New Tax Gradation

Sun (Auckland), Volume I, Issue 139, 2 September 1927, Page 3

New Tax Gradation

Minister Answers Criticism

Late Sitting of the House

(THE SUN’S Parliamentary Reporter.) WELLINGTON, Thursday. k MEASURE that was described as the biggest thing a overnmeiit could attempt—readjustment of Land and ome Tax gradation—was brought on in the House of Representatives at 11 o’clock at night when the Hon. W. owl4le Stewart, Minister of Finance, moved the second reading of the Land and Income Tax (Annual) Bill. Because the a ered scale placed an extra burden on the moderate income and left the higher incomes as before, Labour members attacked the proposals vehemently.

'J’HE Minister said that, except with respect to paragraph 3 ot part 11. of the schedule the Bill was in the same terms as the annual Taxing Act passed last session. The paragraph above referred to fixed the rates of income tax payable on income derived' otherwise than from debentures. In last year’s Act the minimum tax on such income was fixed at sevenpenee in the £, and the maximum tax at 4s 6d in the £. Between these extremes a graduated scale, increased for every £ of income, was fixed. The present Bill preserved the same limits of sevenpenee and 4s 6d respectively, but provided a series of finer graduations in the scale between those limits.

“With the alterations proposed,” said the Minister, "neither the man with £3OO, £4OO, or £450 pays any more than at present, and the man wich £750 goes up only 35s if he has no children, and if he has three children he goes up only 15s, so that the increases, while they are necessary to produce a proper graduation, are extremely trifling over those classes, if there is any increase at all. £3OO EXEMPTION “The alteration in the point at which the exemption of £3OO begins to disappear has also been criticised as if it were increasing the burden on certain classes of income. The real reason for the alteration is that under the old scale a most unjust and sudden jump occurred at one point in it. This is easily seen if you take the case of the man with £6OO income, who was entitled to deduct £3OO, and on the balance of £3OO pay the lowest rate of sevenpenee. But the man with £7OO was entitled to deduct only £2OO, and was consequently taxed on £SOO, not at sevenpenee, but at eightpence halfpenny,, which meant that by reason of his £IOO extra of income he paid 100 per cent, higher tax. The man with £6OO paid a tax of £7 17s 6d, and the man with £7OO paid £ls 12s 6d. It is impossible to argue that this was a just process of graduation. Discussing the point as to whether company taxation was an added burden to the individual taxpayer, the Minister said some of his critics complained that company taxation was passed on to the consumer. The best authorities on taxation were of the opinion that income tax was not passed on, except perhaps where monopoly conditions prevailed. He finally suggested that the business community would welcome the provision that companies may free themselves from the necessity of making returns and paying tax on behalf of their debenture holders, if they supplied the commissioner with information enabling him to make personal assessments. Sir oseph Ward questioned whether an increase in land and income tax. under any heading, was necessary. If it was, he asked why had the Government taken £500,000 out of revenue to pay off a loan that it did not require to do. TAX-FREE INCOMES When the Minister moved the second reading, Mr. J. McCombs protested against a Bill of such import-

ance being introduced so late at night, and went on to criticise the measure as a disappointment after the Government’s promise to adjust taxation equitably. It was merely creating a great number of tax-free income receivers in the country. On one hand we were inclined to increase Customs taxation, and erect a tariff wall to protect our own manufacturers, but on the other hand the Government was penalising companies which could not sell goods at the price they wanted, as they had to set something aside for company taxation. Why was the graduation not more steeply graded, he asked. The Government had promised in Budget after Budget to readjust the basis and to reduce taxation, but the excuse was that revenue was wanted. This was no justification for a system that was inequitable, unjust, and a handicap to people who had to enter into competition with goods imported from other countries. Mr. W. D. Lysnar complained that local bodies were being favoured at the expense of the private individual, and he asked the Minister to amend the Bill now to bring them more into line. Everything was being done to aggravate the position of the man on the land. AT WRONG END Mr. M. J. Savage said that he felt that a start was being made at the wrong end. “We are always trying to get something from the 'tuan down below,” he said, “but why not start at the other end?” He doubted the efficacy of the Taxation Committee and the value of the evidence of its experts, and expressed a firm belief that the House, through its Finance Committee, could accomplish more than all the Taxation Committees. It appeared from the Minister’s remarks that a reduction in the tariff was proposed.

Mr. Stewart: No. Mr. Savage: Well, I do not know, but the average taxpayer would like to know where he is. The Government says it has increased taxation, and says it will make it up in subsequent legislation, but that appeals to me as something like buying a pig in a hag. Mr. D. Jones said that it should be remembered that the farmer, after paying all other taxes, paid no income tax, but he might pay such heavy taxes as to have no income left. The Labour politicians do not grasp at all the position regarding farmers’ taxation. They are entirely ignorant of the farmers’ position. It is high time that, seeing that they are going about the country wanting to represent the farmer, they learned something about his taxation. Mr. Jones asked the Minister of Finance and the Minister of Lands to go carefully, during the recess, into the question of the large number of landowners who had property they could not subdivide, whom graduated land tax was never intended to touch, and who were paying a tax almost amounting to rent. After the Minister had replied the second reading was passed at 1.20, when the House rose.