HIGHER TAX RATES

Timaru Herald, Volume CXLII, Issue 20503, 22 August 1936, Page 4

HIGHER TAX RATES

COMPARISON WITH BRITAIN

HOW INCOMES ARP AFFECTED

It is regrettable that the Minister of Finance, when putting forward in his Budget a table which purports to make a comparison of income tax in the United Kingdom with that now proposed for New Zealand, should have used out-of-date rates for the United Kingdom (says a statement by the Associated Chambers of Commerce of New Zealand).

The Minister’s table (with two exceptions in the higher grades of incomes) shows the New Zealand taxpayer with a wife and two children as paying less than the corresponding taxpayer in the United Kingdom. This is because the Minister, in his table, used the rates which were in force in the United Kingdom last financial year (1935-36) instead of the rates now operating, and which were announced on April 21 of this year.

Exemptions Increased

It is true that the Minister says, in relation to his table, that “owing t<? the recent increase of 3d in the stand ard rate, the amounts for United Kingdom are slightly higher in some cases than is shown.” However, this is not the whole story, because, while the standard rate in the United Kingdom was increased this year, special allowances (irrespective of the size of the income) were also increased. This has the effect, in regard to different grades of income, of reducing the taxation paid by the United Kingdom in-come-tax payer. Consequently, the comparison becomes much less favourable to the New Zealand taxpayer, who, in many cases, is to pay more, not less than his United Kingdom equivalent. The table below—compiled on the same basis as the Minister’s, but at the rates obtaining to-day in the United Kingdom—sets out the position. An addition to the table is a column showing New Zealand income tax plus unemployment taxes. The addition of unemployment taxes was omitted by the Minister in his table, but it cannot be ignored in any comparative table, because unemployment taxes are in truth nothing more than a form of income tax, for which there is no equivalent in the United Kingdom. The second part of the table shows, in comparison with the United Kingdom, the heavy taxes on the higher grades of unearned income in New Zealand.

The table is as follows (based on a married couple with two children)

Earned Income Tax

Unearned Income Tax

' If the severity of the rates on the New Zealand taxpayers needs any amplification, it is given by the cabled reports of April last regarding “the stunned silence” with which the House , of Commons received the British Government's Budget announcement, not of any anticipated further reduction in taxation, but of an increase in the basic rate of tax on incomes. Of course, feverish re-armament was the reason for this. In the cause of re-arma-ment, and national and Empire safety, therefore, the resources of Britain are t ing called up; the total defence vote is £160,000,000, or 20 per cent, of the total proposed expenditure for the current financial year. The British Government estimates that the yield from income tax (including surtax) will be 40 per cent, of the total receipts from taxation for the current year. “Mother Hubbard Welcome” 'Tie hard-hit New Zealand incometaxpayer finds himself paying, in many i cases, more than the man with a similar income in the United Kingdom. Yet the Dominion has no Empire to guard, j no colonies, no protectorates; in fact, it is making no real financial provision for‘even self-defence. The proposed expenditure on defence represents only 4 per cent, of the total proposed expenditure for the current year. i To say that the £6.000,000 which the | New Zealand Government estimates in-come-tax will produce this year represents only 23 per cent, of the total estimated yield from taxation, as comrared with 40 per cent, in the United Kingdom, and that therefore there cannot be much wrong, is no argument in reply. In fact, this only emphasises the terrific burden of total taxation in New Zealand, which, with the aid of the further imposts of graduated land tax and increased income tax, is to produce an additional yield of over 4i millior.3 for the current financial year. The fact is that where Britain is calling on her taxpayers for reasons of plain safety, the resources of New Zealand are being depleted for the sake of lavish expenditure on social services, p”' 4 public works, as if this Dominion is an inexhaustible paradise at whose door it is not expected that need will knock. If it does, it must receive a Mother Hubbard welcome.

3 cs <v 3 £ 8 < £ U.K. Taxpayer N.Z. Taxpayer 3 H ■a, g sf N S S ZSb £ £ 8. i d. £ s. d. £ s. d. 300 Nil Nil 11 0 0 400 1 11 8 3 8 0 17 14 8 450 4 15 0 7 16 9 23 16 9 500 7 18 4 12 9 8 30 3 0 550 11 17 6 17 6 9 36 13 5 600 21 7 6 22 8 0 43 8 0 800 59 7 6 44 14 8 72 8 0 1,000 97 7 6 70 8 0 104 14 8 5.000 1,360 10 0 1,283 14 8 1,451 8 0 7,500 2,476 15 0 2.556 10 4 2,807 10 4 10,000 3,730 10 0 3,936 6 9 4,270 13 4

2,000 382 7 6 331 12 10 399 6 2 3.000 681 15 0 680 10 8 781 10 8 4.000 1,029 5 0 1,140 10 8 1,274 17 4 5.000 1.431 15 0 1,711 12 10 1.879 6 2 7.500 2,548 0 0 3.408 13 9 3,659 13 9 10,000 3,801 15 0 5,248 8 10 5.582 15 6