LAND AND INCOME TAX.

Otago Witness, Issue 3251, 5 July 1916, Page 29

LAND AND INCOME TAX.

BSLL INTRODUCED.

SECOND READING DEBATE

WELLINGTON, Juno 27. In the House of .Representatives to-night tho Land and Income Tax Bill was introduced by Governor's Message. i Sir « ! os. Ward claimed urgency for the measure. In moving the second reading, he said it was desirablo for tho convenience of the people and tho department that the lawshould bo consolidated, as had been done. In this Bill. Though the measure contained 169 clauses it was not necessary to refer to each one, but ho would explain tho new portions. Part 1 dealt entirely with administration, and there were no changes. No changes occurred in part 2, and part 3 had one small change, enabling an objector to go first before the commissioner with his objection, and if they did not settle the difference tho objector could then go before a magistrate. The Bill abolished tho mortgage tax, as promised in tho Budget. Subsection E of clause 85 provided that where the principal business of a company ■was gold mining the company would be exempt from taxation, but shareholders would be liable to income tax on tho dividends paid. In the latter part of the Bill tho company was made an agent for tho taxing department, and had to collect the tax on the dividends paid. Sub-clause 3? of clause- 86 provided for taxation, under the income tax of an interest derived from mortgages. This was in lieu of mortgage tax. Clause 93 exempted from income tax income not derived from New Zealand if chargeable with tax in some other part of the British dominions. This was in sympathy with a similar arrangement now being made in the Old Country. The probable less of revenue due to this change would be about £4OOO per annum. Clause 95 provided in tho case of banking companies that income exempted from taxation under "Tho New Zealand Loans Amendment Act, -1915," should be excluded. Clause 115 made theatrical companies' agents responsible for any taxation its members might have to pay. In part X new penalties were provided for the non-payment of taxation within specified periods. _ Part XI simplified the procedure of imposing penalties for evasions, enabling the commissioner to impose these without first obtaining a conviction. These wero the chief alterations, the principal of which was the abolition of the mortgage tax. ! Mr Wilford said the principles of taxation set out in this Bill were so interwoven with tho Finance Bill, to come later, and in which taxation on war profits would bo dealt with, that ho felt it impossible to deal with one without trenching on the other. He thought the most satisfactory course would be to defer criticism until the War Profits Bill came down. They would then have tho whole of the taxation proposals before them, and would be ablo to discuss them in better perspective. He did not feci capable of dealing with tho amendments brought down by tho National Government, and he wished to enter his protest against the manner in which this Bill was being rushed through. Mr, Pearce endorsed Mr Wilford's protest. ! The same thing happened last year ■when the Taxation Bill was rushed through, with the result that taxation was heaped pn the farmer that no one suspected. For instance, the income tax on farmers was made retrospective for two years. Sir J. G. Ward: That was not so. Mr Pearce: Well, I don't know what elso it was, when two years' taxation was duo on the date of the first collection. The graduated tax worked out most unfairly, and ho considered that tho Bill should have contained some repeal of the principle that made a man pay a tax on his debts. Mr Witty protested against the Bill being rushed through, and while not intending to take up the time of tho House discussing tho Bill, ho would vote against the second reading to mark his displeasure _ at the manner in which the Bill was being forced through. Mr M'Combs said sufficient had been said during the past half-hour to justify the Government in postponing further consideration till members had had time to consider the Bill at greater leisure. It was to a great extent a consolidating measure, but the whole question of taxation was now before the House, and the old law as well as the proposed law had to bo considered. Dr Newman asked for further time to consider tho Bill. The epiestion of double taxation on companies was a most serious matter, and unless it was dealt with cautiously ho was afraid many companies in New Zealand and England would have to close down. He advised the postponement of tho whole question till the Prime Minister and Treasurer had had an opportunity of looking into it in England. Mr Forbes said tho whole incidence of taxation required review, especially the graduated land tax. What was wanted was a tax that would make a man part with land in excess of what lie could use to advantage. Grave dissatisfaction ex'stcd regarding land valuation and assessment. The constitution of the Assessment Court required amendment in the direction of giving objectors representation on it, as in the case of the Arbitration Court. Unless this was done tire settlers would have little confidence in tho manner in which valuations were dealt with by the court. He advocated generous treatment to the Government Life Insurance Department in the matter of taxation to encourage its existence, and enable it to compcto with foreign offices These and other principles of taxation might well have boon discussed at length, but as it had been decided to force this Bill through there was little use in discussing them. Mr Ngata said the Minister had informed the House that there was no change in the legislation regarding Native land, but he held a different view. The interpretation olanso made tho progeny of a full-blooded Maori and a half-caste a European, and as there was no Native land in the dominion that was not now owned by a majority of thoso who, under this Bill, should become Europeans, this meant that all Nativo land would come under the, land tax, ordinary and graduated. He wanted .0 knew whether this was tho deliberate iiV;cntJon of the Cabinet. In past years the Government had wisely kept she graduated tax off Native land, but this Bill was going to bring almost every Native block under its influence, and ho thought tho Minister had boon the victim of the vagaries of tho law draftsman. Mr Newman and Mr Buddo endorsed Mr Forties's contention that tin time was ripe for a revision of the graduated land tax.

