BUDGET PROPOSALS

Otago Witness, Issue 4038, 4 August 1931, Page 49

BUDGET PROPOSALS

BUSINESS MEN’S VIEWS GENERAL SATISFACTION EXPRESSED. COMPANIES’ HEAVY BURDEN. The general opinion among Dunedin business men whose views on the Budget proposals were sought on Friday coincided with that expressed by one of their num her, who remarked: “They seem perfectly fair. The money had to be found." In fact, the firm stand taken by the Prime Minister (Mr G. W. Forbes) was genera ally commended, and praise was expressed of the equitable manner in which the additional taxation is to be spread over the community. Nevertheless the view was widely expressed that Mr Forbes had been optimistic in his estimate of the revenue that is to be expected, and the general opinion seems to be that he will have to be content with a much smaller amount than that for which he has allowed. Regret was expressed that taxation on companies should be so heavy, one merchant stating that he was afraid that the Prime Minister and his departmental officers did not realise how great had been the loss of profit by business houses. COMPANY TAXATION “ The Prime Minister is to be congratulated on making a determined effort to balance the public accounts, as there is no reason to believe that revenue will be more buoyant in the following year,” said Mr James Begg. Income tax payable in 1933 would be much smaller than in either 1931 or 1932, Mr Begg added. Profits earned this year on which tax would be payable in 1933 would be small or nonexistent. It was regrettable that income tax had been raised on the profits of companies as this tax must cheek investment and stifle enterprise. Companies, of course, were merely tax collectors, that job being delegated to them by the Government. They collected the money either from their shareholders or their customers, the latter for i>reference. Company taxation as levied completely vitiated the principle of graduation. Whether a man’s income was £lOO or £lOOO, all paid the same tax, so that the principle of taxation according to ability to pay was quite vitiated. Every employer of labour now became a tax collector. Therefore a large section of the population had been forced into the ranks of “ publicans and sinners.” If money must be found —and there was little to complain of in the methods adopted, regrettable as some of the imposts might seem —further drasticeconomics in public expenditure were urgently required, as * taxation on the present scale probably created unemployment to a greater degree than it was being relieved. The recent loan of £5,000,000 floated in London, Mr Begg added, committed the country to produce an extra 30,000 to 35,000 bales of wool per annum or an equivalent quantity of butter for all time. It seemed to him that if people realised the burdens they were incurring by these overseas loans they would demand that loans of this kind should forthwith cease. The expenditure of the £5,000,000 would in all probability not assist in the production of a single pound of wool or butter. OPINIONS OF MERCHANTS The opinion was expressed by a wellknown Dunedin merchant that the Prime Minister might find that his estimate of revenue for the current year would be very wide of the mark. To illustrate this view he quoted the import figures for the leading brands of case whisky. In 1929, he said, over 21,000 cates, had been imported, but in 1930 the figure had fallen to less than 14,000. A more striking fact, however, was that for the first six months of the present year the imports had been only 4000 cases. The importation of bulk whisky might have increased, but bulk whisky did not give the Government such a return in duty as case whisky did, because in the latter case duty was paid on a great deal of water. The Customs returns from spirits would in the future show a very considerable dr6p. Neither Customs nor Income tax revenue, he stated, would reach the Prime Minister’s expectations. Neither wholesaler nor retailer was making money at the present time, and it was obvious that their payments in income tax must show a big shrinkage. The duties in both tea and sugar were reasonable, and, as prices had recently been reduced, the public would not be affected to any great extent. He had been informed by the local- Customs Department that the 5 per cent, ad valorem duty would not, apply to tobacco, but to tobacco pipes. The effect of the new duty of 16d per lb on cut and plug tobacco would be an increase in the price of Id per ounce or 2d on the usual 2oz tins. Most tobacco used for

cigarette purposes would come under the . heading of “ cut ’’ tobacco, as only two or three lines were cut sufficiently fine to be classed as “ cigarette ’’ tobacco. He thought that the Government had made a mistake, in not putting the 3 per cent, primage' duty on all goods. Last year the value of imports had been £48,000,000, and a general primage duty of 3 per cent, would yield about £1,500,000. About 30 years ago the primage duty had been 1 • per cent., and later it had been increased to 2 per cent. No one had been affected to any extent. Last year the Government had taken this duty off, and, as a result, it had lost a great deal of money. A general primage duty was a much better way of procuring money than some which were being employed. An interesting point was raised by the merchant in referring* to death and stamp duties. The Prime Minister’s figures, it seemed, were based on previous values, but values were steadily decreasing, and estates were becoming smaller. Most shares for instance had dropped considerably, and the Government must expect smaller returns. Stamp duties were mainly based on values, which reductions in interest would help to bring down. Another prominent merchant said that -while he was a Reform supporter, be realised that Mr Forbes had been placed

