COMPANY TAXATION

Southland Times, Issue 19591, 12 August 1922, Page 5

COMPANY TAXATION

POSITION OF FREEZING COMPANIES. ! TAXATION COMMITTEE’S PROPOSALS. (Special to the Times.) CHRISTCHURCH, August 11. Mr F. Deverell, secretary of the South Island Refrigerating Companies’ Association, expressed satisfaction with those recommendations of the Taxation Committee which referred to freezing companies. “A large number of the more important recommendations by the North and South Hands Freezing Companies’ Associations to the Taxation Committee have been included in the Committee's recommendations to the Government,” said Mr Deverell. “In so far as they go the recommendations tend to rectify a position which was? prejudicial not only to the freezing companies but to the interests of the whole of the primary producers of the Dominion. There can be no doubt that the present incidence of taxation is undemocratic in that it> does not ensure taxation of tlie individual according to his income, and it also differentiates in favour of the investor in debentures or shares in small companies. On examination of the published balance*sheets for th*?, year 1921 of twenty New Zealand companies with a combined (uud-up capital of over £3,200.000 we find there is a nett profit for the year equivalent to a return of 3.14 per cent, on the par value of the capital invested owing to the extent and cost of the necessary buildings and plants of freezing works entailing the expenditure of a large sum of money. The bulk ef the companies if they earn a reasonable return on their capital are liable to pay the maximum rate of 8/9iJ in the £, irrespective of the rotation the earnings vf the company bear to the invested capital. Ae the average holding of the 23,772 shareholders in New Zealand freezing companies is only £132 it will be seen that these djarehoiders are in the main being taxed at the maximum graduated rate fixed for the largest incomes. “The following figures will show to what extent the freezing industry, in common with other large has been affected by the gross increase in taxation since 1913,” continued Mr Deverell. “A company with a capital of £150,000 paying 8 per cent, and placing 4 per cent, to reserve in 1913, with the income tax at 1/4 in the £, would have paid a tax of £1275, while in 1921, paying the aune dividend and placing the same amount to reserve, the income tax would be £I4,(MX), that is to say, mi increase of no less than 989 per cent, since Buch a state of affairs must, inevitably raise a prohibitive barrier to the flow of capital into the Dominion from abroad. Tt» result is that the development of the Doaimmn must be retarded at the very time when fretb capital and initiative are most needed. The incidence of the present- system of taxation, on. freezing companies falls eveniusfly on the primary prodtaoer, for whwm. a reduct fen i.i#-awy r c