TAX ASSESSMENTS

Otago Daily Times, Issue 25069, 10 November 1942, Page 2

TAX ASSESSMENTS

BASIS OF FARMERS’ PAYMENTS

FAILURE OF TEST CASE (P.A.) AUCKLAND, Nov. 9. The appeal sponsored by the Farmers’ Union against the system adopted by the Commissioner of Taxes in assessing farm stock for income tax and the social and national security charges has been dismissed by Mr Justice Fair. The case, which was submitted to the court as a test, was that of Alfred Whitmore Babbage, farmer, of Kawhia, who is a 'breeder of sheep and cattle. For the year 1939-40 the commissioner gave Babbage a net income for social security charge of £1326 and a net farming income for income tax of £636.

The appellant, his Honor said, argued that the respondent could not make a claim on one basis for income tax and on another for the social security charge and was stopped from departing from his income tax basis. His Honor could not appreciate or accept this argument. Section 2.5 of the Finance Act, 1941, gave a clear and definite direction to the commissioner as to the method he was to adopt in calculating income for the purpose of the social security and national security charges for this income year, said his Honor. That was a direction he could not disregard. The appellant argued that the basis of assessment for the social security charge must be the same as for income tax, and, as admittedly the standard value could not be regarded for income tax, so it could not be regarded for the social security charge in the case of this taxpayer and others in a similar position. In his Honor’s view, this contention was correct, but the respondent relied as a second authority on section 25, which was enacted on August 27, 1941, more than four months after the assessment, which was the subject of this appeal, was made. Having regard to the facts that the commissioner had the power and r y to amend incorrect assessments a; that a construction confirming the operation of the section to assessments not already made would be unreasonable and unjust, it seemed clear that section 25 must have been intended to operate so as to apply on the basis laid down to all taxpayers liable for the social security charge for the income year in question. The commissioner had determined the amount, on the basis that Parliament had said he must adopt. If a lesser amount had been demanded on the lower basis he would, his Honor thought, have been entitled and obliged to amend his assessment. For these reasons the appeal must be dismissed.