THE TAX ON ASSURANCE POLICIES.

Otago Daily Times, Issue 7316, 28 July 1885, Page 3

THE TAX ON ASSURANCE POLICIES.

The following' circular lias been addressed to the members of both Houses by the representatives of the companies doing life business in this Colony :—

We, the' underaignl'dj the representatives of the life associations doing lmsliiess In Nuw Zealand, submit to your consideration the folldw'ing reasons why life assurance societies should not be' included fof'taxa.tion purposes in "Tiie Property Assessment Acti.1885.," and" .we.trust; they will have sufficient weight to induce you,fa eliminate from^axntion the funds of life assurance societies altogether.:— _ . 1. That a tax upon the funds of life assurance societies is a tax upon thrift and upon the only means, in many instances, a man is in a position to make to avert' poverty from his wife and children. Such a tax, therefore, cannot but be unjust.

2. That instead of taxing institutions for averting poverty, it is the duty of the- Legislature to encourage by every possible means in its power all societies which have for their sole object the alleviation of distress and privation. 3. That the average amount of the life policies issued in jTewjZeiiland does not exceed .some £300, and are chiefly on the lives of. people of .means bo moderate that it has been considered as only a measure of justice to them to exempt them from taxation under the Property Tax Act, so that the passing of the measure taxing the funds of life societies would create the anomaly of taxing a man only on that portion of his income which an enlightened sense of his responsibilities led him to invest in a life policy.

•1. That the moneys sought to be taxed by .the contemplated Act represent iv the main the savings of poor men, who, by the exercise of a patient and selfdenying industry, are endeavouring iv the only way possible to them to keep their widows and their orphans from the poverty and wretchedness which already are the too frequent, results of the death of the breadwinner of the family.

S. That in no other of the Australasian Colonies are life assurance societies subject to taxation. It wa9 proposed'some few years since in Victoria to tax the premium income of life offices, but, on representations being made to the Attorney-general that such a tax was oppressive and unjust, he at once announced to the House that the Ministry had decided to forego the tax of life assurance societies in the following words :-*-" With regard to thot-ax on assurance companies, the Government propose to make a great concession. Iv deference to the opinion of a great number of members, and as the Government wished ..very much to encourage life insurance, they had come to the conclusion" that they would strike out life insurance altogether." . .'" .. 0. That all friendly societies, building societies, and savings banks are exempt from taxation, and why not life assurance societies ? Life associations are not formed for the purpose of making gain or profit, like banking or lire insurance companies, but are merely a number of persons subscribing to a common fund for tho mutual support' of their families in, -the event of death ; and what are called profits by a'-life-office are simply caused by its funds being investedata higher rate of interest than that assumed-in the tables of premiums charged, and a saving in the loading made to the premiums for expenses of management. This surplus money is returned to the members periodically in the shape of cash bonuses, and can only be regarded as premium paid in excess of what was required to meet the risk, but is not gain in the sense of an ordinary trading transaction. If not taken in cash by the members, it is added to the policies in the shape of additional assurance, called a reversionary bonus. You' do not propose to tax friendly societies, or building societies, or sums paid into a savings bank, and surely there is no greater friendly, society or savings bunk than a life assurance society and when, therefore, you admit the ; principle of not taxing thrift in the above three instances, we submit that it should not be/violated.iv the case of life assurance societies. ' ' •. .-•'■•

7. As an illustration of what the proposed tax of even three farthings in the pound on the funds'of'a life assurance, society would do, we may say that-if £(3000 per annum were raised by this means in taxation from life offices doing business in New Zealand, including the Government Life Association—which we assume it is not intended to exempt—that sum would produce assurances to the extent of £318 000 under the non-participating rate of the largest life oftiee doing business in this Colony, assuming the ages of the assured to average 30 years ;• so that the Government by imposing this tax would be.virtually robbing the widows and orphans of those who are assured to the above extent. Can. tlie Government say what amount of poverty and distress the above sum of £318,000 would alleviate, and are they not by this proposed tax creating paupers to burden the State?: "..-..

8. That the proposed tax is .most .'oppressive aiid unjust.. It is equivalent to 6s 3d per cent.on the total hinds; and to a life office that is working on low premiums and realising only a low rate of interest say 5 per cent, on its funds; the1 t«x wtiu'fd reduce the rate of interest realised to £i 13s 9d per cent and is very likely to bring what, if untaxed, would be a flourishing institution into a position of financial difficulty. ■..-...■ 9. That all life assurance societies; excepting the Government Life Association, already pay a license fee of £200 per annum, which is equivalent to a tax of id in the pound dn an annual premium income of £64,000; whilg the average annual premium income ot all tlie life institutions doing business iii the Colony, including the Government. Life. Association, does not reach this aniouiit; so that the present license fee is surely a heavy enough tax.'to impose on life assurance societies. Again, the Government get succession duties'on the sums assured as they tall in, so that they already receive a very substantial share of the proceeds of the policies ns they are paid. .

10. That it is a principle of the property tax to tax a man only on his surplus estate, "whereas the proposed, measure is without precedent, as it contemplates the taxation of the whole of the funds without any regard to the present value of the liabilitiesfor which these funds are intended and must be kept to meet. :- ■

In conclusion, we trust you will see vburwayto accept the reasons here presented as sufficient to induce you to follow the course adopted by the Victorian Parliament on a similar occasion, and free life assurance societies from any legislative disabilities iv their work of promoting amongst the community those habits of thrift and self-reliance which redeem so many families from a cruel and hopeless poverty. . ■ . . ...

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