OUR TAXATION.

Stratford Evening Post, Volume XXXI, Issue 23, 12 September 1911, Page 2

OUR TAXATION.

COMPARISONS WITH OTHER COUNTRIES. WHAT THE STATE RETURNS. In his Financial Statement, Sir Joseph Ward said;— 1 am of opinion that in the best interests of the country it is desirable to deal with the w idely made and pcrsitent statements that, have been •circulated in reference to tiie taxation of this country, statements which have been tnc means of creating an erroneous belief as to the amount of taxation borne by our community. It is sometimes honestly but mistakenly stated that New Zealand is the most, heavily taxed community in the British Empire, if not in the civilised world. This is far from being true. In comparing the taxation paid by individuals in dilfercnt countries we arc met with serious difficulties in getting the exact position. Some countries levy more from direct taxation than others. I'h revenue derived from property tax, land tax, estate duties, or income tax is collected in different ways by different Governmnts. In some countries there is no income tax, in others no land tax. In some inheritance taxes are considerable, in others wholly absent. The incidence of taxation, direct. and indirect, differs greatly in most systems, in some the poorest members of the community paying an unreasonable proportion of tiie whole. It is necessary to distinguish between taxation and charges for services rendered by the State. In a country like New Zealand, which owns its railways, the income of the service is regarded as revenue, and it is an error to speak of this as taxation. If the total annual earnings of the railways of the United States of America (£580,680,445) or tiie United Kingdom (£120,174,052) wore added to. the revenue of those countries, as is done in Now Zealand, the taxation would appear to lie enormous ; aril so on with other State activities. Only by a careful analysis can the real amount, of taxation be ascertained. A country with a small revenue per head may have a more oppressive system of taxation than one with a much larger per capita revenue. The status in civilisation of a country may be gauged roughly by the proSrtion of its revenue applied to usel public purposes and the equitable incidence of taxation—that is, the proportion of revenue collected from those best able to bear it. Judged by this standard Now Zealand holds a high position indeed. Take a small business man, farmer, artisan, or labourer with four children in New Zealand owning land valued at not more than £SOO, and on which a home and business premises arc erected at a value of £IOOO, or oven more, and in receipt of an income under £.400 per annum. He pays no direct taxation whatever to the general Government, and may contribute very little through the Customs, if ho is a teetotaller; and non-smoker. Even if ho and his wife and children use the average quantity of dutiable goods, including silks, jewellery, and other articles deemed luxuries, ho will pay only about £6 8s 2d per annum. If lie consumes the average amount of tobacco and alcohol in addition, he will pay in all £lO 5s 9d in indirect taxation. If they elect to go without what are considered luxuries, ho and his family will pay hardly anything at all in the way of taxation. For the amount paid, supposing it is £lO 5s 9d per annum, he gets much in return. His children receive a free education. xir £5 8s per annum, the cost of the education of each child from the age ■ of' live to four-teeny ■ lie receives from the State £2l 12s yearly. If his children are talented they can win their way to any position dependent upon a superior education. When his children begin to work they arch looked after by Government officials to see that they have sanitary surroundings, get a minimum wage, sufficient air-space, and are not workd too long each day. He is also safeguarded in many ways during his working hours, and, if he has been unfortunate, will at sixty-five receive a pension from the State for the rest of his life. His lot in respect of taxation and the benefits obtained therefrom will compare favourably with that of any worker anywhere in the world. In New Zealand no income tax is paid on an income of less than £3OO. This is a very high exemption. In Britain it commences at 160; in Japan at £3O, and it rapidly progresses there until at £IO,OOO per annum as much as 4s in the pound is taken by the State. in Germany taxation on the poorer members of the community is much higher than in this Dominion. In addition to heavy Customs duties on meat and other necessaries of life, the income tax which they have to pay is, compared with ours, very severe. SOME EXAMPLES. Here are some examples which should be studied in order to realise how fortunate wo arc in comparison The amount of exemption varies in different States of the German Empire. In Prussia all, incomes of £45 or over, earned or unearned, must pay income tax. In some States the exemption is only £2O; and, as the tax is assessed on the total earnings of the family and not those of the father only, few escape it. it .s graded from i per cent to ;|- per cent, on an income of £45, and increases as tho income grows. Take the case of a servant girl in Saxony with a salary of £ls per year. Taxation on ’neomes begins in Saxony at £2O but income includes food, lodging, Christmas presents, and other gratuities. The employer is compelled by law to give tin' authorities a list of these items. Food, lodging, and other tilings will be, at the lowest computation, £23, making the income £3B per annum, bringing the girl under class 3. The direct tax is 4s. per year, but in Germany the local taxation is based upon tho Imperial tax. In some towns it is tho the same, in others more; thus, in Frankfort-on-the-Main tho local tax is 125 per cent, of the Imperial tax, in Duisburg 200 per cent., at Elberlield 250 per cent., at Berlin lOOper cent., In some places it reaches 350 per cent. At Dresden the servant girl, in addition to the 4s. direct taxation, must pay for general purposes 3.for church and school tax about 3s. (id. total 10s. (id. if the total income is £4O instead of £3B, she is placed in class 4. which applies to incomes of from £lO to £47 10s. She will then pay JBs. in direct taxes. Consider the position of a married couple in Dresden, each working, and together earning £IOO. They are taxed together, and will pay £1 10s out of the £IOO If in dilfercnt occupations ■and separately earning only £SO, each would have to pay income-tax amounting to £1 16s. But in New Zealand-it is not only the poorer persons who are lightly taxed. Those -who are members of what in other countries are called tin; middle classes are hotter off here than elsewhere. Wo will take the ease of a men rociving £IOOO per annum in New Zealand, England and Germany. In Now Zealand he will pay £29 11s Bd—that is, lid in the pound oh £7O0 — .11 in excess of the exemption of £3OO. A Londoner receiving £IOOO, half of which is earned and half unearned, will pay on the £SOO earner, art ') i in

