NO HIGHER INCOME TAX

Taranaki Daily News, 22 August 1930, Page 11

NO HIGHER INCOME TAX

budget proposals stand BOTH TAXATION BILLS PASSED. abolition of super land tax. By Telegraph.—Press Association. Wellington, Last Night. Urgency was accorded the passage in the House of Representatives to-day of the Land and Income Tax Amendment and the Land and Income Tax (annual) Bills. Moving the second reading of the Land and Income Tax Amendment Bill the Prune Minister said one of the principal provisions was the abolition of the super-tax on land. It had to be recognised that owners of land had been the hardest hit by the fall in the value of primary products and it was necessary that this relief should be given them. The next clause made clear the extent to which unimproved value was. subject to income tax, all estates of an unimproved value exceeding £7500 being as-' sessable. Another clause brought South African War veterans in- line with Great War pensioners in 'granting them exemption from the taxation of pensions. Referring to the clause reducing the exemption allowed in respect to income derived from the use of land the Prime: Minister -said formerly this had stood at 5 per cent, on the improved value. It was considered that in the case of city buildings the allowance. of 5 per cent, was too great because the actual depreciation- in buildings constructed in steel and concrete would not amount to more than one half per cent, annually. By fixing the basis on the unimproved instead of the improved, value the coemption became more workable; Special provisions with respect to the-asseS-Sment for income tax of insurance companies whose headquarters were outside;, -New. Zealand brought these .companies on to the same footing as New Zealand institutions. Formerly they had -enjoyed an advantage and their income tax was a long way short of that paid by New Zealand companies. 'There was no reason why overseas institutions should not contribute at the same rate.

“LEARNING' BY EXPERIENCE.” • Mr. W. D. Stewart said the Bill afforded another instance that the Government was learning by experience and only by experience detrimental to the taxpayer. The Reform Party had protested against the supertax when the proposal was before the* House and the views. expressed had been sustained by ' the Royal Commission appointed to deal with hardship. Referring to other features of the Bill Mr. Stewart said the proposal to assess income tax on the returns from

land of dn unimproved value exceeding £7500 was in line with the modern trend of political opinion and was an approach to the ultimate basis of taxation on income alone. Opinion was riot yet quite ready for the total substitution of income for land tax. The Bill would bring city and country taxpayers on to the same footing; both would be.' 'liable to income tax, both would be liable to land tax- and both would be entitled to 5 per cent, exemption, which would place the rural taxpayer on a more favourable standing than the city man because the unimproved value in the country practically amounted to two-thirds of the capital value while in the city the proportion was very riiuch smaller. Mr. Stewart pointed out that the change might very well have a detrimental effect on chain business. They would have no means of. passing the tax on to consumers, and if their businesses suffered there might be a consequent increase in unemployment. It seemed to be the policy of the Government to mate the maximum taxation for one. year the minimum for the following year. The Prime Minister might next year find himself faced with a continued fall in values of produce and it might not be possible to repeat this year’s programme of increasing taxation.. He said he had made all the reductions possible in departmental expenditure but that claim had not been accepted by outside critics as being sufficiently demonstrated. He asked Mr. Forbes to take;*a long view of the situation if he were 1 again confronted with a difficult position next year.

H COMMISSION SUGGESTED. It might be well for the-Prime Minister 1 to have his claim that it was impossible to reduce expenditure supported by the finding of independent experts, an.d ? for that reason Mr. Stewart suggested\that it would be wise to set up a commission to investigate the expenditure.,The . Prime Minister would need to, 'be'., prepared to show that he could do ryithout extra taxation or that he could/effect a saving in spending, failing.jvhi.ch he. should be able to show that, /outside experts concurred in the claim that a reduction in expenditure was not possible. The Deputy-Leader of the Labpur Party, Mr. M. J. Savage, said Parliament would soon be a' tiling of the past ' il they were going to. set up outside inquiries into the running, of . the Civil Service. . Surely the Government, could imder.takeit.. Jt was, the Government’s j esponsibility. . He submitted that in the matter of taxation both farm and city people should be treated alike. The 5 per cent, allowance on the unimproved value instead of on the capital value was a. step in, the right direction. Statistics showed,that there were still many incomes .capable of bearing a greater degree. ..of .taxation. The great bulk of assessable, incomes was above the . £lOOO mark;-and he contended there was a greater, case. for taxing those sources than,-.for raising additional revenue from

