TAX ON COMPANIES

Te Awamutu Courier, Volume 53, Issue 3796, 17 August 1936, Page 5

TAX ON COMPANIES

■ f WHO REALLY PAYS. SHAREHOLDINGS ANALYSED. The increased taxation on companies, which is imposed by the Budget, contrasts strangely with the earlier oeclaration by the Prime Minister that the burden of taxation would be placed on the shoulders best able to bear it (says a statement by the Associated Chambers of Commerce of New Zealand.) The larger corporations in this Dominion are now to provide a substantially increased proportion of the income tax revenue. Possibly the Minister is under the impression that our large public companies are owned principally by those “whose shoulders ere best able to bear the burden oi taxation.” Has the Minister made any inquiry into the true position? HOLDINGS IN BANKS. The fact is that if one were to examine the share registers of some of the largest companies in the Dominion, one would find them composed of hundreds of small shareholders, many ot whom are not themselves taxable as individuals because of their net income being, in the ordinary course, exempted out of taxation. To take the banks as an instance: in answer to the Royal Commission on Monetary and Banking Systems in Australia recently, Mr A. C. Davidson, general manager of the Bank of New South Wales, pointed out that of 13,498 shareholders in that bank 9802 (or 72.6 per cent of the total) held shares ot the value of £5OO or less, while the individual holdings of another 1966 (or 14.6 of the total) while exceeding £5OO did not exceed £lOOO. That is to say, 87 per cent of this bank's shareholders held parcels ot shares the dividends on which do not exceed £lOO per annum at the present rate of dividend. Of the larger holdings (and there were only 169 shareholders holding shares to an extent exceeding £5000), Mr Davidson said that 849 estates managed by various trustee companies held 59,015 shares (that is, £1,180,300 of capital), while the Public Trus‘tee held 1532 shares on behalf ot 42 estates. These holdings, while they go to swell the averages of the larger shareholdings, of course do not corlectly represent the position, because the beneficiaries concerned will be many more than 891—the number ot estates. STATE BIGGEST SHAREHOLDER. What is true of the distribution of shareholdings in the Bank of New South Wales is true also of every large public company doing business in New Zealand, in 1932 the chairman of the Bank of New Zealand announced that there were 6976 shareholders in that bank, of whom no less than 2445 each held 100 shares or fewer, while the holdings ot a further 1384 were between 101 and 200 shares. In making this announcement, he said that “many of these shareholders are elderly people of limited means to whom every pound of income is of importance.” These are the type of people who are to pay increased company taxation under the proposals ot the Government. The new maximum rate of 7s 6d in the pound on companies is, in actual fact, going to be even more, because ot insufficient allowances made for various items of expense, and for undistributed profits retained for expansion of business, so that a well conducted company will really pay 10s more on each £1 distributed as dividend. This will have the effect of making the State the biggest company shareholder in the country. Is this Socialism in our time? The State is appropriating the property of citizens without taking the risks which ,any citizen must take in investing in a public company. ABOLITION RECOMMENDED. Commissions have reported against taxing companies direct as individuals, and commercial opinion also has for many years supported a change being made to taxing every individual upon his total income from all sources. The 1924 New Zealand Taxation Commission stated that the system of company taxation served a useful purpose during the war and post war period under the conditions then prevailing,'fulfilling, in addition to its natural function, the part of the English excess profits tax, but the Commission added that, with a return to more normal conditions of trade and industry, the inequalities ot the system became apparent, and it recommended that the .system be abolished in favour of taxation of the individual. As it is, the increased company tax is unjust, it will prevent the embarkation of large amounts of capital in new commercial undertakings, and it will smother industry.