THE WAR BONDS.

Otago Daily Times, Issue 16741, 8 July 1916, Page 6

THE WAR BONDS.

No specific reference is made in the Financial Bill to the proposal for the local issue of war bonds. .Doubtless the issue : s to form part of the loan of £12,000,C00 which the Government see&s authority to raise at such a rate of interest $s the Minister of Finance prescribes. It may be presumed, also, that it is the present intention of the Government to adhere to the proposal outlined in the Budget and to issue the war bonds free of income tax. To that proposal we have already expressed an objection which it seems opportune to repeat on the ground that it differentiates unduly and unjustly in favour cf the investor of large amounts. The advantages to be reaped by the investment of considerable sums in war bonds, as compared with the investment of small sums, are both present and prospective if, as Sir Joseph Ward said in the Budget would be the case, the proceeds of the investment are to be free of income tax, and it is on this ground that the strongest objection to the proposal lies. The currency of the war bonds is to be for 20 years and the effect of the proposal of the Minister of Finance is that the investment of large sums will virtually confer on the investors immunity from 'taxation on those sums for the entire period. The Canterbury Chamber of Commerce raised a highly important objection to this proposal when it directed attention to the inadvisability of limiting in any direction the potential sources of future taxation. No one 'can say what is likely to happen after the war and the possibility has to bs borne in mind that within the period which i 3 to form the currency of the war bonds the British Empire may be forced into another fight for freedom and for existence that maj tax its military and financial resources to their utmost limits. It is a sound argument that the State should not contract to free the proceeds of any investment whatever from taxation. There is, moreover, really no excuse for the Government financing upon a wrong principle or following a bad example—for the Australian local loans are, in respect of the immunity of the investment from income tax, raised upon the terms which Sir Joseph Ward proposes in the case of the issue of war bond's. If the Government were to offer a slightly higher rate of interest on the war bonds than is at present proposed, without attaching to it the bait of freedom from income tax, it may confidently be asserted that the success of the issue would not be imperilled. Moreover, the price paid by the Stafe for the money it secured by the issue would not actually be greater than it will be if the conditions are those at present proposed. At the same time, the Government would silence the criticism that one class of investor is favoured to the detriment of the other class and it would encourage the investment of small sums, and thus popularise the issue. It is an important consideration that the State -would certainly have no more to pay for an issue of 5 per cent, bonds, subject to incorrte tax, than it would under the original proposal, since it would not sacrifice the present and prospective proceeds of taxation upon any large sums that may be invested, and it is equally important that it would preserve to itself the right, which should be recarded as inalienable, to impose taxation upon wealth of all descriptions as occasion may require in future.