the ■ Customs. i Land tax seemed to be the weakest flaw in . the Government's proposal, continued. Mr. Savage. He regarded the removal .of the special land tax as a retrograde. step and suggested that the supertax. l should have been retained on estates above.£2o,ooo unimproved value. That., would do no injustice to the small men on the land. The principle of land tax. should be to make it easy to use the land for its full production, and in the case of big estates land it was not being used to that extent.

THE LIMIT APPROACHED. Mr. C. A. Wilkinson said there was a limit to which taxation could be imposed and that limit was being approached. The proposal for a special exemption .in . .respect to. the income derived from ,the pse of Jand to be.based on ; the unimproved value would, result im hardship and would discourage building.. He asked the Government to amend the

clausa to provide & reasonable allowance for depreciation. Mr. R. A. Wright referred to the difference between the taxation policies of the three main parties, in the House and said he believed tire Reform Party’s policy had been correct. The supertax on land had been introduced With a great flourish of trumpets but the Government had now found it advisable to abolish it. He congratulated the Prime Minister on having made the change. Mr. J. 8. Fletcher said he did not think there should be any differentiation between the treatment of the man in the country and of the man in the city as far as taxation was concerned.. He favoured income tax alone as a basis of taxation. He did not think the unimproved value of land should enter into consideration. If a man owned an estate value at over £7500 but did not make a profit he should not be taxed, but if a man owned land of an unimproved value of only £lOOO but earned from it an income of over £3OO he should be taxed on the same basis as the man in the city. Mr. W. D. Lysnar declared the: amount paid in land tax by the farmer should be deducted from his income tax. . Mr. J. A. Nash: Would you do that to the city man too? Mr. Lysnar:-. Certainly not! The city man can pass his land tax on. but the. farmer cannot. .. . . . Mr. Lysnar urged the Prime Minister to mfik.e such a concession to, the man: on the land. There would be no real prosperity in the Dominion until the burden on the land was relieved. Mr. J. Bitchener also asked the Government to ease the burden on the farmer. He asserted that it was difficult for many men to carry on, but the Government appeared to be showing consideration only for those on Crown lands. Even then it was finding difficulty in having Crown lands taken up. - Mr;-A. W. Hall objected to the double, tax on farmers and read quotations to show that Liberal members had objected to it in the past. ? .. Mr. J.'A. Young said the effect of the supertax had been to destroy industry and create unemployment.

OPPOSITION LEADER’S VIEWS. Mr. Coates reminded the Government that it had been in office-two years and it had produced two land and income tax amendment Bills. He wondered what it would produce next year. The consequence of last year’s Bill was well known and it was unfortunate that the present Bill demanded an increase in taxation at a time of depression. A return to confidence .. was important and this could be induced by granting some relief from taxation. Mr, Coates favoured income tax on the basis'of farmers’ taxation. An unfortunate feature connected with land tax was the almost impossibility for farmers to get the full allowance for improvements, with the result that the unimproved values on which they, were taxed were too high. Mr. W. H. Field also urged that farmers’ taxation should not be too heavy. He said he considered the tax on income was the fairest method, but at a time of stress like the present he had no objection to a hand tax so long as it was not allowed to be oppressve.. ' Replying to the debate the Prime Minister eaid it wag claimed that the o-reat fight by the Opposition had eaved the farmers, but 1500 farmers only were affected and it looked well for the Opposition to say that the whole of the 80.000 farmers of New Zealand were hit. ' The supertax would have been satisfactory if it had not been for the price of wool and other produce. There was a difference of opinion as to what exemption should be allowed on ferro-concrete buildings. He had before him the prospectus for a ferroconcrete and steel building and depreciation of H per cent, wae allowed. Mr. A. Hamilton: That is a life of 400 years. The Prime Minister: The amount can be fixed. Mr. Fletcher: Who is going to fix it if the Prime Minister and the Government are not? The Prime Minister; It will be fixed by experts. The Bill having keen read a second time was then considered in committee.

