INTEREST REDUCTION

Taranaki Daily News, 29 March 1932, Page 7

INTEREST REDUCTION

1 COMPULSION OPPOSED. . FLAT RATE TAX URGED. Definite views. upon a compulsory reduction in interest rates and a general super tax upon interest are expressed by the Auckland Stock Exchange in a letter which has been forwarded to the Minister of Finance, the Hon. W. Downie Stewart. The letter states: “We are opposed to a general reduction of interest by legislation, as it destroys the country’s credit, and the stain of broken. contracts will remain as a blot on the Dominion for many years to come. From our experience as brokers we find the great majority of debenture-holders are quite prepared to pay whatever taxation may be necessary during the next few years until the present depression passes. We would emphasise that what the investor objects to very strongly is interference with interest for say the next 20 years with no provision for readjustment dicing the currency of his security.. While the depression raises 'a suggestion for a reduction of contractual interest no boom period has ever heard it put forward that as a measure of mere fairness such interest rates should be increased.” Attention is drawn to the previous suggestion made by the Exchange as follows: “It.is respectfully suggested, but only as a last resource, and then strictly as an emergency measure, to impose a tax at a nat rate on all interest whether derived from bonds, mortgages, fixed deposits, savings bank deposits, etc., irrespective of the individual holders liability for ordinary income tax. This would produce a large and readily-col-lected revenue. The tax would not destroy capital or credit, as it would be recognised as a temporary measure only, and in our opinion would make for the desired equality of sacrifice without placing the stain on the credit of the Dominion such as would a compulsory conversion of existing loans. x _ “We are opposed to the reduction of dividends on cumulative preference shares unless and until the profits earned, are insufficient to pay ordinary share dividends. Cases may be cited of Australian companies paying lower preferential dividends and reduced interest on debenture issues while maintaining the usual rate of ordinary share dividends. We have m mind several companies where a reduction of preference dividends would, simply mean an increased distribution to ordinary shareholders. “We are opposed to reduction of rents except in cases where no reduction has been made to meet existing conditions. The average reduction in Auckland is 40 per cent., and there is a large number of vacant shops and houses. In addition, there is considerable difficulty in many cases in collecting even the reduced rentals. Therefore, a compulsory reduction in addition to those already made would be quite unfair to property-owners who have met their tenants in difficulty. We suggest that the taxation of power board, revenues should, be immediately introduced, and this may apply to other State and municipal trading organisations. Such taxes will spread over the whole community, and are easily collected.”