AUSTRALIA’S NEW TAXATION.

Timaru Herald, Volume CXXV, Issue 18626, 23 July 1930, Page 9

AUSTRALIA’S NEW TAXATION.

Postage Charges Increased. REDEMPTION LOAN ISSUE. United Press Association—By Electric Telegraph—Copyright (Received July 22, 8.55 p.m.) CANBERRA, July 22. The House of Representatives passed a Bill increasing the letter postage rate from lid to 2d, also increasing slightly the newspaper bulk postage rate. The Department expects to gain from these sources, and other adjustments of postal rates at least £1,000,000 extra revenue. Loan Proposal. Nearly nine millions have already been subscribed to the Federal Government’s £10,000,000 loan. The issue has been open five weeks and closes next Monday. IS IT SUICIDAL? FEDERAL TAX ON SALES. When the mail left Australia was wondering how the 21 per cent, sales tax would work and whether it is workable. Some people were saying and some were denying, that it works well in Canada, whence Mr Theodore derived his inspiration. According to the Commonwealth Budget, the 2.1 per cent, sales tax embraces “all imported goods sold for consumption in Australia and all goods produced or manufactured in Australia,” excepting sales made by primary producers and sales of specified produce. Milk is one of the exempted articles, but when manufactured into dried milk is it primary produce or a manufactured article? Similarly, grapes are exempted, but are they still grapes for the purposes of the tax when they are turned into currants, cultanas, or dried muscatels? Meat is also In the favoured class, but nothing is said about the sausage. Is it still “meat” or taxable as a manufactured article? Is a dried apricot or a dehydrated carrot exempt as “orchard or garden produce,” or taxable as a commodity? The exemption list leaves no doubt respecting wheat and what the tariff might term “manufactures thereof.” Whether it is wheat, flour, bread, or pastry, it is all exempt. Coal is also exempt, but not, apparently, when it becomes coke. Apparently a sales tax takes no notice of the difference between gross and net profit. Advocates of the tax say that the payer of it will merely pass it on. But can the Australian manufacturer pass on the tax without raising prices and thereby curtailing consumption to a point at which his business will become unprofitable owing to loss of turnover?

“My company” (writes one Australian manufacturer) “makes up outer wear, and carries extensive made-up, ready-to-wear stocks. Towards the season we reduce our prices appreciably, and at the end of the season we obtain less than cost prices, or best prices. Between and during seasons we make up stocks to keep the factory going. This period covers two and a half months of each season, making five months in the year which is run at a loss. In the balance of each season we make orders and stock, the stock relying on repeat business or to supply customers with rush orders. This has been the sequence of things for the last three years. If, say, one or two months’ supply is not sold during the season, which has been the case for the last two seasons, these are jobbed out at the end of the season at less than cost. If this tax comes into force other manufacturers, like ourselves, will not take the risk of making stock and risking it being jobbed out, and on top of this being saddled with a further loss of 2i per cent. We shall be forced to reduce our turnover by half, and I shudder to think what the results will show at the end of the current financial year. Many manufacturers will be forced out of business before then. With the turnover cut down to, say, half, we shall require only half our present employees.. “Some business men say, “Add the 2 h per cent, on your cost,’ but if they were in business to-day they would realise at the present time of depression how hard it is to sell anything at a small margin, and how hard it is very often to sell seasonable goods even at a loss. We employ on an average about 60 hands. Should this tax come into force we shall have no alternative ,but to dispense with at least half of these. The average number of times a manufacturer turns his capital over is about five and a half times a year. On a capital of £SOOO a 21 per cent, tax would be £687/10/-. A7i per cent, net profit on capital expenditure would be considered good trading during the present difficult times. A 7* per cent, net profit on £SOOO would be £375. On these figures this would show a loss. I venture to say that the manufacturer with a capital of £SOOO could not readily find £687/10/- with which to pay his taxes. If pressed, he would be financially embarrassed and forced into liquidation. A manufacturer working on a turnover of £27,500 a year would employ between 40 and 80 hand 3. The result will be many more thousands joining the ranks of the unemployed. In normal times 2h per cent, could be added on to cost in the same way as any other item, but in bad times iz is an impossibility.”