UNFAIR TAXATION.

Wairarapa Age, 22 August 1929, Page 5

UNFAIR TAXATION.

GOVERNMENT PROPOSALS DENOUNCED. : SERIOUS THREAT TO FARMING INDUSTRY. VIEWS OF REPRESENTATIVE MEETING. The United Government’a land and income tax propoeala were vlgorously denounced at a meeting in Masterton yesterday convened by the Wairarapa Provincial Execu-' tive of the Farmers’ Union. Mr. C. C. Jackson, Provincial President of the Fanners’ Union, presided over an attendance of upwards of forty farming and other repreeentattvea. A number of apologies for v absence were received, amongst them several from farmers who were prevented by floods from getting into Masterton. Opinions on the tax proposals were etxpressed In moat of the letters and tele grams of apology. In most cases the proposals were warmly Criticised and referred to in such terms as “unfair,” “inequitable,” “uajuat” and “stupid.” The chairman read telegrams he had exchanged with the Dominion President of the Farmers' Union on August T. Mr. Jackson’s telegram was as follows':— Proposed taxation land and income tax. Would be glad to know if you are in faAinr or not. Grave anxiety among Farmers’ Union members ..here as to your attitude. Your reply 'V anxiously awaited. To this Mr. Polson replied:— No dual taxation is proposed and only 1750 landowners are affected by the new graduation. Income tax will only be imposed when income tax would be greater than the land tax, in which case no land tax will be charged. I favour this plan as a compromise and in fact supported it months ago to avoid and prevent dual taxation which was suggested. CLASS LEGISLATION. After an extended discussion which is reported below, the following resolutions, moved by the ehairman and seconded by Mr W. H. Buick, were carried animously:— That in the opinion of this meeting, the land and income tax proposals of the Government are inequitable insofar |M the supertax is class legislation. > .The reduction of the mortgage ex pmption falls heavily on settlers who Ore on the border line of success or Failure. Economy in public expenditure would be a better service to the country than O Increasing taxation. A resolution was also passed approving the increase in the primage duty. On the motion’of the chairman, Mr. PUmer seconding, it was agreed:— "’That the foregoing resolutions be forNrarded to the members for Masterton, Wairarapa and Pahiatua and to the Dominion President of the Farmers’ (Union, with a request for their support.” TO DAY’S CONVENTION. The following delegates were appointed to attend the national convention. convened by the Dominion President opthe Farmers ’ Union, which is to tneet in Wellington to-day, to discuss the Budget proposals: Messrs. C. C. Jackson. A. Rose, T. R. Barrer and W. FARMING AND EMPLOYMENT. In gobmitting his resolution, Mr. (Tsckson said they must recognise that toll fanners holding land of an unimproved value in excess of £12,500 and mot suitable for subdivision, would be heavily penalised by the imposition of the supertax. They would also recog Mise that this would have a drastic upon the position of unemployjnent in this country. The reduction in the mortgage exemption would be a Jrery severe blow to the average farmer. The additional primage 'duty plainly was not needed since in the last quarter Customs revenue had increased fry nearly £BOO,OOO as compared with the corresponding quarter last year. OVEB-TAXATION AND SURPLUS. Mr. F. W. Pointon said that an Equitable adjustment of taxation was ivery difficult to arrive at, but to-day both the townsman and the farmer Were overtaxed and bver-rated. Taxation and rates had become a rent. In Haborating the point that the proposed increases in taxation were not war Wanted, Mr. Pointon said there was a Befleit of £577,000, or allowing for an (early interest payment of £156,000, an tactual deficit of about £420,000. lAg linst this, the increased primage Mu*v might produce £400,000—at least Iso* less than £300,000—the supertax lan farmers’ income tax, £600,000, and Jtfo. lowering of the mortgage exemption ®s' 000. Customs duty for the June Innrter showed an increase of £284,000 (compared with the corresponding quarter in 1928—this before the new primlag*’ duty had come into force. It seemJed evident that under Sir Joseph fWerd’s proposals there would be a huge surnlus

