INCOME TAX.

Star (Christchurch), Issue 12284, 5 April 1918, Page 4

INCOME TAX.

REFORMS NEEDED. The Progressive Scheme as Applied to Companies. Striking Inequalities. (By H. F. Wigram.) No. 2. The instances of inequalities given in itiy first article are all hypothetical, as I hesitated to comment on the affairs of actual trading concerns; but I fee! justified in departing from this rule and in referring by name to the West-port-Stockton Coal Company, Ltd., because the chairman of that company. Mr William Recce, in moving the adoption of the icport and balance-sheet on February 27 last, said;Income tax is £5411, as against £1259 last year- So much has been said about the incidence of taxation and the hardship on small shareholders of a heavy flat rate company tax, that I will not say more than to express the hope that some method will ho introduced hearing more equitably on people of moderate means, who have invested their savings in industrial companies, and are penalised in so doing. Mr Recce’s speech from which the above is quoted has been widely published, as well as the balance-sheet to which it relates, and is, therefore, fair matter for comment.

Tho Westport-Stockton Coal Company, Ltd’., was founded in 1900, and, like many similar enterprises, encountered unexpected difficulties owing cli icily to the singular geological conditions sometimes met with in Now Zealand. For the first ten years of the company’s existence tho ordinary shareholders received no return on their investment, and since then two dividends of 5 per cent each have been paid them. The total return, therefore, has been 10 per cent spread over twelve years, an average of less than one per cent per annum. The capita! of the company is divided among 772 shareholders, whose average holding is £232 nominal, which probably in many cases represents small savings. I have selected the affairs of this company for examination because it is a good illustration of many similar enterprises which have played an important part in the development of the natural resources of New Zealand.

Freezing works, woollen mills, mining companies, dairy factories, etc., have all helped to make this country what it is. The men starting them, though inspired by tho hope of gain, have done good service to the community. Many have failed and lost their money, and of those who ultimately won through to prosperity, most have had a hard battle before their efforts were crowned with success. If tho present policy is continued, the case of the Wcstport-Stockton Company will not act as an inducement to the establishment of similar enterprises. INVESTMENT RESTRICTED. I question, too. whether tho effect of the present system on capital values has as yet been fully appreciated- A reduction is inevitable, unless progressive income tax is readjusted, but the full effect -will not b'e felt immediately. Some companies are struggling to maintain their dividend rate in the hope that the clouds will pass by, and- in doing so are tempted to strain resources by using money which in past years would have been more prudently carried to reserve. Even where dividends have been reduced owing to taxation it will take time before the market drops to its ultimate level. Shareholders who arc not compelled to sell will hesitate before accepting the inevitable. Tire ultimate effect must be, as stated by the ‘Wellington Chamber of Commerce, to " restrict the. investment of capital in commercial and industrial enterprises.” (Remit to conference of Chambers of Commerce held in Wellington, November 28, 1917.) REAL PRINCIPLE DEFEATED.

The system of making companies liable for the maximum rate of progressive Income tax has the further disadvantage that it prevents the principle of progressive taxation from being extended to its logical conclusion. The present maximum rate both for companies and individuals is reached at £6400, the reason being that a company tax of 7s 6d in the £1 is considered as high as it is politic to go. It is, in fact, in my opinion, already too high in some cases, notably in the instance quoted above of a large concern which can barely pay a dividend at all. By unequally yoking together the companies and the individual, the Department is prevented from taking toll from the higher incomes. If it is fair to tax the man with £6400 at 7s 6cl in the £l, what should the man worth £IO,OOO a year pay? What should ho asked from tho man who has £20,000? Surely in these times of stress and emergency there would be no hardship to such men if they were asked to give up half their income to the bitter needs of their country? The third aud concluding instalment of this article will appear in the “ Star " to-moirow.

themselves, are f rip nelly to the United States and hostile to Germany. Leading Turkish officials have repeatedly declared that Turkey had no chance of winning by this alliance, and is running the risk of losing everything. If Germany wins, Turkey’s sovereignty will be sacrificed. • 11 Berlin to Bagdad ” means, not merely rail communication between those places, but political sovereignty over the whole area, so flint Turkey stands to lose everything if Germany wins tho war. If the United States should now declare war on Turkey. German officials would at once seize the large plants of American colleges and institutions in Constantinople, Smyrna, Beirut and elsewhere, and put them to military use. It is known that Germany desired to rid the country of tho non-Moslem population, tho Armenians, Syrians, Greeks and Jews, in order that it might not have the problem of dealing with various unassiinilated nationalities. If war were declared now, Germany might take a direct hand in completing the destruction of these non-Moslem races, and even if this were not done, there would bo a new pica fpr rousing the Tuples to do their dirty work. Further, war with Turkey would involve Bulgaria, with which country America has no possible occasion of trouble. The reasons given, Dr Barton contends, are at least, valid for a postponement, to the last possible moment of a declaration of war. which could hardly be followed up by any strikingly effective action so long ns demands for nun are pressing on other fronts,