the pound, £lB os; on the £SOO uneanied, at Is 2d in the pound, £29 3s Id; total, £l7 18s -Id. At Erank-fort-on-thc-Main a person in receipt of a similar income will pay £96 per annum. The German Empire is purposely taken for comparison. It is one of the greatest of world Powers, in the front rank of civilisation and prosperity. Were a poor or backward State referred to it might be said that the comparison was unfair* It is not necessary, however, to go as far as Europe to find a country where the small man is more heavily taxed than in New Zealand. In Tasmania income-tax is payable as soon as the income reaches £BO per annum. The exemption begins to diminish at £llO, and disappears at £4OO, so that on an income of £3OO, at which a New Zealander pays nothing, a Tasmanian pays income-tax on £270 at o.UI in too pound—that is £6 3s 9d. There is no exemption for land-tax, which is payable on every pound of the unimproved value, and if lie owns unimproved land worth £6OO lie will pay £2 Is 8d land-tax in addition. A glance may be taken at the direct taxation system of the other Australian States. In South Australia a man owning land of the value of £SOO, exempt from taxation in New Zealand, would pay Jd in the pound, whiclP'oqnals £1 0s lOd. Absentees beyond the Commonwealth pay 20 per cent. more. If his income is £3OO and derived from personal exertion (except in Now Zealand), ho will pay 4ld in the pound on income over the exemption of £2OO or £1 17s 6d. If his income is from property the rate will i be 9d- irn the pound—that is, £3lss. In Victoria the unimproved value tax on land is .jd per pound: the owner of £SOO will pay £1 0s lOd, as in South Australia; Income tax is at the rate of 3d in the pound on an income of £3OO per annum, if such income be derived from personal exertion (other than income arising from live stock, wool, meat, milk, dairy produce, fruit, fodder, and other crops arising from land under the unimproved value of £SOOO, after allowing’ an exemption of £150), and 6d in the pound if arising from any other source except, income from interest on Government debentures, dividends from companies', etc. A person in receipt of an income of £3OO per annum, at which a New Zealander is exempt, will pay from £1 17s 6d to £3 15s. In Queensland there is no land tax except that of the Commonwealth v.ucl local authorities’ rating, but income from land exempt in New Zealand is taxable, with an exemption of £2OO, above £2OO it is 9d in'the pound, so that an income of £3OO per annum derived from land would pay £3 15s in taxation. On income derived from personal exertion, ■ the first £2OO is exemjit and 6d is payable oa every pound over £2OO. ■ it is interesting: -to -compare the taxation on dividends of coun.-ii.ies j.i Germany with mat of Lot us suppose tual> i-a L.is ... untiy a company, with a capital of £IOO/)'A) makes £j.O,UOU prone and uiscriouu s £BOOO in oivideaus. me taxation pa,,abla will be —income, tax on £Jwu ..t is 2d in tue £, £ CoS 13s -ici; annual liccr.sc fee at is per cent., £SO; total, £6.10: I,’s Id. iv similar company m ouei, of tno German oiams, say, in Duisburg, whore the local taxation is t i.jc.; dn.c levied by the linpoii.il Government —will pay —income tax on £ILO,UdO, loss 3 h pm cent, of the capital of me company, unit is £iU,oUu—£3soo—£6soo, £'J6U ; to the city on a -£10(000 tmdo>-Uooiiß>3, ait 2 per .cent., £200; income ’tax, local, 8 per cent., £800; total, £1260., tint oh the £BOOO paid m dividends income tax lias to lie paid by the recipients. The amount will 1 depend upon the _total income of Cadi ■or the shareholders, as the income tax is graduated. If they are persons in receipt of incomes of £SOO per annum they will pay to the State ,3 pei 1 cent, £2io; to the, local authority, 6 per cent, £480; to the church, 0.45 par cent, £36; total, £/56; bringing the total taxes on the £IO,OOO to ’ £2056. in New Zealand income Lax is not, of course, levied on div idends received from companies, the one tux at the source only , being collected. We hoar a lot of complaint about cur land tax. This is not high until the graduated tax becomes payable; but it must lie remembeied. that oui graduated laud tax is not imposed for revenue purposes, but with the intention oi causing closer settlement by a subdivision of large estates, widen will, of course, reduce the revenue derived from the graduated tax. In New Zealand an owner of laud of the value of £SUU or under is, as stated, exempt from land tax, no matter what the value of his House or other improvements thereon may he. In many other countries not only is there a tax on land of small values and all improvements thereon, hut a portion of the increase in values is also claimed by the State. Thus in England the duty on increased value is a tax of 20 per cent, levied on any increase in the site value. It is to oe paid whenever the laud is sold or let on lease for more than fourteen years, and whenever it changes hands by death. The duty is £1 for every complete £o of increment value. Then there is the reversion duty, width is a special form of increment tax payable on the determination oT a lease of land payable to the owner or lessor, it is £l for every £lO of increased value. Again, there is a duty on undeveloped land at the fate of Id for every £1 in value. There'lire certain special exemptions, of course, to all those taxes, but their existence shows how much better off the landowner is in New Zealand. In Germany, on all inhabited houses and landed properties that change ownership within a period of from twenty to sixty years, a State tax of 1 per cent, and a local tax of 2 per cent, must be- paid on the sale price—that is, 3 per cent., no matter whether it is sold at a loss or gain compared with the previous sale price. If there is a profit—that is, an increase over the previous sale price—there is a graduated scale of taxes amounting to I per cent, on the increase of from 25 per cent, to 30 per cent., and 1 per cent, on each increase of 5 per cent, above that. There have been complaints without real justification made .as to the amount that is obtained in this country from inherited estates, but ! propose to show that it is not excessive in Now Zealand, ft is increasing in all countries.

