TAXATION

Poverty Bay Herald, Volume LV, Issue 17180, 10 February 1930, Page 13

TAXATION

EXISTING ANOMALIES NEED TOR REVISION At March 31 last, over 92 millions—a third of our gross public indebtedness — was classified as for "financially unproductive purposes." This sum was equal to our total national debt prior to the Great War.' The State no\V requires about 18 millions annually by way of taxation to meet its obligations. These "striking facts Were the basis of an interesting address to the Rotary Club today by. Rotarian Chas. Bull,' who dealt exhaustively with the subject of taxation. 'The speaker proceeded to show that income - from fawning products must be a guide as to expenditure both public and private until such time as an export trade iri 'manufactured goods can he developed,'and in 1 considering the prosperity of the country the relativevalues ol our' produce must be borne, in mind, as the whole community must in the end adjust itself to these values. The taxable capacity ol tile country is governed by flic income from our products, which if only stabilised'from year to year would relieve the Government's difficulties in obtaining revenue and the individual would ''have a more clearly defined limit for private expenditure. As it is we have a 'Government working behind in collecting its revenue, and to a very large Went the .'individual spending ahead of his realised income. TAXATION DISmiBUTION

For the last fiscal year the total taxation receipts amounted approximately to IB millions, raised rrom the following sources: Customs and excise 43 per cent., land tax 6 per cent., income tax 19 per cent., death duties 11 per cent., totalisator tax 3" per cent.,' miscellaneous 13 per cent. The outstanding feature of this table is the large proportion of indirect taxation, as compared with direct taxation." Certain taxes are designed to have a twofold effect, e.g., some items in the Customs tariff, in addition to yielding revenue, are affording protection to secondary industries and also ; to some products' of the land. Higher graduated land tax is intended to lessen and prevent land aggregation. In pre-war days with only one-third of our present State Indebtedness, taxation was'light and could'cause no great hardship to private activities. But now that taxation has become a real Invrden, the effect of the various taxes requires most careful consideration. High rates dry up sources of revenue, stop progress and enterprise And impede production and industry. The speaker drew attention to a recent statement by the chairman of J. C. Williamson, Ltd., illustrating this point. While the taxation required annually per head of population in New Zealand may not be as great as in Australia, wo have reached a point when the most careful consideration is required hi the increasing amount the Government is requiring from year to year for the revenue of the country. Inequalities and anomalies will exist in any taxing system, but when taxation becomes heavy, epecially through graduation, such may become serious. LAND TAX The receipts from Land Tax last year amounted to just over the million, or only one-sixteenth of the total taxation receipts, of which two-thirds was derived from rural funds. The tax is levied on the unimproved value, with a limited mortgage exemption, the sanie provisions 'applying to rural and urban lands with the exception of certain amendments to rural land taxation effected last year. In connection with rursil property the earning value depends lai'gely upon the improvements effected, and an owner of fanning property does not consider the Government's unimproved value. He regards the value of liis land from a producing basis. If the proportion of unimproved value was the'same on |ll developed rural property, uniformity <tt valuation existed, and a full exemption of all Mortgages raised tor the acmiisition or improvement of the land, it might be claimed that the tax operated substantially in proportion to the revenue every year. ' However, we tad that firstly a Meat variation in the proportion of improved' to capital Value exists. Take" the nercentagea ft counties near at hand-Cook W per cent., Uawa 65 per cent., Havfke s Bay 74 per cent, anct the variation extends from 20 per cent, to 80 per cent throughout the Dominion. becondly anyone associated with' hind values Knows that the recent' revaluations in ottr own land district show discrepancies as between the various counties, thirdly, a limited mortgage allowance dependent on a valuation which may var> to a large extent when compared witli the earning value, has created a army of tax-free"/ apd at the same tune hardship has created through overtaxation. With tile exception of owners of land exceeding "£16,000 or over, who are not subject to income .tax oi land tax' is the greater, and ' certain leaseholders owners of Ural lands, are riot *>,• undue tax. The owners of other lahds, With a few minor exceptions .are, ni achhtion'to being, liable for land .tax .also a&essel for income tax ance for land tax Oaid !».; jnopei'ty owners are 'liable for h<sa>y graduated land tax and they arc in a Position to pass this oh. J* Vent and cost'of commodities to the consumer, who has to share in the payment. W may be an eVil to aggregate eduptiy lands, but it is surely'ln the interests and 'for the benefit of the whole com munity that the merchant, and the banker extend ' their '' activities from city to city, from town to town, acquire profit and erect substantial btuldinliS Thev have a heavv graduated tax, to pV on profits, and must necessarily pass on land tax as'" an ' overhead charge It does not seem equitable that a tax designed to burst up largo rural estates should also a»pjy "to city properties. The "substitution of a reasonably low flat rate 6n land wouM tend to reduce'the" cost of land and ease the financial position df many large firms' which are' now feeling the competition of the small trader,-'Who. though not burdened with a heavy land tax, can make the same profit with reduced selling prices. BE VISION NECESSA BY There are over 85,000 holdings of agricultural, dairying and pastoral lands in the Dominion and only 29,000 rural land taxpayer*. It would appear that in view Of the small amount land tax represents of our total |axa; etiou receipts a complete revision might bo carried out to advantage TJie 1922 Taxation Commission expressed the opinion that'the prescjit graduated system should ultimately be .abolished* in favor of a flat rate, with a reduction on the smaller holdings, together with safeguards to onsure that, (lie land is properly worked and not held for speculation. INCOME TAX Income tax receipts last year amounted to 8J millions—throe times land tax receipts. Over 52,000 taxpayers contributed, and ainiost half this number derived their 'incomes from salaries or wages. Probably of all our sources of taxntion income tax may be regarded hs the most crioitabic. It is an appropriation of part Offthe income or profits. lis operation cannot by itself cause hardship or curtail development. A rise in the rote could not cause 500 out

