TAX ALLOWANCES

Otago Daily Times, Issue 21975, 9 June 1933, Page 11

TAX ALLOWANCES

REMEDY FOR UNEMPLOYMENT ENCOURAGING NEW INDUSTRIES. (From Oce Own Correspondent.) LONDON, April 13. Speaking yesterday at the annual meeting of Imperial Chemical Industries, Ltd., Sir Harry M'Gowan (chairman) referred to the handicap imposed ou the development of industry by the present system of income tax allowances for the wear and tear of machinery. “The remedy for unemployment," he said, “ has partly to be found in the establishment and extension of new industries. In these days some security of tenure through Government measures is Essential. Tiie tariff partly provides the mechanism, but old or revenue duties are still subject to all the uncertainties of annual Budget requirements. This defect should be remedied by appropriate transfers between the two categories of import duties. “ Encouragement should also be given to capital outlays on new ventures,” he maintained, “by a more elastic system of income tax allowances for wear and tear of the plant employed. The Crown cannot properly reply that the Income Tax Acts provide an allowance for obsolescence of plant, because that allowanee only becomes effective if new expenditure is incurred on replacing the obsolete, plant. “ New ventures which do not succeed do not renew their plant, and thus have no means of obtaining the allowance. In that event, the provision is an empty shell. The Royal Commission on the Income Tax recognised this in its recommendation that an allowance should be granted in respect of obsolence for machinery or plant, disused for any' reason, whether replaced or not, except where the disuse was the result of the discontinuance of a business. A SHELTERED “ New enterprise means fresh employment, but it also means risk. The Government share the profit of success, but decline to share the risk of failure. These wear and tear obsolescence provisions should be enlarged and modernised to encourage new capital expenditure. The Government must meet industry in these matters if they desire to make an effective contribution to new enterprise. Industry, for its part, should assist by lowering the expectation of normal return upon the capital expenditure within the bounds of reasonable safety.” Sir Harry M'Gowan paid tribute to the adoption by this country of tariffs, and remarked that “while industry, even in the home market, may still have to sustain further shocks arising from world conditions, we can be fairly confident dhat Great Britain is in some measure sheltered from the blast.”