INCREASES IN TAXATION

Taranaki Daily News, 25 July 1930, Page 11

INCREASES IN TAXATION

MINISTER’S EXPLANATION TOTALISATOR LEVY DOUBLED. ALL AMUSEMENTS TO PAY MORE. The new taxation proposals were the subject of the following comments in the Financial Statement presented by the Hon. G. W. Forbes: — When we find ourselves faced this year with a shrinkage of £2,830,000 in revenue and added liabilities on rigid items of over £400,000, there is no possibility of bridging the gap without some additional taxation. Having carefully combed out the expenditure, the most the Government can do is to endeavour to place the additional burdens as equitably as possible and in such a way as to cause as little economic disturbance as possible, in order that a return to more prosperous times may not be hindered any more than can be helped. “In connection with the amount of additional revenue which it was deemed advisable to obtain from indirect taxation, I may say that in preference to other things it was considered that additional duty should be placed upon cinematograph sound-films. As the value of • films varies a great deal, to be equitable any increased taxation should be upon an ad valorem and not a footage basis. The difficulty here, however, is that the value of a film is not known ..when it .comes over the wharf. In this connection it may be explained that films are not sold, but are rented to the theatre proprietors, usually • for a percentage Of the gross theatre takings. Further, films are not dealt with singly, but in groups or ‘‘blocks.” Under these circumstances an ad valorem Customs duty in the ordinary way is hardly practicable, but it is proposed to impose the equivalent of an ad valorem duty in the shape of a. film-hire tax. Briefly, the proposal is that the filmdistributing firms will be required to make returns monthly to the Commissioner of Taxes of the gross rentals received from sound-films and the administration expenses incurred in New Zealand, commencing as from July 1 last. After deducting these expenses, and also the percentage of gross rentals upon which income-tax is levied, the residue will represent the value of the films, on which will be levied an ad valorem tax at the rate of 10 per cent, in the case of British films and 25 per cent, in the case of foreign films. LAND AND INCOME TAX. “It is proposed to obtain part of the additional revenue required from land and income tax, but at the same time the opportunity is being taken to remove certain anomalies and place the taxes on a more equitable basis. * : The information obtained from last year’s income-tax returns of farming incomes showed clearly that previously many large incomes had been escaping their fair share of taxation and that the amendments made last session were in the right direction. Experience has shown, however, that the special landtax was too rigid in its incidence and was inequitable in some instances. At the same time, information received by the Tax Department shows that the incomes derived from many farms of an unimproved value of considerably less than £14,000 (and thus not at present assessable for income-tax) are. not contributing a fair share, towards the expenses of the State. Accordingly, to overcome all these difficulties and iniquities it is proposed to abandon the special land-tax and make all farmers owning or occupying land of an unimproved value of £7500 or over liable to’ assessment for income-tax on their farming as well as other income. The provision in last year’s legislation whereby the land-tax payable was deductible from the income-tax on farm-, ing incomes will also be repealed, and farmers will henceforth be assessed for income-tax on the same basis as other classes of the community. ANOMALIES AND INEQUITIES. Further, it is found that the present general provision allowing a deduction for income-tax purposes of 5 per cent, on the capital value of property used in production of the income has given rise to serious anomalies and inequities. This allowance is intended as a set-off for land-tax paid, and also to provide for depreciation of buildings, but the method is too rough and ready to be equitable. For instance, a taxpayer deriving income from rents is at present allowed as a deduction the interest on his mortgage and also 5 per cent, on the full capital value, in which his equity may bo relatively small. In many such cases the taxpayers practically escape in-come-tax, arid by reason of the mortgage exemption may also escape land--tax. Again, in the cities, owing to the erection in recent years of large and valuable buildings, the 5 per cent, allowance has in some eases relieved the business man not only of the amount of his land-tax, but, in addition, of a considerable part of his income-tax. Further, the taxpayer carrying on his business in a steel-frame structure with a life possibly exceeding one hundred years is allowed the same rate of 5 per cent, as the taxpayer using a wooden building with a possible life of-, say, forty years. Even in the latter case 5 per cent, on the capital value is an excessive allowance. Further depreciation is an actual expense and should be allowed as a deduction before arriving at the assessable income. At present it is a special exemption. Accordingly, it is proposed to revert practically to tho position obtaining prior to 1923, and reduce the allowance to 5 per cent, on the unimproved value or the taxable balance in cases where a mortgage exemption has been allowed in the land-tax assessment, together with an appropriate allowance for depreciation of buildings, varying with the different classes of building, at the discretion of the Commissioner of Taxes. The proposal really amounts to dividing the present allowance into its two parts—an allowance of 5 per cent, on the unimproved value as a set-off against land-tax paid, and depreciation on buildings at appropriate rates as a deduction from profits. The change will apply to all assessable income derived from the use of land, whether in the course of farming or trading.