ana income tax there was to be a considerable increase in Customs taxation, increase of about .<j ni»Hson ana' a {tali,': bringing up-the revenue to'some, six millions. A consider-* able amount of this, with profits added, would be paid by the poorer people. Why was the Government relieving tho smaller farmers of injustice but not bringing forward, any proposal to relieve thn wage-earners of their heavy burdens under- Customs taxes? < Mr Massey: The workers have not to pay t»YCB on their debts. AMENDMENT MOVED. Mr Veitch: The small farmer would share in the relief under Customs taxes. The hon member moved an amendment,, thai tb,e I _biU be-referred back to tho Government, with the. lecommcndationsr(l) That a' substantial reduction be made' this year in the Customs .taxes . on. thenecessities of life in common use in the homes of the people, in orßer to reduce the cost of lining; (2) that there should be a substantia! increase in the higher grades of graduated land tax, to ensure the subdivision of large eßtates at reasonable prices j and v. 3) bubslantial increasca in tho taxation on higher incomes and in death duties.

others were being established. They on that side of tho House, lie stated, wero willing fto work whole-heartedly with the workers, and if the workers would only co-operate with them they could remedy muiiv evils. (Laughter.) Mr W. D. Lysnar (Gisborne) said that ho should vote against tho amendment, though he agreed with tho main principles of it. He recognised, however, that.anv .adjustment of the Customs tariff was impossible this sossion; and exactly the same was the case in regard to land and income tax.

Mr Massey: The bill v.ill be passed this session.

Mr Lysnar: Yes; but not to come into force this year. He contended that the huge accumulated surpluses showed bad nuance. He was glad that the Primo Minister intended to'treat the huge amount invested in soldiers' land as an asset; and hoped that in case of necessity it would bo used to liquidate tho debt. He hoped that somethingwould bo done to get something out of Germany towards the cost of the war. What'-they did not get in 'indemnity, they should, tret in duty on .German goods coming in the country. (Laughter.) There would bo a good deal of such goods cominjr in. (Laughter.) Mr Downie Stewart (Dunedin West) opposed the amendment. DISAPPOINTED. '. A READJUSTMENT, NOT AN INCREASE. Colonel Mitchell said that he was disappointed, with the Prime Minister's statement in regard to land and income tax. It was quite evident that the Government did not intend to increase the taxation on land and incomes this year or next. It was a readjustment, not an increase. Mr Massey: That is not go. Colonel Mitchell: You distinctly said that your bill would not bring in any more revenue, and was really an adjustment. Certainly the Government was taking some taxation off smaller ©states and putting it on the larger ones; but the latter were very few in number; and there was to be no reduction in the taxes on the necessaries of life. He regretted that the Government was not making provision lor paying off the wai debt sooner. The producers, he held, had not paid sufficient in taxation on their profits during the wjar, and were not paying sufficient now; Mr J. P. Luke (Wellington North) urged that a committee should be set up to [deal with the revision of the tariff so that the House could see to work on it as soon as Parliament met next year. OPPOSITION LEADER'S PROTEST. GOVERNMENT BY COMMITTEE. Mr Wilford altogether disagreed with, the suggestion of setting up such a committee. It was surely the duty of the Government to present a tariff policy to the House, not to ask a committee of the House to find a policy for the Government. That was becoming too much of a habit at the present time. A Defence .Committee was 6et up to find a deforce policy for the Government, also a' Tinance Committee, a committee on Armour and Co.. Ltd., a committee to say what the price of butter should be, and so on. He wanted to see the Government bring down legislation. to cause subdivision of large estates,- and the only way to do that was by a sut>stantial increase of the graduated .land tax. -

Mr Massey: Especially on unimproved land.

Mr Wilford objected to. the Prime Minister putting words into his mouth. Ho urged that the Prime Minister should introduce legislation showing a strong radvnjii.'e'jgin taxation .on large estates, 'Tar"g§»3n&*nles, and death duties, holding over' the operation of the Act until the Customs taxes were revised next year. The Commissioner of Taxes could readily tell the Prime Minister what increase in tha graduated land and income tax and death duties would be necessary to allow of the repeal of the tea tax and so on. ■ .. Mr Massey said that tho rates of taxatioi' would be increased this year. Mr VPilford replied that the principle of increase was there, but tho lates of increase wero not satisfactory. His idej. was that the small farmer needed helping, but the big farmer" holding a jarge .area an 1 not using it properly .neetted to *> e hi- to:the boundary. What a difference there would be in the feeling oi the l.eopla of the country towards the Prime Minister if they did not'feel that ho was tied to the big landowne-rs. Mi Massey t They kmw that ia not the case. (Laughter.) Mr -Wilford said they knew that there would not be a strong enough movement to make them out up their estates. Mr Massey : The big estates are melting tiifi snow in a thaw. I know a dozen eoonties in my district whore there are no big estates left. Mr H. E. Holland (Buller) declared that the war profits of this country, after allowing for the increased cost of production, quite amounted to 100 million pounds; and these profits had not been at.all adequately taxed. Again, the unimproved land values in 1914 wero 228 millions, in 1919 they we're 273 millions, and the Prime Minister 6tated that last year unimproved values increased by 2i millions. That made a total increase of 71 millions between 1914 and 1920, yet the land tax was only to be 11 millions i in all. AMENDMENT LOST. On a division the amendment was lost by 32 votes to 16; and at 12.21 a.m. the bill was read a second time. The division list was as follows: For the amondment (1G) Atmore, Forbes, Eraser, Holland, Howard, McCombs, Masters, Parry! Poland, Savage, Seddon, Smith (R. W.), Smith (S. G.), Veitch, Wilford, Witty. Against tho amendment (32)—Bitchener, Bollard, Coates, Dickson (J. S.), Field, Glenn, Guthrie, Hamilton (A.), Hamilton (J.R.), Harris, Hawkon, Henare, Herriee, Hockly, Hudson. Hunter, Jones, Lee, Luke, McLeod, McNicol, Malcolm, Mander. Massey, Nosworthy, Parr, Pomaro, Powdrell, Reed. Rhodes (Sir R. lI.V. Rhodes (T. W.); Young. The committee stage and the third reading occupied two minutes only, and at 12.23 the House adjourned till 2.30 this afternoon. . ■ '