Mr Buddo contended that circumstances had greatly changed since the present scalo was adopted, and now many small farmers wore paying graduated tax on an area of not more than 60 acres. This was never contemplated by Parliament, which levied tho graduated tax for bursting up big estates. Mr Anstey said the opportunity should have been taken thoroughly to revise the graduated land tax, especially at a time when land was wanted for soldiers' settlement. He approved of abolishing tho mortgage tax, but .favoured a reduction of the exemption on income tax to catch single men with an income of £3OO per year, who now paid next to nothing by way of taxation. Mr Payne said the evasion of the payment of income tax should bo punished by imprisonment. Tho time had arrived when the exemption of incomo from taxation shoidd be abolished, so that everyone should pay a quota towards the war expenditure. At the same time the taxation on companies should be so regulated as' to avoid pressing too hardly upon those people deriving small incomes from shares.

Mr Young contended that representation should be given to objectors on the Assessment Court. He further contended that under the Bill no exemption was- allowed fo„- mortgages in the payment of ordinary land tax.

Sir J. G. Ward, in reply, said the Bill was mainly a consolidating Bill, and no attempt had been made by tho Cabinet to reconstruct the whole system of taxation, because such a task could not be undertaken by a National Cabinet. He did not feel disposed to be back-stabbed by members on either side of the House without defending himself. He contended that there was nothing in the Bill detrimental to tho Government Life Insuranco Department. Aa a matter of fact, they were reducing the taxation on the department and not increasing it, as many members supposed. Much had boon said about tho Government taxing farmers on their "debts" through mortgages, but he wished to say there was no way out of it. The only reason this system of taxation was ever introduced in this country was because it was unavoidable, and being unavoidable -t had to be continued. Referring to the omission pointed out by Mr Young, Sir Joseph stated that there was an obvious flaw in tho Bill, and ho -was under tho impression that to rid the Bill of that flaw it meant the restoration of the mortgage tax. He would have a further opportunity of conferring with the advisers of the Government on the point, and ho would make a statement later on. For the moment, however, he wished to say there was absolutely no intention of duplicating taxation on small farmers under this particular clause. He rebutted the contention of Mr Pearce that farmers had to pay two years' income tax in one year. The farmer had been treated in exactly the same manner as any other member- oi the community. Regarding the remarks of Mr Ngata, he had been advised that the interpretation clause would not bear the constructionplaced upon it by the hon. member, and therefore the Bill did not have the_ effect he supposed. He could, however, refer the point to the Crown Law Officers for further consideration. In conclusion, he stated there was no reason why the Bill should be unduly pushed forward, and he was prepared to give members further time to consider it after thoy had hoard all the necessary explanations. The second reading was carried on the voices, and the House rose at 11.45 p.m.

PROPOSED ALTERATIONS. WELLINGTON, Juno 29 The Land and Income Tax Bill was taken In committee in the House of Repre scntativee to-day. Sir Joseph Ward stated that an endeavour would be made to give effect to the proposal to abolish the mortgage tax. It was clear that the Bill had gone further than was intended. Farmers would not receive the concessions under the new system that tbey now enjoyed, because they would not be able to deduct from the land tax the amount of their mortgages, and it seemed impossible to give them that right if the mortgage tax was abolished; otherwise the department would lose revenue which it must have. They could not give a double concession, and he could not see how they could allow deductions of mortgages and abolish the mortgage tax at the samo time He therefore proposed to reinstate the right to deduct mortgages, but if that was done ho wished the House- to understand that the mortgage tax must be restored. Iho Government was extrcmoly anxious to repeal the mortgage tax, but if it was repealed the revenue must be found from some other source. He also proposed to ask the House to hold over several other clauses for further consideration. Ho d.d not expect the Bill to bo through this week, by which time the department would have prepared a series of figures which would enable members to understand more clearly how the revenue would bo" affected. He had just received figures which showed that the loss from the abolition of the mortgage tax -would be £344,000. The revenue from the income tax on mortgages would be £170.000, so that the loss would be £174,000. He also proposed to hold over for consideration the point raised by Mr Ngata regarding the position of Natives, as there was no intention under the Bill to Vary the position of the Natives. Mr Pearce contended that the mortgage tax should be repoaled. He thought tho Minister's estimate of tho loss of revenue was excessive. . •

Mr Hindmarsh argued that the Minister should have stuck to his Bill. It was "Well known that tho income tax was passed on by the merchant to tho consumer, but the moment there seemed to bo a danger of passing anything on to the former the Minister climbed down.

