BUDGET’S NEW TAXES

Taranaki Daily News, 31 July 1931, Page 7

BUDGET’S NEW TAXES

HEAVY ADDITION TO INCOME TAX INCREASES IN CUSTOMS DUTIES TEA. SUGAR, BEER AND TOBACCO NEW PRIMAGE DUTY OF 3 PER CENT. rpHE Budget presented by the Prime Minister and Ministei of Finance, the Right Hon. G. W. Forbes, to the House of Representatives last-night diseloses the following proposals in the way of new taxation for the current financial year:— Increase from 10 per cent, to 30 per cent, of the surtax on income tax. . Reduction from £3OO to £260 of general income tax exemption. Stamp duty of 5 per cent, on overseas steamer tickets. Stamp duty of 10 per cent, on art union tickets. Increases of Customs and excise duties as follows:— Tea, 3d per lb. Sugar, id per lb. Out and plug pipe tobacco, 1/4 per lb - Imported beer, 1/- per gallon. New Zealand beer, 6d p gallon. i . Various luxury articles, wearing apparel, etc., 5 to 20 per cen . Imports now free of duty, primage duty of 3 per cent.

POSITION OF FINANCES •BALANCING PUBLIC ACCOUNTS. THE REVENUE AND EXPENDITURE. ' The Minister of Finance submitted the following statement of the result of the steps taken to balance the Budgets REVENUE. £ Customs 7 csoS Film hire tax • 50,000 Motor-vehicles—duties and lieends 1,760,000 Stamp and .death duties .... 3,140,000 Land tax 1,100,000 Income tax 4,230,000 Interest receipts— Railway capital ?30,000 Post Office capital »35,000 Public moneys 745,900 Public Debt Redemption Fund 820,000 Post Office surplus J’?!?® from reserves Other sources 1,346,000 Total revenue 24,946,000 expenditure. Permanent appropriations .... 17,679,904 Annual votes 7,083,877 Total expenditure ........ 24,763,781 This would leave the amount of £182,219 to provide for supplementary estimates and contingencies. SHRINKAGE IN THE REVENUE. • The following is the Minister’s explanation of the position he has had to face in drawing up the Budget, his estimates Indicating that he had to make provision to cover loss of revenue? and increases of expenditure totalling together £6,859,900:— . , The economic situation will undou’btealy mean * large shrinkage in practically all State revenues during the current financial year. The results during the closing months of last financial year and also the experience of this financial year up to date are ample evidence of Although imports for last financial year showed a decline of 20 per cent, compared :with the previous year, the total for this year is likely to be several million less than for last year. The Customs revenue will be lowered proportionately to an even greater extent as, in times v like the present, the falling-off in imports is always heaviest in luxury lines, where, generally speaking, the rates of duty are highest. Forecasting this, our largest item ot revenue is always a difficult matter, and the difficulties are greatly accentuated under present conditions; but, having regard to all the circumstances, it is considered that on the present tariff the receipts would be £1,100,000 less than for last year, or a falling-off of approximately £2,030,000 compared to the amount budgeted for last year. The last figure ia the measure of the shortage that has to be provided for to obtain a balanced budget for this year, for, as previously explained, the total revenue received last year was insufficient to the, extent of £1,639,000. fti regard to income tax, which will be based on the trading results and. incomes during last financial year, it is obvious that a substantial decrease is to be expected. On the best information at present available, the comparative decrease is estimated at £400,000. As for land tax, this item fell short of last year’s estimate of £1,240,000 by £94,000, and collections this year will probably show a further decline. The estimate for this year has accordingly been set down at £1,100,000. stamp DUTIES AND OTHER ITEMS. Stamp and death duties will also be considerably affected by the prevailing economic conditions. The decrease in values will mean less in death duties, while returns from racing .taxation and amusement tax are also seriously affected. A decrease in the volume of business means less revenue from impressed stamps. The total revenue from stamp and death duties for last financial year fell short of the estimate by aPP™-«-mately £390,000, and a further fallin ooff of about £300,000 is expected tms iin- * reflected the shrinkage in the purchasing-power of the people y falling short of last year s estimate by £40,000, and it in estimated that this year will show a further falling-off amounting to about £70,000. Railway interest is another item which 5s a considerable factor in the prospective deficit for this year. Last years

