THE TAXATION SYSTEM

Otago Daily Times, Issue 25214, 1 May 1943, Page 4

THE TAXATION SYSTEM

The Labour Party, realising that “the need for revenue is so continuous,” adopted at its annual con- 1 ference a recommendation that “no alterations should be made in the present taxation system that would reduce taxation.” It would be rather surprising if any member of the community has seriously entertained a hope or a belief that, under existing financial conditions, any reduction of taxation .would be proposed in the Budget which will probably be delivered at some date about the end of the month. But, unless anything unforeseen occurs to upset the arrangements that have been made, this is the year of the general election. In the normal course of events the election would have been held two years ago. And it may be recalled that, with a shrewd conjecture concerning the effect which his forbearance might have on the mind of the electors, the ‘Minister of Finance unexpectedly refrained in the Budget of that year from providing for any increase of taxation. He was himself opposed to a prolongation of the term of Parliament by reason of the war situation, but his colleagues over-ruled him and thus deprived him of the opportunity of securing from the constituencies an expression of appreciation of the toleration he had shown. The Labour Party conference, however, while recognising that there can be no reduction of taxation this year, considers that an investigation of the system on which taxation is imposed is desirable, so that readjustments may be effected. In actual fact there are several anomalies to which the Minister might usefully give his attention and there are various adjustments which might reasonably be made, and the Labour Party’s suggestion is one that may therefore be cordially approved. Among adjustments that have been represented to the Minister as deserving of his favourable consideration is one concerning taxation in relation to the maintenance of plant and machinery. Income-producing assets in manufacturing and other industries are in present circumstances being subjected to an unusual degree of wear and tear in order that war requirements may be fulfilled. The conditions, however, that have placed an exceptional strain on these assets have rendered it impossible that necessary maintenance work should be carried out on them. The incomes of the proprietors of the assets are, therefore, being increased —possibly increased to an extent that makes the proprietors liable to the payment of the excess profits tax—while the assets are themselves being seriously deteriorated, and the greater the time for which maintenance repairs are delayed the more serious the deterioration and the heavier the cost of the repairs must be when ultimately they can be effected. The Commissioner of Taxes I has declined a request that permission should be granted to manufacturers,

farmers, and others concerned to set aside, and charge against profits, I some appropriate annual sum to provide against the deferred expenditure when the chance to undertake it occurs. This should, however, not be regarded as a conclusive settlement of a matter which, it has been pointed out, really has an important bearing on the rehabilitation of industry after the war. A factory owner whose plant is worn out by the use made of it during trie war and who has been taxed out of the means to defray the restoration or replacement of it will be in a hopeless position when the war ends. Industry should, in all fairness, not be stripped during the war of the capital that will be required by it after the war if it is to be placed on a footing on which it can be efficiently conducted. It has been suggested that the proprietor of the machinery or plant should be enabled to invest in war bonds the funds which in ordinary circumstances would have been expended on maintenance work. The suggestion is of distinct merit. By the adoption of it a double purpose would be served. The amount invested would be withdrawn from circulation in the meantime and would thus, pro tanto, be a check on inflationary tendencies, and it would become available for rehabilitation purposes when normal conditions return.