LAND, TAXATION AND SMOKE SCREENS.

Southland Times, Issue 19346, 11 September 1924, Page 5

LAND, TAXATION AND SMOKE SCREENS.

To the Editor. Sir, —Your editorial of the 6th was incomplete in its heading. 1 have taken the liberty of completing as above. My attack was on the Prime Minister as the focusing point of economic and political principles which he has carried into practice during his term of office. The fact that Liberal and Labour support the same principles has no bearing upon their validity or otherwise as applied to New Zealand conditions. Impracticability is a term always applied by the Opposition. Most ideas are labelled so at some time or another. I do not condemn the practice of encouraging secondary industries, I condemn rhe practice of doing so by means of a Customs tariff under New Zealand conditions. I am justified in using the term “smoke screen” by the figures you give, the percentage of Customs duties would naturally decrease during the “profiteering and boom” years, 1914-19. I note the percentage for 1920-23 is on the increase and permit me to point out the sugar tax will increase it, as also the reduction of income and .and tax. To be quite fair I was incorrect in stating that the bulk of revenue was raised through the Customs. You have the advantage of me, Sir, in that I have not access to any detailed figures. However, Customs and excise yield over £7,000,000 out of a total of over £19,000,000; is it correct that it yields more than any other single item of taxation ? Is it correct that the ad valorem duty cr head was: £ s d 1912 17 3{ 1919 1 17 44 Is it correct that the following items jhow duty per head as follows: 1912. 1919. Tea 1/114 Tobacco 24/51 29/54 Cocoa and coffee 11 2§ Can the ad valorem duty for, let us say boots and clothing, be given both for 1912 and 1924? Can the total duty per head be given for the same years? There are a few axioms in .connection with the matter which give a foundation to reason from: (a) Primary production and export are absolutely essential to the prosperity and progress of New Zealand. (b) Secondary production is dependent entirely in New Zealand upon primary’ production. (c) It is not sufficient to maintain our primary industries; they must be increased and enlarged. (d) The basis of all civilisation and progress is economic; it is not less so with agriculture in New Zealand. To develop, it must pay. Advertising the joys of a country life, agriculture education, etc., will not increase by themselves agricultural activities if the main factor, hard cash, is lacking. Very well, does it pay? The Prime Minister appears to think that on the whole it does not. He states the farmers have great difficulties in making ends meet. The Minister of Lands would not suggest as a means of livelihood any young man taking up farming. Mr Cousen, at the Farmers’ Union: “It was almost pathetic to see that 80 per cent, of the farmers' were in unsecure positions.” If it does not pay, and it seems to be generally held that it does not, the Prime Minister, for instance, has somersaulted from his optimism of a few months ago to pessimism to-day. There can only be two remedies: (a) Increase prices of products. (b) Decrease cost of production. To deal with (a) is not within the scope of this letter. In dealing with (b), it is as well to take our most important primary industry—-butter-fat. Butter-fat returns about 1/6 per lb.; to the producer apparently it costs nearly as much or more on the whole to produce, otherwise why the pessimism? It remains, therefore, to get the cost of butter-fat down and to do so it follows the “10-20 cow cocky” must be required to pay less for his dungarees, boots, essential foodstuffs, implements, harness and the commodities in general he uses. The most direct method to achieve that would be a lowering of Customs duties if not an entire abolition. The effect would be to revive commercial competition, as the primary producer would gain access to a world market direct and not be driven into the necessity of paying fixed prices under “gentlemen’s agreements.” The actual lowering of prices would be a good deal more than the duty figure; there would be the cost of collection in clearing fees, interest on prepaid duty, etc. In fact, the effects would be far-reaching, as New Zealand industrial concerns would also lower prices owing to a lower wage bill. The matter cannot be followed in detail; it would probably result in an increase of export of New Zealand secondary products, etc., etc. The standard of living would not be lowered; rather the opposite. There is no other direct and speedy way of cutting down the cost of production. Remissions of income and land tax snay be passed on, but not voluntary; there is no certainty that the agriculturalist wljo does not pay these taxes directly will benefit by these remissions at all. He may get cheaper amusements and a little off his tobacco, but the “cockies” the Prime Minister’s principles have evicted in Taranaki probably get very little of either. I am quite awaye a remedy, “more production,” has been trotted out to the distressed dairyman. That is not a general cure for the trouble. In fact, if the butter fat producer turned out less he would

be better off in the long run, the country would give him more inducement to get on with his business.

However, the cow is not a machine; she won’t work longer hours or double shift. To get more butter-fat, better feed or more of it is needed, or better cows. All that means more labour and money and it is certain that in general the second 1501 b. of butterfat per unit will cost more than the first 1501 b. If the first costs 1/6 per lb and no profit, there will be no profit on the balance. I must here deal with a reference in your issue of the 6th inst. to a book on Danish Agriculture, by Mr W. Meakin. The inference from your reference is that agriculture in Denmark is highly profitable. Now the Danish Government itself has recently investigated a considerable number of farm accounts. Its published results show that farms over 250 acres pay, or did pay in the period under investigation, 2 per cent, on capital, and that NO return on capital was received in the case of holdings under 25 acres. I suggest exit Denmark.

It is an interesting speculation as to what the Prime Minister will do in the case of the distressed Crown Land tenants in Taranaki. To be consistent to his political and economic principles he should give them a subsidy each year, as with the Colonial Sugar Company, until they are able to pay dividends without.it. During a recent year the butter consumer was subsidised 3d per lb. for eating butter; it would only be just if the producer was paid the same amount for producing it now that the tables have turned. However, there seems no lack of “cheap money,” and although I use the Prime Minister’s own words, he is “having a terrible time making it go round,” they will probably be offered some of it. In effect, they and their families will be working for the “Jews” until something in the way of a boom turns up. Moreover the State acts as guarantor and failing to collect the “pound of flesh” pays itself. Failing in his pursuit of Imperial Preference and a British duty on foreign dairy produce the Prime Minister has adopted this method of meeting the fall of market values. The cardinal principle of political economy and also of taxation should be to stimulate and encourage progress and production. The Customs tariff in New Zealand does not do this, in the primary industries it renders production more difficult and costly and in the secondary industries it encourages inefficiency, while to commercial interests it gives an advantage the shrewd business man will not readily relinquish. It is not generally recognised that postwar problems are as yet in front of New Zealand and that pre-war principles will not necessarily solve them. I make no prophecy about the future value of our primary products. I take the Prime Minister’s assurance that in spite of the agriculturalist’s troubles the country generally is prosperous. Certainly it ought to be, with the millions he is so assiduously handing out. I am, etc., “SUUM CUIQUE.”