THE OTAGO DAILY TIMES TUESDAY, February 13, 1940. TAXATION AND THE WAR

Otago Daily Times, Issue 24221, 13 February 1940, Page 8

THE OTAGO DAILY TIMES TUESDAY, February 13, 1940. TAXATION AND THE WAR

The statement which was reported to have been made by the Minister of Finance at Auckland, that no extra taxation is contemplated by the Government for the present financial year, was expressed in terms that were certainly liable to create misapprehension. It would be impossible to impose additional taxation for the year ending March 31 next for the simple reason that Parliament will not be in session before that date. The fact that, as Mr Nash said, the Budget for the year which will begin on April 1 has not yet been completed—it would be surprising, indeed, if any steps had been taken for the preparation of it—suggests that the Minister must have been misunderstood in his reference to the Government’s financial proposals for the twelve months. It would be highly gratifying to the community if it could be assured that there would be no fresh taxation in the coming fiscal year, but its satisfaction would not be unmixed with speculation as to the course which the Government intends to follow in respect of its war financing. On the second reading of the War Expenses Bill in the House of Representatives last September, the Minister estimated that the cost of the war to the Dominion up to March 31 would be about £9,750,000. “But,” he added, “I think it may cost us £20,000,000 or £30,000,000 next year if present circumstances continue.” From this it is sufficiently clear that, whatever its taxation proposals may be in the abnormal conditions created by war, the Government will be unable to avoid borrowing extensively for war purposes. The Minister was careful to show that even the estimate of £9,750,000 from September to March would be liable to correction, in the light of special military needs as they might arise. He explained that the War Expenses Account would receive, in addition to the normal appropriations for the Navy, Army and Air Departments, all the extra revenue derived from the 15 per cent, increase in income tax, extra death duties, Customs duties, and postal and telegraph charges, and such surplus revenue from the Consolidated Fund as might be directed, as well as all moneys that might be appropriated later. But, he said, after all those sums had been taken into account, the total would still be some £4,150,000 short of the sum necessary to cover the estimated liability up till the end of the current financial year. If extra expenses were incurred, he concluded, then inevitably the Government would have to find the money either from what was called the “ Reserve Bank procedure ” or by borrowing from the public in the ordinary way. The borrowing powers taken in the War Expenses Act are ample, and it is certain that these will have to be employed. The Government was empowered, for instance, to borrow up to £10,000,000, which would include any money that might be obtained from the Reserve Bank, as such transactions, Mr Nash said, would be treated as borrowings. In addition, . power was taken to borrow, if it were deemed expedient to do so, all the moneys previously authorised by the Bill by agreement with the United Kingdom Government without formal security, or on such security as might be agreed upon with the Home Government. This, the Minister said, merely revived, in slightly modified form, the power obtained in 1914 to borrow from the Imperial Government the money likely to be required for expenditure in Great Britain on the I maintenance of the New Zealand forces abroad. Doubtless" the machinery thus provided will be utilised as occasion demands, while for purely domestic military expenditure the Government will have recourse either to the Reserve Bank —to which it is already committed, for various unspecified purposes, to the extent of some £21,000,000 —or to the local money market in the normal way. War obligations, in the light even of experience in 19141918, when the British Government advanced some £25,000,000 to this country, must be expected to involve the Dominion in heavy expenditure of loan moneys. Present uncertainties make it impossible to estimate the limits which this expenditure will reach. In these circumstances, therefore, it is somewhat surprising to find the Minister either unwilling or unable to give information concerning the intentions of the Government with regard to the proposed introduction 6f universal superannuation benefits on April 1. Mr Nash has stated that the Government has not considered any interference with the Social Security

Act, yet, although the financial year is a bare six weeks off its conclusion, he is not able to give any estimate of the cost of universal superannuation in the coming year. The Government, budgeting under the extraordinary stress of war conditions, might reasonably be expected by now to have its course, in relation to social and other ordinary expenditure, clearly charted.