of 1500 people affected to claim relief on the grounds of hardship, as is the case through the increase in land tax, nor would J. ('. Williamson have had to curtail sictivilies ill Australia through an increase in the income tax rate only. The chief anomalies in our income tax system we're stated to bo (I) exemption of profits derived from land used for farming purposes; (2j tax free debentures; (3) through joint stock companies' profits being'assessed collectively, and (4) a taxpayer enjoying profit from land as well as from other sources enjoys a low rate of tax on assessable income. NEED FOR REVISION The speaker said ho did not wish to appear to lie advoeating an increase in taxation from those already heavily taxed; on the otiior hand ho made 110 apologies for expressing the opinion that if is tii.uo'the operation and effect of our land''and income taxes wore fully considered with a view to a complete revision on a basis of contributions in proportion to revenue enjoyed. The result might well be a reduction in the general rate of tax. Land tax, wmle not sound in theory, is not likely to be dropped in New Zealand while we arc dependent almost solely on the products of hind for revenue. Could wo not' regard it, said the speaker, as an animal charge or rent due to the Government,' i" return for that part of'the country's debt expended in providing the privileges and protection every* land owner enjoys. No land'owner seriously objects to local body fates 'and pays them as" a matter' of coul'se. The total land tax how' received .aihounts to only 3d in tW'i dii''uiu i iTiprovo(l value of all lani/s'in the Dominion, or £."> per StOOtl'Vininipro'v'cd value. Substitute a Hat rate of'about this amount for our present tax '"aiiij 'it would 'Ke' .very difficult to ydyan'ee aiiy' sound ' reason against such' a change, or' t)to principle of evory'faTitter, 'merchant, and residential owner alike coiifi'ibutiiig on a common basis. Some aljowa'noo could be m'uiie : of ffie dual, 'purpose' of the present' tax may hot javor it,'as such a change would "'hot' provide any''Burstiiig "tip effect on large areas'.' Wliy penalise thousands for the sake of" a hundred .offeiiders'J Surely such areas could be classiified and ii' special tax imposed tifCrcon if iieccssary. 'Unless"direct'taxation he based on 'revenue % earned, how can one section of'the 'community substantiate a claim of being'overtaxed' as compared \vith another section. One thousand pounds hot profijt' earned from farming has the same' spending bower as £IOOO earned front a business isr' salary, and providing that allowance' is made" in all cases'for depreciation of all improvements aiid assets of a wasting 'nature U?ecl in producing more income and for tfic 'payment of an annual land tax. {.lie ro's-iiffing income, however earned, in'usf' siiiVly"' be a .sound and common sense .baW on which to assess income ■tax'."' Oii this 'basis a tax lower than the present one would produce a sum oqualio the present total receipts and all sections of the community 'would be taxed alike. There are inequalities requiring adjustment. The farmer is o'.ntUlod to a more certain tax based on'his ahility to pay, and commerce and industry require some relief from two heavy taxes they arc now subject to. .Some such revision Would tend to ease the burden on production and industry, maintain confidence for development and progress, and relievo unemployment, which are our main national problems to-day. Upon the motion of Rolnriau Nieholls, who presided, n hearty vote of thanks was passed to Rotarian Bui} for his interesting paper.