TRADE UNION FUNDS

Taranaki Daily News, 20 December 1932, Page 9

TRADE UNION FUNDS

INCOME TAX ASSESSMENT. FRIENDLY SOCIETIES CONCERNED. Wellington, Dec. 17. One of the largest trade unions in the Dominion has received a substantial assessment for income tax for the first time in its history. This action by the Land and Income Tax Department - has caused considerable interest in trade union and friendly society circles. The organisation concerned, in common with many other trade unions; ■ has created reserve funds, which have been invested- in gilt-edged stocks and in property. It is upon income derived from these sources that the department is claiming income tax, and it- is understood that in some exceptional cases retrospective demands are being made over the last two years. A portion of the organisation’s .investments constitute a definite reserve for a death benefit fund, and it is probable that the official claim for taxation will be strongly contested on that ground. The development covers an even wider field, as the department bases its claim bn an interpretation of the law which only exempts from taxation such income of a trade union or friendly society as is not derived from outside trading. The accumulated funds of the friendly societies of the Dominion were returned this year at a total of £4,277,715. Of this sum, the amount placed on investment at interest is £3,664,776, and the net interest earned, subject to taxation according to the official reading of the law, is £178,900.

COMMENT IN AUCKLAND.

“MOST UNHEARD OF ACTION.”

“It is a most unheard of tiling,” said Mr. John McLeod, Auckland secretary of the Manchester Unity Independent Order of Oddfellows, when the reported proposal to levy income tax on friendly societies was referred to him. He explained that, in order to provide certain benefits to their members, friendly societies had a certain scale of contributions fixed on an actuarial basis. Unless in addition Jo current contributions there was capital invested bringing in a return of not less than 4 per cent, they could not provide the sickness and death benefits now existing. All the capital funds were built up originally from members’ contributions, which were invested in Government or local body debentures, mortgages or freehold or sometimes in the purchase of property. In normal times friendly societies were compelled to earn not less than 4 per cent, on money invested on freehold security, but the income had so fallen away recently that the two years’ suspension of this provision of the Act had just - been extended for a further three years. “If it is proposed to tax us on the income of such investments, it will be quite impossible for the society to pay the benefits which members have been accustomed to receive,” said Mr. McLeod. 1

Trades union secretaries approached

yesterday had received no word of the prospect of a tax. on their funds. They did not appear to be greately perturbed about it, as for the most part their incomes in these days are not sufficiently substantial, to offer much enticement to a needy Government department.