The Timaru Herald. MONDAY, AUGUST 13, 1917. TAXATION OF COMPANIES.

Timaru Herald, Volume CVI, Issue 16311, 13 August 1917, Page 6

The Timaru Herald. MONDAY, AUGUST 13, 1917. TAXATION OF COMPANIES.

Attention has been drawn to an anomaly in the system of taxingincomes which threatens to have serious effects foT a great number of small shareholders in public companies now that the rate of income tax is to be increased. The system under which a company's income is assessed for taxation as one siim- means that the smallest shareholders are required to pay at the same rate as the largest, which may be the highest rate laid down. That did not matter much when the highest rate was Is 4d in- the £, but when the highest rate soars ud to 7s Gd the matter becomes one of importance. That a small shareholder in a rrablic conrnnny of which the income exceeds ±'6400 should be taxed on what lie derives from it at the same rate as if he had a personal income of £6400 is monstrous injustice, bxit that is what will hanpen if the income tax is raised as the Government proposes, and no change made in the system as it kioplies to companies. Tire injustice is not one that applies to a few persons only. 'A ST'eat many Tenistered companies, which do good service in developing industries of various kinds, have their share lists very largely made tin by men of small means,' and many men past working nu-c have their savings invested in such concerns, and are wholly dependent on them for a moderate livelihood. law could intend

that such men. and women also for whom a competency has been so assured, should be taxed like the richest members of the community. _ The system is unfair also as it affects the companies themselves, since they pay the same. tax for the same income, irrespective of the amount of capital which produces it. The great advantage in taxing companies' profits as they are made by the company instead of as thev are received by individual shareholders lies in the sinmlicitvof the former process, but that "advantage should not be sought at the expense of gross injustice. The fairest amendment of the system probably would be to tax shareholders on the dividends received by them, and tax also the unappropriated balance of the company's nrofits. the taxation on which would then be at a lower scale. The _ Government would then be certain of getting its fair proportion of all profits, without injuring the weaker companies or treating shareholders, whose total income from investments not be (sufficient to bring them under the income tax if it was differently derived, as if thev were men of wealth- If sufficient revenue for the Government's reciuirements was not obtainable by j these means, the difference might quite reasonably be made up by increasing the graduated scale on incomes that are above £6400. mid can afford to even more than 7s 6d in the £.