in a difficult position in difficult times, and one could not help admiring both his courage and his ideas. Every business man in New Zealand realised that, principally because of unemployment, revenue must be obtained, and it had been necessary to look into every possible channel to see where it could be procured without harming any particular industry or section of the community. The increase in taxation was certainly staggering, especially so far as companies were concerned, for taxes were payable on the results of business for the year ended March 31 last. It was a well known fact that ..very few companies or films could say that from March 31 last until March 31 next any reasonable amount of profit was going to be obtained from, their business. In fact, one could go further and say that numbers of companies and firms knew now that the result of the year’s trading would be a loss and that there would be a greater loss next year. The taxes, coming now and having to be paid at an increased rate on last year’s profits, were going to be a very heavy burden on industry throughout the country. One could not help thinking that the estimated revenue from income tax on the present basis would not be realised. He was afraid that Mr Forbes and his departmental officers did not thoroughly appreciate the great loss of profit that business houses were experiencing. Business men were finding if difficult also to interpret the several acts that bad recently been brought into force, and it seemed a great pity that some more simple form of taxation could not be arranged. With respect to tariffs, it had been generally thought that the free breakfast table, as instituted by Sir Joseph Ward, would have, to some extent, be abandoned. The duties on tea and sugar had certainly been anticipated. The duty of id peh lb on sugar, of course, amounted to £4 13s 4d per ton, and it also had to bear the surtax, which made the final duty £4 18s per ton. Mr Forbes had been quite correct in his assertion that this increased duty would be met to some extent by the reduced selling price of sugar made by the manufacturers. The f.o.b. Auckland price for sugar in May, 1930, had been £l7 per ton. To-day the/price was £l4 15s. showing a drop of £2 5s per ton. He was also correct with regard to tea, as the landed cost to-day compared with the price 12 months or two years ago was considerably reduced, and would to some extent compensate the public for the increased duties.

With respect to primage duty, it had always seemed to him an anomaly that goods coming from Australia did not bear it. The result of the duties would among other things, that Australian dried fruits would carry a 3 per cent, primage duty. An anomaly also existed with respect to spirits. Australian whisky, rum, and other spirits carried a duty of 36s- per gallon, plus 2 per cent, primage. Scotch whisky or West Indian rum, as well as others, carried a duty of 40s, plus 5 per cent. It was difficult to find a reason why Australian spirits should some into the country at lower rates than, say. Scotch whisky. Another business man expressed approval of the increased duties on silk and artificial silk. He stated that it was a move in the right direction, for if the duties resulted in a decreased demand for these classes of goods there might be a greater demand for goods made from one of New Zealand’s principal products—wool. MANUFACTURERS’ VIEWPOINT Manufacturers fully recognised the unenviable and difficult task facing the Government in balancing the budget, said the president of the Dunedin Manufacturers’ Association (Mr W. G. Kindlcy). Though most of the proposals were naturally irksome condemnation must be tempered by a full recognition of the fact that money must be found and that whatever means were adopted to restore the balance must be endured for the next year at least. Naturally manufacturers viewed with alarm any legislation that meant increasing costs, and, as many raw products were imported for secondary industries, the 3 per cent, primage on goods which had hitherto come in free must have prejudicial effects on the selling price of the finished article. As sugar was a raw product for many of the leading industries the increase of Ad per lb was going to- be a very serious matter, either for the manufacturer (if he had to carry the burden) or for the consumer (if the burden was passed on). With the advent of the 10 per cent, reduction in wages and salaries much curtailment in buying had taken place. It had been hoped that this would be rectified when it was recognised that prices had dropped accordingly. With increased taxation and decreased purchasing power manufacturers could not feel that their position was any too secure, and the revenue expected by way of increased income tax further aggravated the position.

Very few manufacturers at the present time were able to pay even a small dividend, and further encroachment upon profits would so affect companies that the investing public would rush gilt-edged securities and industrialists would find it still harder to obtain financial assistance. The one tax that most must admit had to be increased was the unemployment tax and anyone who cavilled at it did not have much consideration for his unfortunate brother. As this tax was being paid in wages to people “ on the border line ” meant an immediate circulation in Dunedin alone of just on £3OOO weekly, and through the spending of this amount in the shops the business man was obviously receiving some substantial benefit as an offset to unemployment taxation. THE BEER DUTY What the full effect of the increased duty of 6d per gallon on beer will be is not as yet known locally, and word is at present being awaited from Wellington. A local brewer informed our representative, howevy, that there had been a heavily decreased consumption of heer, due both to unemployment and previous increased taxation. The Government in all probability would not receive increased revenue. In the past the increase had been passed on to the hotelkeeper. who had responded in many cases by reducing the size of his glasses, again

reducing the consumption. Who would have to bear the increased cost was not yet known, but it was certain that the new duty would result in a further decrease in consumption. So far as the new duty of Is per gallon on imported beer was concerned, the brewer added, little difference would be made, as the amount consumed was very small. There would, however, probably be a decreased consumption of Dutch and German Jager. WHEAT AND FLOUR DUTIES DISSATISFACTION IN CANTERBURY. CHRISTCHURCH, July 31. Although the reductions in the duties on wheat and Hour are lej« severe than the Prime Minister at first proposed it is not believed they’ will secure to the wheatgrower’the price of 4s 6d a bushel which he had been guaranteed by’ Mr Forbes. It is estimated that for milling quality Tuscan the return will be no more than 4s 4d or 4s s<l a bushel, on trucks, and this only in favourable cireumstances. Mass meetings of growers are to be called to consider the revised duties.