The Southland Times PUBLISHED EVERY MORNING “LUCEO NON URO” MONDAY, NOVEMBER 1, 1937. The State Takes 10s In The £

Southland Times, Issue 23345, 1 November 1937, Page 6

The Southland Times PUBLISHED EVERY MORNING “LUCEO NON URO” MONDAY, NOVEMBER 1, 1937. The State Takes 10s In The £

At the annual meeting of shareholders of the D.1.C., held in Dunedin on Friday, figures were quoted which gave clear evidence of the effects and dangers of company taxation in New Zealand. The D.I.C. is a big business organization which employs 860 workers and pays them £122,837 a year in salaries. For the last financial year this company paid the Government £84,521 in taxation, direct and indirect, “also sales tax on everything purchased in New Zealand.” The chairman of the meeting, Mr P. L. Halstead, stated that of the company’s net profits, “arrived at after making all necessary provision for depreciation but before providing for taxation, the Government takes 9s lid in the £, the shareholders divide 7s id in the £ and 3s in the £ is retained in the business for the purpose of expansion and stabilization.” Nor is this altogether the end of the taxing process. The individual shareholder does not have to pay taxes directly on his dividend; but the amount has to be included in his income schedule for the purpose of assessing the rate of taxation at which he is to be charged. Under this system a taxpayer with a taxable income of £3OO a year, who receives £lOO in dividends, pays tax on £3OO only, but at the rate applicable to £4OO. The important fact indicated by these figures is that a large company employing much labour is able—after paying a dividend that is no more than reasonable—to retain only 3s in the £ for expansion and stabilization. It need not be assumed that if taxation were light the greater part of the net profits would be put back into the business. But if a company like the D.I.C. were able to keep 6s in the £ instead of 3s it would be in a position' to develop and strengthen its enterprises just twice as far as at present. This would mean bigger stocks—resulting in increased production for manufacturers — bigger staffs, and bigger reserves for less prosperous times. Under existing conditions the tendency is to go slowly. The Government has given the business community no reason to feel that confidence in the future which is an important psychological factor in the process of expansion. “Nothing is worse for a country than the belief that a depression must follow a time of prosperity,” said the Minister of Finance, the Hon. W. Nash, on Friday. What Mr Nash and his colleagues in the Government seem unable to realize is that the underlying uneasiness in the minds of the people today is not altogether a surviving timidity from the lean years, nor a fear of some hypothetical slump in the stock markets of New York and London, but a growing distrust of a Government policy which appears to have been designed to weaken the economic structure at a time when it could most opportunely be strengthened against possible shocks in the future. A crushing rate of taxation is being maintained in New Zealand while other Governments are giving relief .to industry and trade. Nor is this all. Statements have been made by members of the Government, from the Prime Minister downwards, which indicate that the Labour Party’s aim is a complete Socialism in New Zealand. The less responsible members have been talking currency reform; and the Parliamentary Under-Secretary in charge of Housing, Mr J. A. Lee, has published a pamphlet advocating a money policy along the lines of radical experiment. With this sort of thing happening almost every day it can scarcely be surprising if the general tone throughout the country is caution rather than confidence. Before money flows freely for business expansion and the development of industry there must be reason to believe that the future promises a fair degree of security. No amount of optimistic talk in Parliament can be a substitute for sane government and equitable taxation. ■

The Labour Government has shown, in its policy hitherto and in statements from what could be termed a left-wing group within its ranks, that New Zealand has been committed to a programme of reckless expenditure and high taxation which must lead, at the first drop in prices overseas, to the need for retrenchment or experiment. It can be gathered, from repeated statements in the House which indicate a somewhat morbid preoccupation with the mistakes and difficulties of past Governments, that retrenchment is a word expunged from Labour’s dictionaries. The way is to be onward and upward. High taxation is necessary, Mr Nash and the Government claim; and if present methods continue it may have to be higher still. And then what? Is there evidence in the history of State enterprise to justify any hope that the Govern-

ment can control industry and trade without wastefulness and inefficiency? Mr Lee has been quoted as saying that the difference between the most conservative member of the Labour Party and the most progressive member of the Opposition is “the difference between the will to inhabit a profit system, or the will to inhabit a system based on human requirements.” The profit system may have faults, like every other system devised by mankind; but it has one vital factor—the incentive to produce efficiently. If the Government has discovered an economic cure-all there should be no need to make the announcement piecemeal, in obscure hints from private members and periodical ministerial outbursts. But it seems more probable that the Government sees only the vaguest outline of a future policy, and that its approach to the time of experiment is to be simply through the steady pressure of taxation. When that fails, it believes, will be time enough to devise expedients. By that time there may be another Government saddled with the task of straightening the tangle.