THURSDAY, FEBRUARY 9, 1933. PAYING THE PIPER.

Star (Christchurch), Volume XLIV, Issue 683, 9 February 1933, Page 8

THURSDAY, FEBRUARY 9, 1933. PAYING THE PIPER.

J_JAVING EMBARKED on a foolish and unwarranted attempt to assist the farmer at the expense of the rest of the community, the Government first put its inflated exchange policy into operation and then cast about for means of countering the adverse effect on the Budget caused by that experiment. The new taxation proposals, outlined to-day, are the result. Everyone realises that the Government, faced in some respects by circumstances over which it has no control, must have the gravest difficulty in discovering fresh avenues of securing the money necessary to carry on the country, but a feeling is inevitable that it has gone about the business in the wrong way. How can confidence be restored and revenue made buoyant by the imposition of a sales tax of 5 per cent, accompanied by a stiff increase in the petrol tax, further duties on sugar and tobacco, and an additional export duty on gold? Under such harassing conditions industry can have little chance of establishing itself on a sounder footing, facing the future with renewed hope and preparing to re-absorb the thousands of unemployed. A prominent economist has stated that a sales tax is a vicious and unsound impost, and must strike with its main severity on the incomes of those at whose expense the new exchange bonus is being provided, thus shifting the burden of past rural speculation—the root of our present troubles—on to the shoulders of the rest of the community. Any gain in taxable capacity, he added, would be to some degree set off by reduced taxable capacity in other directions. This view is endorsed by other authorities of standing, and is borne out by the experience of other countries. A sales tax is contrary to all the canons of sound finance. Mr Forbes, in the House last evening, denied that the sales tax was for the purpose of bridging the gap made by exchange and contended that it would have been necessary even if exchange had not been raised; it was absolutely necessary to keep the country solvent. Whatever the ground for this contention it is indisputable that, as things are, the revenue drawn from the sales tax will not go to help the Consolidated Fund and improve the finances of the country with consequent benefit to all, but will be diverted to offset the disastrous effects of the exchange rate experiment. Xor will there be anything but harmful pressure on the internal trade of the country, with repercussions in all directions.

The Prime Minister, in a statement on January 27 defending the Government s exchange decision, said: “ The restoration of sound business conditions, the expansion of production, the absorption of the unemployed, the increase in purchasing power and in demand and the revival of general business activity—all these must depend on the creation of such conditions as permit profits to reappear.” Those words represent a genuine desire on Mr Forbes’s part, as even his critics must admit, but with a sales tax, with dearer petrol, dearer sugar and dearer tobacco, what prospect is there of that happier state of affairs being brought about? Dearer sugar, for one thing, adds straightway to the burden of the cost of living and will affect adversely every household in the country. The increased petrol tax will not be accepted with equanimity by motorists, already heavily and unfairly overtaxed, and most likely will lead to a decrease in consumption, so that State revenue can expect to be no better off. It is remarkable that the Government has again left untouched the taxation of State and municipal enterprise in direct competition with private enterprise; the omission heightens the impression that the latest proposals have been conceived in haste and with little regard to alternatives that would be acceptable to the people as a whole. The Government apparently is pursuing a vicious circle calculated to do anything but lower existing burdens and give industry new life.