Mr. A. Harris asked if foreign insurance companies would be taxed on t’? same baeifl ae the Government Life Insurance.

BUILDING DEPRECIATION. • Mr. Forbes replied that that was so. Mr. Wilkinson gave notice that he would move an amendment to fix the depreciation on brick or concrete buildings at 3 per cent, and on wooden buildings at 4J per cent. Mr. W. E. Barnard asked if there had been a departure from the Budget regarding the taxation of life insurance

companies. Mr. Forbes said the rate of depreciation on buildings would be fixed. The rates mentioned in Mr. Wilkinson’s amendment were fairly handsome and they could not be adopted because the rates could be fixed only after the matter had been carefully investigated.

Mr. Coates referred to insurance companies and said that Hie proposals did not place foreign companies on the same footing as the Government department because the Government department did not pay dues which had to be borne ' y private companies. After objections had been raised py members to the clause relating to life insurance companies the Prime Minister stated he would have no objection to discussing the position before the Bill came before the Legislative Council.

The short title was passed at 11.45 p.m. When the clause relating to the payment of income tax by occupiers of land the unimproved value of which <s in excess of £7500 was reached, . Mr. Hamilton asked the Prime Minister whether it would be possible to increase the minimum to £lO,OOO.

Mr. Forbes said he could not do so. Mr. Wilkinson asked whether notice would be taken of the wages paid by a father to children.

Mr. Forbes said this would be done if it could be shown wages were actually paid. The clause was passed.

When the exemption clause was before the committee Mr. Wilkinson moved an amendment that the rate of depreciation of premises be fixed at not less than four per cent, per annum in the case of wooden buildings and 27 per cent, in the case of brick or concrete. This was defeated by 53 to 14. Mr. H. M. Rushworth then moved an amendment providing that assessment of deductions for improvements should be .in the hands of the Minister of Finance instead of the Commissioner of Taxes. Ho pointed out that until gome principle had been evolved a great deal of taxing, authority would be required. No public servant should be entrusted with . such powers. ■.!'■ •:• ■.<! .••• h:>. 1 Mr. Forbes stated that experience had shown that the Commissioner, .of Taxes, had always been very reasonable men.

Mr. Rushworth remarked it was not a question, of. reasonableness or competence. There would be many problems arising and a great deal of authority would have to be delegated. Furthermore, when disputes arose it would be possible to ask the Minister of Finance questions on the subject, But it would not be possible to deal in the same way with the commissioner. Mr. A. M. Samuel pointed out that placing .the necessity to decide in the hands of the Minister of Finance would leave him open to charges of party bias and similar embarrassments. He added that appeals against the Commissioner’s rulings could always be brought before Parliament.

The amendment was lost on the voices and the original clause was passed. Mr. F. Langstone moved that an additional clause be added to the Bill providing that in computing the annual taxable income of any registered company under the Act of 1908 no exemptions should be allowed on directors’ fees in excess of £2OOO in that company. He pointed out that by the payment of very large directors’ fees companies avoided paying a fair share of income tax. The motion was ruled out of order.

Mr. H. S. S. Kyle moved to add a clause providing that the mortgage exemptions should be restored from £7500 to £lO,OOO. He contended that under the Bill before the committee farmers would find their taxation burden heavy and additional exemption on mortgaged estates would provide some protection. The motion was rejected by 38 votes to 29, and both the Land and Income Tax Amendment Bill and the Land and Income Tax (annual) Bill were then reported to the House without amendment.

Speaking on the third reading of the Amendment Bill Mr. Samuel expressed appreciation of the fact that the Prime Minister had agreed to meet members of the House and representative insurance companies to discuss the new clause relating to insurance company taxation. .... The Land and Income Tax Bill was . read a third time nassed.