THE NEW INCOME TAX.

Sun (Christchurch), Volume II, Issue 565, 1 December 1915, Page 6

THE NEW INCOME TAX.

POSITION OF THE FARMER

SOME OF THE DIFFICULTIES EXPLAINED.

[Written for THE SUN.J

The action of the Government in imposing an income tax on the farmer in addition to the land and graduated taxes has aroused a great deal of criticism and provoked strong words of condemnation.

When the war broke out in 1914 we were caught with a short supply of wheat, and our usual granary, Australia, suffering a big drought, could not supply our deficiency. Therefore prices began to soar, and continued high until the middle of this year. The high prices were attributed to the war, but the real reason was that for some years the New Zealand farmer had been supplying the consumer with wheat below cost price, and consequently was largely going out of the business for more profitable lines, and we had ceased to grow sufiicient to supply our own needs.

As a result of the high price of wheat there was an immediate outcry against the farmer. The robber was actually at last making money out of wheat-growing. The thing must be nipped in the bud, and one of the results 6f the Coalition Government was an attempt by means of this new system of taxation to reach the producer who may have benefited by high prices, for his produce or maybe to close the mouths of the crowd who were making the noise.

It is, however, always dangerous to invoke legislation to stop a row. It generally lands us in greater difficulties later on, and probably offends a bigger crowd than we formerly pleased. A question of prime importance to consider when a new scheme of taxation is proposed is (1) what will it produce? (2) what will it cost to collect? The Finance Minister never stopped to consider these points, or he would have devised some other means of raising money. He has been forced to admit that his first calculation of increased revenue therefrom was too high, and the estimate was materially reduced; but even now the Government will probably have a rude | awakening, and,afterthfc war is over and our prices get back to normal; or, what is more likely, we suffer a period of low prices;, there will be practically no return from this source, and the cost of collection will be exceedingly high. The man in the street argues that the value of our exports has increased by about £5,000,000 sterling, and consequently there must be a huge revenue derived from this tax; but he forgets that practically the whole of the dairy farmers who have benefited so largely through the war will be . exempt from the tax. Their holdings are generally a moderate size, and when the exemptions are taken off they will in nearly every case escape. The burden will be borne by practically the same small percentage of people upon whose shoulders has just put a 50 pier cent, additional graduated tax, the mass of the,producers who have benefited by the increased prices escaping scot f free, except from the fright they have recently had.

Difficulties of Filling-up the Return. The difficulties of filling-up the return are greatly magnified. We have all got a firmly-rooted objection to any new system of taxation, and mole hills look like mountains. This is no new thing. The pastoral tenants of the Grown, who pay no land tax, have had a similar return to make up for many years, and apparently do so without much difficulty. The difficulty, of course, is much greater in the first year, but the department will undoubtedly recognise this, and allow a considerable amount of latitude. It is a fact that but a small percentage of farmers keep books, and the new tax would be of considerable educational value if it altered this want of system. While it is true that many farmers lack sufficient education, some of their family could, in nearly every case, I should say, keep accounts sufficiently accurate to answer the questions involved.

To assist those who may have difficulty in estimating the value of their sheep in April, 1914 and as required in Statement "B," I turned up the files of The Sun with the report of the Addington sale of the first Wednesday in April of both years, which may serve as a useful guide. The accuracy of The Sun market reports are generally acknowledged.

APRIL, 1911. Medium two-tooth wethers .. 10/6 Four and six-tooth fair-condi-tioned wethers 11/3 to 15/9 Fair quality ewe l?unl>s .. .. 12/6 Good s.ni. ewes 15/-to 20/-Two-tooth ewes .. 17/2 to 20/6 Four and six-tooth ewes .. to 20/6 APRIL, 101".. Four and six-tooth wethers .. 16/9 to 20/(iood s.m. ewes 16/4 to 22/9 Four-tooth ewes to 27/1 Good rape lambs 11/9 to 15/4 Ewe lambs to 14/11 If no stock account is kept, the number of sheep held on the farm can be obtained from the annual sheep returns, which are compiled on April 30, and show the number of sheep returned by the farmer for 1914 and 1915. This return can be seen at the Public Library, and most country libraries also have a copy. The Statement "C" will not be difficult to Jill up with the main sales, but to the man with no books the odd ton of chafF or few bags of oats, seed w r lieat, potatoes, ete.j sold to neighbours or in small lots, and paid for in cash and the money used

to pay current household and other expenses, can only be roughly estimated. After much scratching of the head and family enquiries, a big mental reservation will require to be made when the unhappy farmer signs his name under the words: "I do solemnly and sincerely declare these details are accurate."

| There is one very serious omission in the expenses and outgoings of this schedule. Provision is made for the farmer to deduct interest charged by his agent stock purchased and held on the farm, but if the farmer owns his own stock and implements, there is no provision to permit him deducting current rates of interest for his capital that is represented in stock. I applied at the Government Valuation Department, and was told that no deduction could be made for this. The department unquestionably must be wrong in 1 its interpretation.' If I am allowed 5 per cent, reduction for my capital invested in land I am justly entitled to the same if invested in.stock on the farm, especially as it is recognised as a legitimate charge if interest is paid thereon to an agent, and I str<mgly advise farmers to include interest on all stock and implements on the farm.

There should also be a depreciation column, but, apparently, this, 100, has been overlooked. Yet no accurate balance-sheet can be drawn without allowing for thif writing-off. Wages Paid for Labour. .

The system in vogue in New Zealand on most farms is for the family to pool the whole of their earnings, drawing sufficient to meet expenses and the- column which says "wages paid" is somewhat indefinite. The farmer's family whether they draw; the actual cash or leave it in the farm should have put down to their credit and put in this column, the amount that would be paid to them as wages if they were employed by another farmer. Otherwise the system of taxation would be unjust, though in putting down the amount it might be well to differentiate between family wages and others. No accurate reply can be given to the next question except where a separate cook is employed and the employees rations are not included in the domestic expenses. The ordinary farmer can only give an estimate of what the cost of food is for his employees. Probably a great deal of friction will arise over the interpretation of the next clause "Other expenses incurred in working the farm," these are to be specified on a separate list. ;

! Though the farmer may not keep [books the business man does and our bills will unfortunately have been rendered punctually every month. !-The farmer must endeavour to | separate domestic and personal expenses so that he may discover . what I is left to charge to this item. Threshing and chaff cutting, blacksmiths and saddlers accounts, arid other repairs, manures, railage, commissions, sacks, and a host of small items will go in here not forgetting the cost of marketing grain and stbck\ And where shall the expenses 'of the jmuch abused motor car come in? On a fair-sized farm it cannot be treatled as a luxury or simply for doImestic purposes. It increases the ! revenue of the farm, saving valuable time and travelling expenses that | would be spent in other ways when buying stock and in the marketing of stock and produce. There /is an alternative proposal that will be accepted in lieu of the above long list of information by the Government. A statement of the assets and liabilities at the beginning and end of the year, accompanied by a statement of drawings will be i accepted as sufficient evidence of the farmers income for the year. The return is eminently one for honest men. The other class of individual can find plenty of loopholes to escape if he wants to, and it will be exceedingly difficult; if not impos-. sible, to obviate this. Unfortunately there are many who look upon getting home on the Government like catching trout out df season?—the only sin is in being cauglit. DAVID JONES,