THE INCOME TAX AND INDUSTRY

Southland Times, Issue 19658, 7 October 1922, Page 4

THE INCOME TAX AND INDUSTRY

It is strange that objection should be taken by any Labour leader to the moderate reduction in the land and income tax recently announced by the Minister of Finance. These reductions are not a concession to the “capitalist,” for there can be no return to a reasonably cheap and stable standard of living in this country until taxation is very substantially reduced. On the contrary, unless taxation is reduced substantially and soon, unemployment must increase, for industry and enterprise are finding it hard to live under the load which they are required to carry. It is difficult at the present time for most companies to make a fair profit on the capital employed in them, ami unless industry offers a promise of reasonable reward capital will not go into it but will go elsewhere. Already in this country too much money has been diverted from trade and industry to safe investments in public securities. It is useless to shout that capital is able to look after iteelf and needs no consideration. Capital is as essential to industry as labour, and fair interest for money is as necessary as a living wage for the worker. No sane Labour leader pretends that capital can be done without or coerced. What Russia needs more than anything else at t-he present time is money, but no private individual will invest in Russia because capital is not safe there; nor will any nation lend to Russia because the madness of the Soviet has destroyed the credit of the country, which rests ultimately upon the security of capital within it. If this country is to do any good it must have thriving industries, commercial and industrial enterprises which are prosperous aud pay good dividends. Such concerns will always command money to extend develop their activities, increase the number of their employees and swell the Dominion’s trade returns. With the State taking nearly half their profits by way of taxation, companies have to earn far more than is necessary to satisfy their shareholders. They have to make a double profit—one for the State and another for themselves. This means necessarily a heavy increase in the prices at which the commodities in which they deal are sold to the public. The trader needs, say, a margin of 25 per cent, to carry on, and if he had only himself to consider he could sell an article which cost him 10s for 12s 6d. But he knows very well that if he is meeting with any success at all the State will cut into his profits, perhaps to the extent of 40 per cent. He therefore makes a corresponding increase in the price of his commodity and consequently everything is dear. As Mr Massey admitted in the House the other day, a company to pay a dividend of 8 per cent has to earn 16 per cent., and the extra 8 per cent, has to cornc from its customers. Heavy taxation therefore affects labour in two ways—it prevents the expansion of industry, and the consequent increase in employment and improvement of wages, and it also prevents the fall of | prices to normal levels. Almost the first thing that the Chancellor of the Exchequer did in Britain when he found himself in a position to reduce taxation, was to reduce the income tax, and Mr Massey is well advised to reduce the income tax here also. He is not throwing a sop to the “capitalist,” although the ’so-called capitalist needs help badly enough. Many com panies, as published balance sheets have shown, have incurred heavy losses and, while the State takes its share of the profits, it gives no help when the balance is on the wrong side of the ledger. Similarly, when employers are earning good profits labour clamours for what it calls “its share” of them, but when losses have to be met in a business, there is no suggestion that its employees should refund a portion of their wages. At the present time employers are in arrears with income tax payments to the extent of £900,000, which they cannot find the money to meet. Labour sometimes points to the revenue from income tax as evidence that, employers can pay higher wages, but we have not heard any suggestion that Labour should help those employers in difficulties to pay off the £900,000 of arrears of income tax. The reduction in income tax is one of the best forms of assistance that the Government can give to labour, aud general conditions will not recover a stable and normal balance until the income tax approximates much more nearly to the pre-war level than it does to-day.