STATE FINANCE

Otautau Standard and Wallace County Chronicle, Volume XII, Issue 583, 25 July 1916, Page 2

STATE FINANCE

''EXCEEDINGLY SATISFACTORY." MINISTERIAL STATEMENT. A LOCAL WAR LOAN. FINANCE BILL PASSED. WELLINGTON, July 15. The Finance Bill, as amended By the Committee of the Whole House, entered the *hird reading stage early yesterday afternoon m the House of Representatives. The debate was anything but noteworthy, but jyi interesting statement was made by the Minister of Finance (Right Hon. Sir J. G. Ward) as» to the financial condition of the Dominion, a condition that he described as exceedingly satisfactory. In the course of his comprehensive explanation he stated that a prospectus was being prepared m connection with a local loan — a considerable sum — but he did not name the amount. FINANCIAL YEAR OPENS WELL. The Minister submitted a statement showing the revenue for three -months ended June 30 of this year, the totals being £3,091,210, as compared with £2.747,751 for the corresponding period In 1915. The net increase was £343,459. The figures were as^ follow: — *" June 30, June 30, 1916. 1915. Increase. Customs ... £898,269 £856,716 £41,553 Stamp and , death duties '390,450 308,775 81,675 Post and tele- / graph ... 428,967 352,886 76,081 Land Tax ... 3,009 24,599 *21,590 Income Tax , 9,524 3,380 6,144 Beer duty ... 43,758 31,584 12,174 ~ Railways ... 1,106,969 952,294 154,675 Registration & ' - other fees 22,836 24,928 *2,092 Marine ... 9,185 - 10,348 *1,163 Miscellaneous"" 76,054 65,830 10,224 Territorial ... 16,218 15,490 728 National endowment revenue ... 85,971 92,655 *6,684 Other receipts — 8,266 *8,266 Totals ... £3,091,210 £2,747,751 £343,459 *Decrease. Tho expenditure for the three months showed an increase of £34,032. — The Minister Optimistic. — . " I take the opportunity of saying," said Sir Joseph, "that these figures ar«> very satisfactory." It was quite impossible for anyone at present to give any indication of what the balance over-ex-penditure might be out of the ordinary Consolidated Revenue at the end of this year. It depended upon circumstances that would make it difficult for anyone to arrive at a moderately accurate estimate of what it would be. There was hope that there would be a balance, not nearly so large as last year, but a considerable balance on the right side. At the present time there was £2,600,000 of our money invested m liquid assets m Imperial Treasury bonds. It -was invested entirely for the purpose of war. He hoped that money would be increased from time to time, and he was looking forward to the outcome of the taxes they were levying to give six anoL a- half millions sterling. If we had that, and tho -war ended within the next year, then the bidlc of it would be used for reducing the war loans. He hoped they would get the country back to iti normal condition financially, and then there would be many things arising outof'the altered conditions to deal with. He thought there was a consensus of opinion that whatever they, were doing, whatever sacrificeo they were making, it was all m tho direction^ of having the country strong and sound and ready for the future era of prosperity when the war was over. — The Country's Assets. — He had put these figures on record for the purpose of showing the genei'al assets this country possessed. The assets m proportion to the country's whole indebtedness w ere enormous from the point of view of being; on the tight side. The Dominion, from the point of vi&w of the investor, stood m the flfest possible position for its eize and population. It was one of the safest countries for investment m the world, and it was only right that he should take this opportunity of calling the attention, of the House to it. — Excess Profits. — The "committee had agreed to the alteration suggested m respect to the excess profit tax and the 5 per cent, extra Income Tax. The British Finance Act had not been followed m the New Zealand Bill m so far that the latter was drafted m view of the different circumstances under which we were suggesting taxation. In j the Home Act provision was made for the collecting of the whole amount m the firstinstance, and it provided also that a deduction just a® we proposed here should be made m the first year should be made m the second year. After close examination into the matter he came to the conclusion that it would be better not to ac'here to the English one.. The assumption of one member was that a reduction of taxation was being made here. That was not so. No reduction was made. The 5 per cent, was altered, not for the purpose of making a reduction, but to meet a, pretty generally expressed desire, both ) i;i and out of the House, that there should be. some lightening of the burden below £900. The alteration m the Bill was to enable a deduction of the war profits from the total amount of income for the purpose of Income Tax. That deduction m this Bill as against the English Bill was made within the yeary and instead of the taxpayer here paying the doable amount m. the first instance, and the Taxing Department having to provide m the next year for his getting credit for the difference, it was to he done within the current year. Anyone m this /Country who paid his War Tax m March, next was paying the exact amount of his tax, and no credit would have to be made for him m the following year. In this respect this Bill differed from the British system of taxing. Sir Joseph explained the deduction this way : Assuming a man's income is £10,000, of v/tych £8,000 represent® excess profits, the tax of 45 per cent on this £8,000 was taken. That was £3,600. Then they iequiied to deduct that £3,600 from- the total income, leaving £6,400. That was the taxable income for income tax. i —Debentures, for Land. — Dealing \vith -the payment for land taken by debentures, he said all debentures would be 5 per cent., and there would be no concession or remission of Income Tax. That clause had been put m to b© operative till 12 months after tlie end of the war with Germany. The giving to the Government of power to insist upon pay- ' merit m this way had been done advisedly ; •it had been done because the war meant an enormous expenditure for a country such, as this to provide by way of loan. These amounts were so large that what was considered^ easy of accomplieihrnfcnt before the war. had now become very difficult. Every member of the House should realise "that tins course yould aot have been taken m ordinary