Estates of £dOO or under are exempt in New Zealand from estates duty. Those taking the inheritance pay according to the relationship <>l the successor to the deceased, strangers paying 1U per cent. Croat care has l»con taken in our legislation to protect the family. In some other countries not only is tho succession duty •as high as ours, hut the interests ot the wife and children of tho deceased are not nearly so well guarded, in 1:1;o United Kingdom estates of over 'J * Ot) and under CoOO pay 1 per cent., so that Cl would ho payable, in (ids country there would he no tax. Succession duty is higher on collateral he»rs in the United Kingdom (hail in Xcw Zealand, and the maximum is the ~;a.ne--10 per cent. In Western Australia the inheritance tax would lie, oil an estate of .CdilO, if the wife and children were at the date of decease l,ona lit It* residents in Western Australia, £'2 10s; if not, Co. In Ouoensland the duty on an estate of CoOO leit to

wife and children would he 1 per cent., £5. In South Australia there is an exemption of £SOO if the estate goes to wife and children ; strangers have to pay, as with ns, 10 per cent. It is the same in,Tasmania. Of the United States all hut. ten- levy inheritance taxes. The tax varies greatly. In some of them the amount reaches 12 per cent., 15 per cent., and in one— New York—in the case of large estates and unrelated or distant persons inheriting, 2d per cent, is taken. The maximum estates duty 115 pel cent.) and succession duty (10 per cent.) is the same in the United Kingdom as in New Zealand, hut the higher duties are reached much sooner in Now Zealand, while the smaller estates up to £‘3ooo are more lightly taxed hero. If we look around the world and compare the taxation systems of this country witii those of others, wc must he impressed with the advantages our people enjoy in this respect. A* man may own a home worth £SOO, receive an income up to £3OO per annum, and ho v. ill not pay one penny of direct taxation during his life, nor will hir, estate on his death if it passes to Ids family. How many countries arc there in the civilised world, the inhabitants of which are in such a fortunate position?