The New Zealand Times. SATURDAY, SEPTEMBER 2, 1922. FREE FROM INCOME TAX

New Zealand Times, Volume XLIX, Issue 11305, 2 September 1922, Page 4

The New Zealand Times. SATURDAY, SEPTEMBER 2, 1922. FREE FROM INCOME TAX

This outcry against the holders of war bonds who do not pay income tax has an aspect which, if not humorous, is in a sense paradoxical. Of the 200 millions of the debt, 150 mllions, being held outside the Dominion, are not subject to income, tax, and . never can be. The balance of 50 millions, being held mostly within the Dominion; does not pay income tax l —and there is a great outcry. Some heaven-born financiers are hugely perturbed. They denounce these local bondholders as inordinate profiteers, unscrupulous bandits who enjoy the fat of the land, while their fellow-citizens lie down oppressed with the burden of taxation. And all this is done with an, air. of protective Concern for the revenue of this heavily-taxed country. But there is no outcry whatever against the holders .of 150 millions who contribute nothing to the taxation. And this though they exact a larger interest considerably than is paid by the local bondholders, in the proportion of anything up to 6J per cent, over the 4$ which is the interest payable on the looa,lly-held war .-bonds. If it is .vital to. the-public finance to get taxation from the holders of the 50 million bonds. Who get 44 per cent, for their money, why is nothing said about the 150 millions, Whose holders draw a much heavier percentage on three times the amount of money? The heaven-born financiers say they draw the line.hard at. repudiation. But the line is just as hard against the smaller amount as against the-, larger." They Way plead'’difficulty of financing. If- so, there is as much difficulty in the case of the smaller holding. Moreover, being heavensent, these financiers have no right to plead any difficulties. Are they not financiers to whom nothing is difficult? And if they want; to squeeze fifty millions, why do- they fail to want to squeeze three times the amount for the Treasury for which they have such a tender regard? ’Pie foreign bondholder who, like the local bondholder;; does hot- pay: income tax, is better off than the local holder in the matter of interest. He draws considerably more than 44 per cent. The difference was fixed by agreement when the bonds were offered .locally. Roughly, that difference represented What the local bolder would have, to pay in.taxation if he had got for his money the higher rate of interest paid to the foreign lenders. Had there been' no difference between the' foreign and local interest rates, the local lender would have had to -pay taxation; and aa the. Treasury would have had to return him everything, or nearly everything, above 44 per cent., the Treasury would .have derived no benefit whatever. Collecting the tax with one hand, the Treasury would have -paid it back with the other. Clearly, the cry against the ' holder who does not pay income tax ie a hollow mockery, the mere sound of brass and tinkle ol cyfiTba'ls, a thing of sound and fury, signifying nothing but a poor attempt! to make political capital out of nothing.

Now consider the aggregate amount of these locally-held bonds. A large proportion is held by small holders, who bad their sayings in: savings banks and other provident institutions. There is for small taxpayers a substantial minimum. As .there are many small holders, these bonds are, from the taxation pSint of view, not what they seem. The exemptions would, if the bonds were taxed for income, seriously diminish the income tax yield. Moreover, there is also a proportion of the bonds held in Australia, and these are not liable to taxation. The full amount of income tax on the 44 per cent, interest of these bonds, if there were ho exemptions and no outsiders, would be about £120,000. But, on account of exemptions and outsiders, that amount would be much reduced. And what is that paltry sum, say, by way of guess, £50,000 or £60,000, in face of the ten millions of our annual permanent charge? Nothing more is required to prove the insincerity or crass ignorance of the patriots who abuse the holders of bonds which are free from income tax. Unless it is that, when informed that even this paltry saving could not be effected without repudiation, they loudly deny all desire for repudiation, and slink away out of sight, with whatever modicum of political, capital they can claim for their fearless defence of the right of an overtaxed people. If it is possible, by some scheme of purchase, to bring this money owed to the 4$ per cent, bondholders into the country, and get some from it, all agree that it. would be good to adopt that scheme. Any scheme is, of course, beyond the power of these financial pretenders, who live on catch-cries which they do not understand, to in-

vent. Instead of making any further noise about it, they should wait and see how the Government, which does know something of the matter, proposes to deal with it. When they see the concrete thing, let them see whether it is just, and according to sound principle, before they begin to bark.