WAR BUDGET

Otago Daily Times, Issue 24336, 28 June 1940, Page 6

WAR BUDGET

THE MAIN POINTS NATIONAL SECURITY LEVY INCOME AND SALES TAX COMPULSORY LENDING The Budget which the Minister of Finance, Mr Nash, presented in the House of Representatives last night dealt almost exclusively with the cost of the Dominion’s war effort for the current year. The estimate given by the Minister was £37,500,000, of which a minimum of £17,750,000 is to be found in New Zealand. To meet the required commitments at home and overseas, the Minister enunciated a policy of taxation to the economic limit and of borrowing for essential productive w r orks and for any balance of war requirements. As the war progressed, he said, and its costs continued to mount, the Government might be forced to use Reserve Bank credit to some extent. The Budget contains only an indirect reference to the imposition of further import restrictions by stating that “ this policy must now be carried much further under the stress of war.” Full details of the Financial Statement will be found on Page 9.

Direct Taxation It is made clear that direct taxation is the main source from which the Government intends to secure the new revenue that is required. In the field of income taxation each pound of taxable income will now be taxed at a rate determined by reference tp the particular income-group into which it falls. The starting rate will be 2s 6d in the pound upon the first £IOO of taxable balance; 2s 9d on the second £100; and 3s on the third £100; and so on by increases of 3d for each £IOO up to a maximum rate of 12s in the pound, which will be payable on all taxable income in excess of £3BOO. The graduation method to be applied to companies wijl be similar to that used last year, but the new rate will be 2s 6d in the pound, rising by graduations of 1-100th of a penny to 8s in the pound at £6600, and rising thereafter by graduations of l-150th of a penny to a maximum rate of 8s 9d in the pound on all income over £7950. At the new rate, it is estimated that the income tax will yield £15,450,000, an increase of £2,400,000 over what would have been received on the basis of last year’s tax. The Minister mentioned that at a later date proposals would come before the House for transferring to the State the whole of any excess profits made during the war. Death and Gift Duties A new scale of death and gift duties is introduced, reducing the exemption from estate duly from £IOOO to £2OO, and from certain succession duties from £SOO to £2OO. In Great Britain the exemption from estate duty is £ 100, and in some of the Australian States £2OO. The new taxes are expected to yield a further £750,000 a year,-or approximately £400,000 for the balance of this financial year. National Security Tax A direct national security tax of Is in the pound on all income, calculated on the same basis as for social security, is announced by the Minister. This is expected to yield about £6,000,000 for the balance of the financial year. To avoid hardship on families with several children on incomes of £4 to £5 per week, the Government proposes to amend the Social Security Act by extending the family benefit to cover the second and each subsequent child, instead of the third and each subsequent child as at present. Sales Tax Doubled The present rate of sales tax is to be doubled, making it 10 per cent. The extra revenue (estimated at £2,000,000 for the balance of the financial year), is to be credited direct to the War Expenses Account. Need for Borrowing The Minister said that if by all’the means outlined a total of £14,120,000 is obtained from taxation for war expenses it would be necessary to borrow £3,630,000 for expenditure in New Zealand. With a view to meeting out of overseas funds as much as possible of the amount which would otherwise come as a loan from the United Kingdom (£ 1ft,750,000) the Minister intimates his intention of organising a sustained Dominion-wide economy drive. A National Savings Scheme, operated in conjunction with the Post Office Savings Bank, would be introduced, and provision for loan contributions by large investors would be made by the issue of loans with a currency of 10 years or more. The Government considers that these should be regarded as contributions to the war effort from the material assets of those with property and should accordingly be free of interest for a period of three years or until 12 months after the conclusion of the war and thereafter for 10 years at a rate of interest not exceeding 2J per cent. Interest-free Loans Referring to interest-free loans already given, the Minister said: “It is not right that others equally capable of affording assistance should not make their due contribution. It is the intention of the Government to formulate for the consideration of Parliament a procedure under which all who have means will be required to assist by subscribing to loans for these purpp.ses.” •