tim« 6. It was put m to meet conditions that were unusual, and called for altered methods. The Government did not intend to go upon tho local market for a loan for obtaining cash for the purpose of land or for anything of that kind, or Jorf Public Works expenditure. -War loan stock would be free of Income Tax. — The Internal Loan. — Part of the money for expenditure on the war would, bo raised by local loan. Da* Newman : How much? Sir Joseph said he thought it would be better for that to be made known later on, as a prospectus was being prepared and would be issued shortly. The loan, however, would be for a considerable- sum, though not more than the country could reasonably provide. They must rely upon the Mother Country fur- part of what was m auired. If they were to go to this country for the whole amount it would bs a bad thing -for the trade and industry of the Dominion, and those who required money to carry on with. Mr Wilford : Will the debentures ba free of Income Tax? Sir Joseph : Yes ; they will be free. Mr Wilford : I think that is very wrong. Sir Joseph Ward: "There is not tho .slightest use, at a time like this, theorising as to what is beet when you cannot carry out the theories. Tiiey only- provided for debntures free of Income Tax up to 4£ j per cent." He would not go further than that. The material point to be- considered was that if they started to raise loans m New Zealand at 5 per cent, it was obvious, too, they must allow local public bodies to give 6 per cent, for their money. Men wanting mortgages would have to pay another 1 per cent. If the Government standard was raised £ or 1 per cent., they were going to have nearly everybody who had money to lend basing their standard upon the Government rate, and asking for interest accordingly. That was the primary cause for the Government deciding that a file of Income Tax 4 per cent, loan should be provided. There w«re some members who suggested that giving the Income Tax m was not sound or desirable, but what they must consider was what was best for the country. — No Small Investments. — Replying to a suggestion that the loan should be made available to the small investor, Sir Joseph said there were very few applications from the small man when 1 the last loan was put on the market. Their response was very poor from all over the country. There were less than 120 applications for the £5 stock. He put it down to this: The conditions m New I Zealand a& against the conditions m the Old Country, are as different as light from dark. The* ordinary man m this country i m receipt of double the amount or more as the man m the Old Country did not atlach much importance to the amount of j interest he would get from a £5 investment. Tlie amount was so small that he did not regard it as a sufficient inducement. He thought that "m connection with the new loan it would not be worth while i trying to get money on a £5 basis. It ■'. meant a tremendous amount of work, and ! the people did not look upqn the return as sufficient for the investment of small amounts. ALL FOR THE RICH MAN. Mr T. M. Wilford said it would, m his opinion, be cheaper for the country ! to issue debentures bearing 5 per cent, interest than providing 4J^ per cent, free ] of Income Tax. Apparently it was only the wealthy men who would subscribe .to the War Loan. If less than 120 ap--1 plications were received for £5 debentures m connection with the Public Works ■ Loan of £2,000,000 m New Zealand last year the small man could be eliminated j altogether. That strengthened his argu- I : ment against fixing 4g; per cent, deben- ! I tures free of Income Tax. They were • going to commit a lasting injury for a y ; temporary benefit. He believed that to issue such a loan was unfair arid wrong ■m principle. The whole trouble was that no basic principle was being adopted for loans and taxation proposals. The Mdnis- i ter of Finance would be well advised to provide by act of Parliament against the exemption from Income Tax of those men who were fortunate enough to have , i money to invest m war loans. He pro- , . tested against the granting of freedom ' from Income Tax. PASSING IT ON. Mr A. quoted the position of the timber'trade m the south, as outlined •m this journal on July 11, to show that j increased taxing was being" passed on. ; Legislation was required to prevent this passing-on process. He complimented the Minister of Finance on the social part of the , measure, especially the grant of a bonus of £4 to wives of the members of friendly societies. The Minister was also to be commended for preparing a system ! by which members of friendly societies would be' helped to obtain a pension. This was a step m the right direction. They were to be commended for the adi vance they had made m socialistic legis- [ f lation, but it was the clear duty of the ! Minister and the Government to regulate : the Cost of Living. After further debate, the Finance Minister replied. He" defended the repeal > of the Mortgage Tax, which was only put on m the original instance because there was no other way of raising the requisite revenue. Its repeal would, if not at once, at least m the immediate future, give a- great relief to scores of mortgagors. The mistake which most of the critics of the Bill made was that the Government were not dealing with the principles ' of j taxation. They were enacting war legislationj not reforming the whole system of taxation. He defended the Government's policy of raising loans at 4^ -per cent., free, of Income Tax. In the first place, he was confident that they would not otherwise get the money, and that they must have it. This was the course adopted m England, and m some instances m Australia, which ought to satisfy the anxiety of the Labor party. -He combated the idea that by reducing the Income Tax exemption over £1,000,000 could be got from' 130,000 taxpayers whose incomes ranged from £160 to £300. No such sum could be obtained, while the cost of collection would be so heavy that tha tax would be of little avail. He "strongly deprecated any suggestion that the land purchase clauses m the Bill had been inserted for the benefit of the large landowners. Such attempts to raise a party spirit weTe out of place and had no foundation m fact. In conclusion, he said it was the desire of the" Government to put the operative clauses of the Bill into force at once. Their desire was to keep the country sound and strong, and when the present time of stress passed they would be m a, position to have a large sum of money which they would be able to devote to the development of the country and the reduction of the Public Debt. , . The motion that the Bill be read a third time was carried, and the House rose.