TAX ON TRADING STOCKS

Southland Times, Issue 24109, 24 April 1940, Page 6

TAX ON TRADING STOCKS

POSITION SET OUT BY COMMISSIONER

EXISTING RESERVES MAY BE SPREAD DETAILS REQUIRED IN APPLICATION (United Press Association) ’ WELLINGTON, April 23. In response to a request by the Associated Chambers of Commerce of New Zealand for an explanation about the whole position concerning the valuation of trading stocks under the recent legislation the Commissioner of Taxes (Mr J. M. Park) has advised the association as follows:— “In reply to your letter of April 15 I have to advise you that under Section 16 of the Land and Income Tax Amendment Act 1939 stocks must be valued on one of the bases detailed therein and the result of such valuation is that any reserve which existed previously legally becomes assessable income derived during the year ended March 31, 1940. If, however, any taxpayer who has created stock reserves in past years considers this procedure is inequitable, I will, on receipt of a written application, be prepared _to consider the spreading of existing stock reserves either forward or backward, as desired by the taxpayer. Such an application should be made as soon as possible, but must reach me not later than the date of the filing of the return of income derived during the year ending March 31, 1940. “Each application must state (1) the amount of reserve, (2) when the reserve was originally created and (3) full details of any fluctuations since it was created. AMENDING ASSESSMENTS “When an application to spread reserves existing at April 1, 1939, over past years is made, I reserve the right to amend back assessments in such a manner as I consider just and equitable in the circumstances. If the application is to spread the reserve forward, no extension beyond March 31, 1944, will be permitted. Where in any case a taxpayer’s application for the spreading back of reserve has been granted, and it is later discovered that the 1940 valuation would, in fact, not have operated to bring the whole of the disclosed reserves into the assessable income for the income year ending March 31, 1940, and it appears that the spreading of the alleged reserve has resulted in the spreading of part of that taxpayer’s 1940 assessable income, such assessments will be reviewed and that part of the reserve assessed in the year ending March 31, 1940, in accordance with the amended legislation. “All taxpayers who lodge applications should be prepared to produce evidence that a stock reserve existed before the 1940 valuation, and those who are not aware of the actual reserve which existed are advised to value the 1940 stocks on the basis nreviously adopted in order to compare that figure with the result obtained from the valuation in accordance with Sections 16 of the Land and Income Tax Amendment Act 1939.”