receipts amounted to only half the estimate of £1,380,000, and apart from the benefit from the salary reductions which come in as part of the provision made to meet the situation, there is likely to be a further decline estimated, at £230,009, due to the continued shrinkage m the railway revenue. Another interest item that, is affected to a considerable extent is interest on the Public Debt Redemption Fund. About £10,850,M0 of this fund is invested in advances to soldier settlers through the Discharged Soldiers Settlement Account, and it is anticipated that under, present economic conditions there will be a considerable shrinkage, set down at £165,000, in the amount of interest that can be collected. In addition to the items I have mentioned, many of the smaller items will be adversely affected by . the prevailing economic conditions, the net decrease being estimated at £280,000. INCREASES IN EXPENDITURE. Economy in expenditure is generally approved, but, unfortunately, there is not the same unanimity of opinion m regard to what items should be reduced. Still, while no effort is being, spared to obtain economy in administration, a substantial reduction in expenditure can only be obtained by curtailing or,ln some cases, eliminating some of the services hitherto supplied by the State, either free or below cost. By services I mean not only work done by the departments of State, but also monetary grants. In effecting economies every endeavour has been made to avoid inflicting undue hardship, but in private life most of us m hard times have to forgo many desirable things simply because we cannot afford them, and the same economic laws apply to public expenditure. I propose, before reviewing the reductions effected or other , steps taken to meet the position, to indicate the budgetary position as it would have been if operations had been continued on the same basis as for last financial 7 ear > which in itself represented a considerable effort to keep expenditure down to a minimum. . The largest additional item, to be provided for this financial year is subsidies under the Unemployment Act. The Consolidated Fund subsidises expenditure out of the Unemployment Fund on a pound-for-pound basis, and as a result of the measure recently placed on the Statute Book it is estimated that subsidies for this year will amount to £1,100,090. . , , , Then there is the increase m debt charges. Provision has to be made for additional interest amounting to £250,000, while under the funded-debt agreement and the repayment of the public debt scheme there is, or would have, been in the ordinary course, an automatic increase amounting to approximately £lOO,990. . , Pensions normally show an increase, but this year, owing to economic stress, it is anticipated that the increase will be larger than usual. Old-age pensions is the principal item concerned, but fairly substantial increases are also expected for family allowances and war pensions. The total increase for pensions is set down at approximately £200,000, while other permanent appropriations involve a net increase of £75,000. COST OF UNAVOIDABLE ITEMS. Failing new legislation, a further increase in this years’ expenditure will arise front the return to the Consolidated Fund of the charges for subsidies to local authorities and other, items transferred to the highways revenue pursuant to sections 36 to 38 of the Finance Act, 1930. These sections are operative to August 31 next only, although there is no°such limitation on the 2d additional petrol tax imposed to cover the charges in question. The intention in imposing a limitation on the transfer of the charges was that the matter should be reconsidered this year. For the balance of this financial year the charge to the Consolidated Fund would be about £120,000 but under present circumstances I think it will be generally agreed that the items in question must remain a char"e on the Main Highways Account, or else the 2d per gallon petrol-tax imposed to cover the charges must be retained for the Consolidated Fund. In addition to the items that I have mentioned, further increases in expenditure arise from various unavoidable new items or increases under the annual votes. An increase of about £130,900 in the net expenditure comes from an estimated decrease of that amount in the credits in aid. These receipts, like the revenue, are seriously affected by the economic conditions prevailing. The.general election this year will mid £75,000 to the expenditure, while the normal increase in the cost of education, assuming operations were continued on the same basis as heretofore, would

amount to £190,000. Then surveys in Hawke’s Bay will entail extra expenditure this year amounting to about £22,900, -while various other items will have to be increased as a result of the earthquake. The particular items I have mentioned mean an increase in the vote expenditure of £327,000, and numerous other items scattered through the votes bring the total additional expenditure under annual appropriations up to approximately £480,000. FACING A DEFICIT OF £6,850,000. For last financial year, however, the expenditure as a whole was approximately £290,000 less than the amount provided for, and as the estimated revenue for this year has been compared with last year’s estimates and not receipts, to arrive at the true position this £290,000 should be deducted from the expenditure increases.

To sum up the position that faced the country, the effect of the economic crisis on the public finances is now found to be such that when this financial year opened the Government, as the executive head of thq Dominion, had to grapple with the stupendous task of providing, in one way or another, for a prospective deficit of no less than £6,350,000, made up as follows:— Shrinkage of revenue: Customs £2,030,000, land and income tax £600,900, stamp and death duties £690,000, beer duty £115,000, railway interest £930,090, interest on public redemption fund £165,000, other items (net) £280,000; total, £4,810,000. Expenditure increases: Unemployment subsidies £1,100,000, debt services £350,000, pensions £200,000, subsidies to local authorities, etc., £125,000, education £10(1,000, general election £75,000, decrease in credits to votes £130,000, other items (net) £250,000; total, £2,030,000. Deduct adjustment (equivalent to under-expenditure for 1930-31), £290,000, leaving £6,850,000.