TAXATION AND RATES. The imposition of additional taxation, Mr. Pointon went on to observe, would make it impossible for merchants and others to “carry” farmers who were on the border line. Taxing a man an additional £lOO really meant (at 6 per cent.) imposing on him an additional capital load of £lOOO. It might surprise his hearers to learn that some of them were being called upon to pay as much as Ils per acre per annum in taxation and rates. Citing actual cases, Mr. Pointon mentioned one in which the payment of £llO in present tax and £llB in rates worked out at 4s t>d per acre. Under the new proposals this would be increased to 6s per acre. In other cases the tax increase would raise the total impost from 5s to 6s 8d per acre, from 6s 4d to 8s 4d per acre, and from 8-s 6d to Ils 2d per acre. Mr. Pointon said he was totally opposed to the reduction of the mortgage exemption. He thought it would have been better and fairer to reduce, to one-half if necessary, the amount (at present £l-38,000) at which the maximum land tax of 7 17-20 d in the £1 'became payable. He could not see why farmers should not pay on income, but the rates of both income and land taxation should be reduced. Mr. W . B. Martin: “What about a straight-out income tax?” Mr. Pointon said he believed in a combination of land and income tax. When Mr. Evans asked how the capital and unimproved values of land were arrived at, the chairman said this was a very knotty question. UNIMPROVED VALUES. Mr. R. J. Barton said that twenty years ago he urged that the light against the system of unimproved values should be one of the main planks of the Farmers J Union. No allowance was made except for visible improvements. Mr. Martin: “It is the market value to-day; that is the trouble.” Mr. Barton said that no allowance was made for improvements like crushing off fern or underground drainage. Moreover, if instructions came from Wellington to put up values 10 per cent or 20 per cent., up they went. He knew of a property on which the allowance for improvements did not equal what had been spent on the cowshed. On many properties there were huge blocks which had no unimproved value at all because it had cost so much to break them in. He had proposed, years ago, that there should be three categories of land —urban, suburban and rural—and that back country and rural land should not come under the unimproved value provisions. Mr. J. L. Heckler said they were all agreed that the taxation proposals were unjust. If closer settlement was desired, the machinery was there. DETERIORATED LANDS. Mr. L. T. Daniell said that in 1912 the unimproved value of Masterton. County was £1,800,000, and to-day it was £2,700,000. That increase was made in one year (1920) in which a new valuation was made. It was of course an easy matter to send these values still higher, and if that were done some of those who were at present happy in not being affected by the new taxation proposals would find that they were out in the cold too. Deteriorated lands, Mr. Daniell went on to observe, had much to do with these taxation proposals. These deteriorated lands, stretching from Taranaki to the other coast at Opotiki and from Te Kuiti to Taihape, had been the hope of the Dominion. Men in this district had spent large sums in establishing their sons on these lands and the disastrous failure of farming in the areas in question had wide reactions. The position now was that the producing lands were expected to pay the share of taxation of the deteriorated lands which were incapable of paying any taxation. The true remedy for unemployment was to bring the deteriorated lands again into productivity. The proposed rates of taxation, Mr. Daniell went on to observe, were to date back to March 31 last, and this would depreciate farm properties. An extra annual load of £3OO meant, at five per cent., a depreciation of the property to an amount of £6OOO in the eyes of a possible buyer. TWO SHOCKS. Mr. G. H. Bremner said that during the last few weeks the farming community in this country had had a couple of shocks, the first in the financial proposals of the 'Government and the second in the attitude adopted on this question by the Dominion President of the Farmers' Union, Mr. W. J. Polson. He wished to take the opportunity of expressing his disapproval of the attitude taken up on this question by Mr. Polson. The chairman said that Mr. Polson’s attitude could not be discussed at that stage. An opportunity would be given on a later resolution. Mr. Breipner said that at a meeting of farmers in Pahiatua on the previous day, there was united opposition to the land tax proposals but opinions were divided regarding the additional primage duty. Personally, he opposed this increase as one that would increase cost of production. The Government ’s proper course was to curtail expenditure. THE INCOME TAX. Mr. Wl B. Martin said they had to assume, rightly or wrongly, that the Government was in need of extra revenue. The present system of land tax was unfair. The mortgage exemption had in the opinion of a good many people created opportunities of evasion. Ho could not say about that, though ho certainly thought there was a danger of that kind. He thought the income tax was the fairest form of taxation. Mr. A. Ross: “It won’t yield enough in a bad year.” Mr. Martin said he recognised that the land tax might have to be retained in some form, but there should be an equitable adjustment. If farmers made a united demand for the income tax he thought the Government would agree to it. TAXATION OF LUXURIES. Mr. A. H. Falloon observed that theoretically Mr. Martin was right, hut successive Finance Ministers had turned down the idea of a universal income tax on the ground that it would not yield an adequate revenue in years of depression. There was room, Mr. Falloon added, for further taxation of luxuries, including the totalisator. The increases now r proposed were going to hit hardest the man not afraid to take up a big block of rough country. Some people said that a Government which enforced economy was committing political suicide, but he did not think the Government would go out of power if