Mr Anderson urged that the mortgage tax should be, retained, but he thought the Minister -was unwise in trying to mix tho land and incomo tax. Thoy should have ono or the other. Mr Pearce said the object of those who objected to tho mortgage tax was to make the man with capital pay, not the man who had debts. The mortgage tax was one of the most unfair proposals over sanctioned by uny Parliament. Mr Payne contended that tho income from mortgages was unearned income, and therefore tho Minister should not only collect the mortgage tax but also subject the mortgagee's income aftor the deduction of tho mortgage tax to income tax. Mr M'Callum urged that tho small income derived from mortgages should have some exemption, as in the ease of other incomes. He also contended that improvements should not bo taxed under tho mortgage tax. Sir Joseph Ward reiterated tho principal statements contained in his explanation in tho afternoon dealing with the proposals

in the Bill, and proceeded to sny that this was no time to raiso a discussion on- the general principles of taxation. It was not only inopportune, but impossible, at this juncture. There must be no doubt as to our future finance, and he was confident that his estimate of the loss duo to tho repeal of the mortgage tax given to the House in tho afternoon was well within tho mark.

Mr Ell said it was part of the party truce that the question of taxation should not be raised, and ho hoped that bone of contention that must divide the House would bo dropped. Mr Wilford said members wore in just the samo difficulty with regard to tho Bill aa they were on the second reading. Tho Bill had been rushed through the teoond Toading, and having reached eommitteo stage they found 20 clauses withdrawn, and members did not know in what shape they would reappear. He suggested that tho Bill be withdrawn and all the taxing,Bills brought down together. Mr "Veiteh maintained that the mortgage tax was most unfair in its incidence, in that no differentiation was made between the mortgagee who was satisfied with 5 per cent. 01 his money and tho Sihylock who demanded and got his 10 per cent. That was a defect that should be rectified.

After the supper adjournment, Mr Wilford continued the discussion on the short title, urging that the Minister should in his taxing scheme differentiate between earned and unearned income, as had been done in the British Budget. He also urged the taxation of luxuries, particularly motor cars, which he regretted to say were not being touched by our Budget or this Bill. He criticised the proposed method of taxing war profits by excess income, pointing out individual cases in which hardship might bo imposed. This, ho thought, was all because we had no guiding principle underlying our system of taxation. At the same time he admitted that the position was full of problems as difficult as could fall to the lot of any Government to settle. The short title was passed at 10.40 p.nx Clause 2 was postponed to enable the interpretation of "Native" and Native land" to be reconsidered. Clauses 3 to 27 were passed without discussion. At clause 28 Mr Wilford asked if it was competent for any member to move to increase taxation, but tf?e Chairman ruled that this could not be done by a private member. Mr Wilford said that under these circumstances the best thing to be done was to let the whole Bill go through. Clauses 28 to 38 were then passed. Clauses 39, 40, and 41, dealing with the valuation of land, were postponed on the motion of the Minister. Clause 42 was passed, and clauses 44 to 49, dealing with subsidiary roil and ordinary land tax, were postponed. Clause 55 had a verbal amendment inserted by the Minister. Clauses 76 to 79, dealing with Native lands, were postponed. At clause 85 the Minister moved to include sicheclitc as well as gold in the business of a company which is to be exempt from income tax. Mr- Wilford urged that tungsten included scheelite, but scheelite did not include tungsten. The Minister said there was no tungsten in the dominion. Mr Young asked why gold mining companies wore exempt from income tax. Tho Minister replied it was being done to encourage investment in mining companies, and so encourage mining. The Minister further explained that it was desirable to alter the system of collecting income tax from gold mining companies. He now proposed not to collect from the companies, but from tho shareholders on tho dividends paid. Mr Payno called for a division against the sub-clause (E) providing for this exemption, but it was carried by 40 votes to 6. Mr Payne then moved to strike out the last word in the sub-clause, in order to make the clause meaningless, as a protest against the exemption of gold mining companies from income tax. The amendment was lost by 39 votes to 10, and tho clause was then passed. Clause 88, providing for special exemption in respect of income derived from land, was postponed. Mr Payne took exception to clause 89, which he called tho Union Steam Ship Company's clause. * Sir Joseph Ward admitted that the taxation of the Union Company came under that clause. It was not a new clause, but was the same as had: been on tho Statute Book for 25 years. The clause was passed on the voices. Mr Payne next objected to clause 93, exempting income from double tax. Me considered that New Zealand should get all the revenue it could. Mr Witty suggested that where income tax was being paid in another country at a lower rate than that levied in New Zealand the difference should bo made up here.Sir Joseph Ward promised to look into the point, but he thought it was sufficiently provided for. The remaining clauses were passed without discussion.

An amendment moved by Mr M'Galium to clause 161, increasing the number of cases of serious hardship which the Commissioner might exempt from taxation, was rejected on the voices. Progress was reported and the House adjourned at 0.15 a.m.