DOUBLING TAXATION

Taranaki Daily News, 2 August 1930, Page 11

DOUBLING TAXATION

-. LAND AND INCOME CHANGES. ' EFFECT ON BUSINESS PROPERTY. Illustrations of the operation of the proposed; changes in taxation have been issiied by the Government. The most striking is the official demonstration; of the alteration in the method of assessing taxation in respect of income derived from land and buildings. The hypothetical "case shows that the sum of land and income tax is to be more than doubled. • ' - • , -

In calculating income tax it is proposed to-discontinue the allowance of 5 per*cent, of the capital value of the .property and substitute an allowance bf 5 per cent.; jd • the unimproved' value with depreciation of buildings at the discretion of the Commissioner of Taxes. ; : Tho official reason for the alteration is that the foi/ner allowance was “excessive.”

The department takes as illustrative of the proposal a business with premises of a capital value of £lB,BOO and with an assessable income of £1724. The unimproved value of the property 'is £10,050, upon which mortgages of £9400 are owing, giving a mortgage exemption under the present legislation of £4950. This leaves a taxable balance of £5lOO, upon which land tax of £24 is payable. Under the proposed legislation the mortgage , exemption remains the same, but the withdrawal of the existing deduction of 5 per cent, increases the tax payable to £25. ’ ■ !

.As against the assessable income of £1724, an exemption is allowed, under the present legislation, of 5 per cent, on the capital value of £lB,BOO, viz., £940, This leaves a taxable income of £784, on which a tax of £3B is payable. Under the proposed legislation it is proposed ,to substitute a reduction of 5 per cent, of the unimproved value, or taxable ; balance where there is a mortgage exemption, and also an appropriate allowance for the depreciation of buildings, to be made at the discretion of the Commissioner of Taxes. The deductions in the hypothetical ease are, therefore, £255, representing 5 per cent, of the taxable balance of unimproved value,. £5lOO, together with a depreciation alTo wanes of £123, leaving a taxable income of £1340. The income tax payable on this figure is £9B, which i with the addition of a 10 per cent, flat increase of £9, will amount to The total taxes payable, therefore, are £62 under the existing legislation, and under the proposed legislation £132, an increase of 113 percent. The allowance for depreciation is less than per cent.

The removal of the 5 per cent, rebate of land tax affords a simpler illustration-. In the case of land of an unimproved value of £looo,.carrying a mortgage exemption of £BOO, the tax primarily payable was IBs. Bd., which was reduced under the present legislation to 15s lOd. Under the proposed legislation this reduction is removed and the simple; tax of 16s. Bd. will .have to b« paid. An unimproved value of £15,000, with no exemptions, would have to pay a tax of £l6 Bs. 2d. instead of £l5/110. allowed under, the present legislation, in other-words, the tax on unimproved values is increased by 5.26 per cent.

'Another' in>. res ting item is the proposed amusement tax. Under the existing scale tax is paid upon all amounts in excess of 2s. at the rate of one penny for every sh’» ing or part thereof, and in eases whete the price exceeds 3s? (id., an additional penny is added. Under the new tax is is proposed to charge a tax of Id. on the first Id., 2d. on Is. fid., and upon sums in excess of Is. fid., Id. for each Is. or part thereof plus an additional penny. The amounts from 2s. fid. to 3d. 6d., already taxable, are thus to ' carry an additional penny of taxation, and for amounts in excess of 3s. Cd. the tax remains as before