it reduced the expenses of running the country. Mr. H. Bennett said that the added charges of importers and middlemen would make the additional primage of one per cent, three or four per cent. That would be £1 per head of population. The lowering of the mortgage exemption would be disastrous to farmers who were clearing and improving scrub country and would greatly reduce the employment of labour. If the penal clauses began to operate at £20,000 it would be quite low enough. LOADING THE POOR MAN. Mr. Hugh Morrison said that bringing the mortgage exemption right down to £SOOO meant making’ the comparatively poor man pay more taxation. Mr. Jackson: “On his debts.” Mr. Morzison agreed, and went on to observe that another factor which had been mentioned was the renewal of mortgages. If the present proposals went through, it must mean a fall in the value of land. He had had a considerable amount of experience in investing money for trust estates, and if these proposals were adopted people with trust monies to invest would be inclined to reduce their valuation of land. That might mean that when a farmer came to renew his mortgage he might find his land was only worth what it was mortgaged for. This would perhaps be the most important phase of all. Farmers had done their best to keep m*en employed, but many farmers, if the Government's proposals took effect, would be unable'to afford to employ labour. Men with scrub country and others would be in the unfortunate position of desiring to employ labour and being unable to do so on account o/ the imposition of the additional taxation and the consequent fall in the value of their land. INVITING DISASTER. A sudden drop in land values, Mr. Morrison continued, would be a serious thing for New Zealand. It would bankrupt a number of farmers and put them out of action. Young men with heavy mortgages would have to go out. Once a slide of that kind was started it was going to affect more or less every farmer in the country if he were heavily mortgaged. There was a tremendous area of deteriorated land and the whole of the taxation was being thrown on the settled districts. If the proposals were allowed to go through as they stood, it meant the thin end of the wedge. It meant that the taxation on the old-settled lands was going to be increased. He agreed to a certain extent with what Mr. Martin had said. He thought that a graduated income tax would gradually break up big estates for closer settlement. Under the system proposed, however, if a farmer made nothing in a bad year he had to pay taxation just the same. Then in a year when he did make something (if his unimproved value was over £12,500) he had to pay income tax. In fairness the income of the good year should be spread over the years in which the farmer made nothing.- A £20,000 limit for the imposition of the additional taxation would be quite low enough. DETRIMENTAL TO THE STATE. “Don’t forget,” said Mr. Morrison, “that a sudden fall in the price of land is going to hit every farmer who is heavily mortgaged—it does not matter whether he is a man with 20 acres of 20,000. It is going to put a lot of men right out of action altogether. Anything in the shape of taxing a farmer on his mortgages must in the long run be detrimental to the State and certainly detrimental to labour and employment.” Mr. Bennett: “And to production.” Mr. Morrison agreed. He had been on scrub country all his life, he added, and on that country you had to spend money to make money. Under the proposed system a man struggling on such land would be hopelessly penalised and would be unable to employ labour. IMPORTANT ASPECTS.

Mr. T. R. Barrcr said that an important aspect of the case was that legislation some years ago diverted capital into local body securities. During the last twelve months there had been a tendency on the part of investors to look for investment in good rural securities, but this development had been neutralised by the proposals now before Parliament. People had closed their pockets on money that otherwise would have been available for rural investment. Another point was that if rural securities declined in value, local rates would have to go up accordingly. He considered that if more revenue had to ibe obtained, less exception was to be taken to the increase in the primage duty than to the other proposals. Mr. Barton observed that the reported intention of the Government was to force subdivision. He pointed out that land could not be transferred without being roaded to the satisfaction of local bodies. This meant a very heavy outlay, particularly if the lands were located, as some of them were, in boroughs. It was required also that lands to be subdivided should be brought under the Land Transfer Act, and this entailed heavy initial expense. PRIMAGE DUTY. There was a long discussion regarding the increase in the primage duty, but much of the discussion related rather to the form of the resolution than to the question of taxation at stake. The original resolution on the subject read: “The increase in the primage duty is in direct contravention of the principles of tjjc Farmers’ Union.” This was withdrawn and a resolution approving the increase in the primage duty, on the ground that it did not amount to fiscal protection and would be spread over tho whole community, was carried with only one or two dissentient voices.