Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, WEDNESDAY, MAR. 1, 1933 TAXATION'S LIMITS

Poverty Bay Herald, Volume LX, Issue 18026, 1 March 1933, Page 6

Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, WEDNESDAY, MAR. 1, 1933 TAXATION'S LIMITS

Throughout New Zealand' to-day, the last day of grace for the payment of income tax, there lias been a considerable transfer of money from the individual to the State. Many people must have been hard pushed to find the amounts necessary to meet the Commissioner’s demands and some will be unable to do so, but on the whole New Zealanders will accept the situation as British taxpayers have done, philosophically if not cheerfully, and each and all, to the best of their ability, shoulder the burdens of the State. At the same time there is undoubtedly a feeling in business circles that taxation has reached a point at which, it has become most oppressive and is liable to defeat its own object. One of the most inexorable of laws is that which is known as the law of diminishing returns and it would be well if the new Finance Minister took cognizance of it. There is no repealing it or amending it. It operates in all sorts of situations and sets at naught the best-laid schemes. “The farmer,” says one economic writer, “recognises the power ot this law. By using more fertiliser, by cultivating more carefully, by providing protection he could probably grow as much wheat on a single acre as he now grows on ten. But it would not pay him to do so. There comes a point in his application of fertiliser and labor to his land where the returns for the extra cost grow less and less. The merchant knows the law. Profits can be taken up to a certain point, but when prices get too high purchasers hold off, the goods are left on tho shelves, and the profit is not collected. The railroadman knows the law. It

used lo be said that he charged all that the traffic would bear; he knew better than to charge more.” Those in control of the New Zealand railways have learned the lesson of the law of diminishing returns, and we are glad to note that as a result of the more enlightened policy of popularising the railways witn cheaper fares and freights the service is steadily improving and on the current year’s operations already shows a half million pounds surplus. The Post and Telegraph Department has had some experience of the inexorable law. The increase in postage rates did not give anything like the revenue expected; traffic fell away, and the Department was glad to return to penny postage. The recent decision of the Government to lower (lie extra (ax on petrol, which il had proposed a few days previously to impose, was governed, we should surmise, not so much by a sympathetic eonsideralion for consumers of motor spirit as to a tardy recognition of the

fact that the extortionate rake-olf of lid per gallon which the Government was going to take would bo bound to result in such a drastic curtailment of tho use of motor cars that no additional revenue would bo derived. Taxation of the motorist had come to

such a point that in many instances i he was fully prepared to forego the u ,e of his car rather than pay the ' tuxes, whilst, transport services which are performing a useful service to country districts not served by the railways, stood in danger of being driven off the roads. The statesman needs to study the law of diminishing j r urns, especially in these difficult times —times made more difficult, we . firmly believe, by the Government's I crass mistake in interfering with New

Zealand exchange. The Government needs revenue and must lie sorely per plexed ns t o how it. is going In gel. if. Tliis milch Is certain that if it fails to balance very carefully the benefits received through the payment of ils exactions with the disabilities created it will find its returns falling off. It certainly cannot levy a heavier income tax with any hope of more substantial collection. Any addition to (lie unemployment tax is out of the question; it is already pressing far too heavily upon those least able to bear it. Customs duties have reached their limit so far as revenue possibilities are concerned. The only hope of the Government being able to carry on without overwhelming deficits is to pursue the path of drastic economy of expenditure, and a most important stop in this direction is the issue of an internal conversion loan, which if successful will enable the interest commitments of the State to be very considerably reduced. Tho loan deserves the whole-hearted support of the public, and holders of bonds must realise that unless its terms arc accepted the exigencies of national finance are such that they may be liable to further and less pleasant oxactions. Conversion will undoubtedly mean severe sacrifice to many who have been depending upon the higher rate of interest, but it is inevitable that unless something is done to relieve the interest burdens of the State the Dominion will have to default. At the same time bondholders and taxpayers and everyone who wants to see New Zealand remain solvent should insist Hint coincident with this loan proposal there should be a much more vigorous policy of reduction of administrative expenditure, starling even from the top with a curtailment of Parliament itself and a very considerable diminution in the number of local bodies controlling the of this much over-governed Dominion.