THE LABOUR BUDGET

Otago Daily Times, Issue 22958, 13 August 1936, Page 12

THE LABOUR BUDGET

A LAND TAX SURVEY By A.P.A.N.Z., F.R.Econ.S. II COMMERCIAL HOUSES AND BRANCHES The incidence of a graduated land tax falls very heavily on business and commercial concerns which, because of the nature of the service they rendered, require to establish branches in the cities and towns throughout the Dominion. It is not from choice they require so many sites; the scattered centres of population in the Dominion lays this necessity upo them. For most ot them it is essential that their places of business should be in the central positions where they can make easy contact with their customers and the public. Again, most find it necessary to acquire freehold land, and to build the type of premises suitable for their business. For many reasons they cannot afford to rely on leased premises. In any case, if and where they occupy leaseholds they were previously assessed on the aggregate value of premises occupied, deducting any tax which the actual owner of any individual premises may have paid. It is an extremely onerous and unequal system. Some concerns, because they are engaged mainly in manufacturing, can occupy low value lands in the suburbs or on the outskirts of the city or town. They escape the heavy part of the tax. Other concerns, because of the nature of their service, must occupy the central or high-priced land. Neither type of .ncern is interested in any speculative profit or the selling value of the land. Once the land is acquired and large sums spent on buildings and plant, they wish to remain in the same property indefinitely. They rather prefer to keep values from growing too high, as, apart from other considerations, it brings to them additional and growing demands for rates. Again, it should be emphasised that these concerns utilise the land to its fullest extent, invariably putting up premises to the full limit of economic 'alue in the particular centre in whiph they are located. The nature of graduated land tax, and especially of the rates of graduation, now proposed is that of a penal tax. It is designed to discourage, limit, or break up big units. Is it the desire of New Zealanders, then, to be a nation of small units, small properties, small manufacturers, one-town stores—and small stores at that? Is it not rather a fact that the big units are essential in many parts of our economic life? They render a real service to the community, providing employment . for large numbers and passing on the benefits of large-scale operation to the public. Is it not constantly explained that prices are high in New Zealand because we are not organised in a Digger way and are thus unable to use mass production methods?

Again, the statistics show that the large units provide the greater portion of the income tax levied. Persons and companies with incomes of £SOOO and greater provided in 50 cent, of the total income tax raised. Where will the tax revenues come from if ve are to turn our faces towards smaller units? Income tax is much more important to the revenues than land tax is. Are we not in grave danger of wrecking the big units and killing the geese that lay golden eggs? A TYPICAL EXAMPLE Large manufacturing company with branches in cities and towns for distribution of its poods, say: Capital £200,000 Unimproved value of, say. eight sites occupied 100.000 Mortgages on land tiO.OOO Net earnings or taxable Income—B per cent, on capital ,10,000 1035. 1936. £ £ Income lax .. .. 4.»!80 0.000 Land tax 416 2.5U0 Total tax •• • • £5,090 £8,500 Surplus for shareholders .. •• »• 10.004 7,500 Percentage of surplus to capital .. S Wo 3%% Division of Earnings— To Government (per £) .. .. ♦. 0/5d 10/7d To company (per £) .. . . •• 13/7d 0/5U Most New Zealand companies are comprised of many shareholders, with average holdings varying from 100 to 500 shares. Is it reasonable that these small owners should bear a levy as high as 10s 7d in the £ on their earnings because combined? The Government in this case takes more than half the profits, but it carries no risks and shared no losses. Should there be a loss, the land tax is nevertheless payable and increases the loss. It will be noted that the combined increase in land and income taxes shown in the above example is equal to 66 per cent. Is it not an excessive increase? Can the business of the country carry it with all the other adjustments and increased costs placed upon it, all at the same time. Must not taxation at these rates be an additional factor in raising prices? And are the firms which cannot raise their prices to be crippled? Possibly the Minister of Finance will allow the deduction of 5 per cent on capital value, as in force from 1923 to 1928 This would, of course, ease he position, but the heavy graduated land tax is nevertheless a fixed and unequ-1 load It is actually a penal tax on size tor certain types of business. It bears no relation to ability to pay. It has to be paid in a year in which a loss is made The allowance men tioned would help the concern making fair profits, but even with it graduated land tax becomes a millstone around the concern which is on a low profit basis. It is a capital levy on any concern which incurs a loss.