DEBENTURE TAX

Otago Witness, Issue 3514, 19 July 1921, Page 42

DEBENTURE TAX

SOME PERTINENT QUESTIONS. The Commissioner of Taxes (Mr D. G. Clark) met the New Zealand Society of Accountants in Wellington last Friday night, and discussed with the members many interesting points connected with the debentuie tax. Keen interest was manifested in Mr Clark’s address, and we are indebted to the Evening Post for the following condensed report of questions that were put by members of the society, and ol the answers given by the Commissioner. Mr James M'Jntosh referred to the great amount of money which had been raised recently by debentures free of income tax. He asked how the agreement of the company relieving the debenture-holder of the liability to pay tax, was affected by section 15 of the main Act, which declared void all contracts which purported to alter the incidence of taxation or relieve a taxpayer of liability. The Commissioner replied that he was not concerned so long as he obtained the tax from the company, in accordance with the law, and of the right amount. That was all lie required. Another question was: “Would a company get the benefit of the tax paid for persons who were not taxpayers?” Ihe Commissioner: “Not unless it does so by agreement with the debenture holders.” lie anticipated no claims for refunds of debenture tax from the companies. The questioner thought the companies might claim the refund for themselves. The Commissioner: “Well, we shall seo when that happens.” “If the rate of debenture tax is altered in the future,” asked another questioner, “will these debentures have to pay?” The Commissioner replied that the tax would have to be collected. As the law | stood at present he would collect from the ' company as agent for the debentureholder “In tile event of the company refusing or being unable to pay, would you use section 103?” The Commissioner: “Not that, but another section which provides that assessment of the agent does not relieve the principal of liability.” "With debentures issued at per cent, free of tax, would the tax be collected on £7 10s or £8 12s 6d?” “On £8 12s 6d,” replied the Commissioner. “There is a recent decision of the English Courts which lays this down.” “If you collected £8 12s 6d, would you allow the company to deduct that amount as interest?” The Commissioner: “I should have to.” Supplementing the information given above, we are informed from Wellington, that the Commissioner slated definitely, in reply to a question, that lie would regard the present issues of bonds as debentures i and not as deposits. This a most important pronouncement, and will relieve companies which have placed what are termed “naked” debentures on ■ the market front doubts they have had as to their position with respect to the amount of the tax for which they ate liable.