MR HUNT’S CRITICISM

Southland Times, Issue 18932, 4 May 1923, Page 5

MR HUNT’S CRITICISM

PREMIER REPLIES COMPANY TAX AND THE FARMER (Per United Press Association). WELLINGTON, May 3. With reference to the remarks made by Mr W. D. Hunt on the question of taxation, in the course of a discussion at a meeting of the Dominion Executive of the New Zealand Farmers’ Union, the Prime Minister made the following statement: — “Mr Hunt, when referring to company taxation, has nor fairly stated the case in seveveral respects. New Zealand is not the only country that taxes companies. In nearly all other countries a company is taxed through a corporation tax and the individual shareholder is also taxed on his dividends. He stated that one could not borrow money and lend it to farmers at less than £8 12s 6d per cent. My reply to this is that many purely investment companies are doing so and paying good dividends to their shareholders, but these companies did not themselves raise money and guarantee their lenders 74 per cent, free of income tax, nor did they entertain advancing money on speculative land values. His suggestion that the remission of the tax would afford general relief is quite wrong and he knows quite well that the revenue required would have to be made up by the imposition of at least a minimum of 3/- in the £1 income tax, and that the burden of finding the revenue would be shifted from the shoulders of large corporations on to the backs of individual traders, fanners and others taxpayers whose whole income-earn-ing power is generally in their own personal exertion and not greatly dependent on capital that they employ. In fact, put shortly, Mr Hiftit’s scheme of taxation is to bolster up strbng combines with large capital at their command and make them still stronger, the natural result of which would be the shutting out of the individual trader completely, and in the end, the exploitation of both producer and consumer. His reference to the £5,000.000 of company tax of last year, which had ’ all been passed on to the farmer, is another, instance of exaggeration. In the first place, the tax paid by companies last year was approximately £2,250,000, and not £5,000,000, and of this amount companies doing business exclusively with the farming community contributed only a very small moiety.

“The real reason why farmers are finding it difficult to get money credit,” he said, “is not to be found in the incidence of company taxation, but in various causes, the chief of which is that money invested in local body loans and other forms of debentures offer greater attraction by reason mainly of their better security and the investor’s knowledge that his interest payments are not affected by the instability of market values for produce. Another reason is that a considerable amount of land changed hands during the past few years at enhanced values and during the slump the lender very often had difficulty in getting his interest payments and also in some instances discovered that his principal was in jeopardy. If Mr Hunt’s contention were sound it would follow that in Australia, with their method of company taxation, mortgage money would be available at a cheaper rate than in New Zealand, but this is not the case. Our ruling rate last year averaged from 5 to 7 per cent., while the ruling rate in New South Wales and Victoria was 6j and 7 per cent. Also if his contentions were sound the question of rural credit would not rise in England and Scotland, and yet a special commission was set up to report on this question and sets out in its findings, causes and effects, which could be applied almost without modification to the conditions in this Dominion.

“Mr Hunt quotes,” he said, “the cost of running the Dominion as £8,900,000 in the year before the war, £11,387,000 in 1918-19, and £18,300,000 in 1921-22. The above figures represent expenditure less interest and sinking fund charges and war pensions. The increase from the year before the war up to 1919 is not above normal, and the increase from 1919 to 1922 of £7,000,000 has been frequently explained by me in my budgets and public statements as due to inflated values which affected wages, material and all commodities paid for by the Government during post-war years. These high prices were not only a burden on the Government during that time, but affected all financial institutions. It is useless referring to this increase of £7,000,000 since 1919 as an instance of the Government’s inability to manage the country, as it covers a period of ‘peak’ prices and wages. The increase of £7,000,000, as I have previously stated, is made up as follows: Butter and flour subsidies .. £500,000 iWar bonus £4,500,000 Pensions (old age, etc.) .. £200,000 Subsidies to hospitals .. ~ £200,000 Total £5,400,000 General increase spread over all votes, increased price, etc., £1,600,000 Total .. .. £7,000,000 “In the course of his evidence before the committee appointed to inquire into the taxation of the Dominibn, the Commissioner of Taxes stated that the proposed change in the incidence of company taxation would mean that the rate of income tax on all taxable incomes of individuals between £3OO and £2OO, would have to be at least doubled. I have already indicated that I expect to be able to ask Parliament to reduce taxation during the coming session by at least £21,000,000 per annum and that afterwards the question of doing away with anomalies would be taken into consideration.”