BUSINESS BURDENS

Waipa Post, Volume 41, Issue 3186, 9 August 1930, Page 5

BUSINESS BURDENS

WEIGHT OF TAXATION.

CHECK TO ENTERPRISE.

A serious view is taken in commercial circles of the effect of many of the proposed. increases in taxation. There is strong criticism of the proposal to substitute for the 5 per cent deduction, for income-tax proposes, on the capital value of property, an allowance of 5 per cent on the unimproved value, or the taxable balance where a mortagage exemption has been allowed, together with an appropriate allowance for depreciation. There is a movement among business men in Auckland, supported by many in Wellington, to make strong representations on the question to the Prime Minister, on whom a deputation is likely to wait during the next few days. Deploring the scant evidence of any practical measures of economy having been taken by the Government, a leading business man said his views was that far more important than the question of the elimination of the 5 per cent deduction allowed on the capital value of property used in the production of income, was the weight of taxation of companies which was crippling enterprise and business development. Company taxation up to 4s 6d in the £, which, with the proposed addition of 10 per cent, would be brought up to practically 5s in the £, was far too big a slice to cut off. It was idle to deny that this unduly heavy impost was exercising a throttling effect on business enterprise, and so was a contributory cause of unemployment. A WRONG SYSTEM. The system of imposing the graduated income-tax on companies in the same way as if they were individuals had been unanimously condemned by the Land and Income-tax Commission of 1924. The report of that commission expressed the view that the ideal graduated income-tax was a tax upon the income from all sources of each individual, and recommended that "the fiscal policy of the Dominion " should be shaped so as to secure the abolition, as soon as reasonably practicable, of the present system of company taxation." The commission further stated that the weight of evidence taken was against both landtax and graduated land-tax, and in favour of abandoning both and substituting the graduated income-tax. It was a fact, remarked this business man, that the rate of personal income-tax was lower, and that of the company tax higher, in New Zealand, than in any other British-speaking country. Roughly speaking, companies paid two-thirds of the total incometax in New, Zealand, as against the one-third paid in personal tax; but the aggregrate taxable company incomes were approximately only onefifth of the total individual incomes. If, say, 50 men with individual incomes' of £IOOO a year, desiring to promote some business enterprise, formed a company, the income derived from their corporate effort was taxed at a much higher rate than their individual incomes. This was wrong in principle, and undoubtedly acted as a check to business development. The State was over-taxing companies, including those which formerly largely financed farmers, and had created various kinds of departments to perform the same functions. EFFECT ON CITY SCHEMES.

Remarking first that it was pleasing to see that it was proposed to abolish that "horribly inequitable thing imposed last year—the special land-tax," a well-known accountant said he thought there would be little room for dissatisfaction in regard to income-tax exemptions if the amount of land-tax payable were permitted as a deduction in the same way as rates. Personally, he thought that the elimination of the 5 per cent on capital value deduction would hit many companies very hard. Not only so, but it was bound to seriously upset the financial arrangements arrived at in respect of several large projected building schemes in Wellington and other centres. It was conceivable that some of these might not be gone on with immediately and this would undoubtedly have a serious effect on employment. There were several big buildings nearing completion in Wellington which had provided employment for large numbers of men, and if other great city building schemes were held up indefinitely, or" even postponed temporarily, many men would be added to the ranks of the unemployed. UNJUST LAND TAXATION.

Vigorous criticism of the application of the graduated tax to city and town lands was made by several prominent business men. It was both ridiculous and unjust, said one, that a tax which was originally designed for the express purpose of bursting up large country estates should be applied to city busineess sites. The operation of the tax in respect of, say, a large pastoral estate or station employing a mere handful of labour might be—and doubtless in many cases actually was —desirable; but it was absurd and a breach of faith to levy a burstingup graduated land tax on a comparatively tiny, but equally valuable, city section wholly occupied by a business employing many hands. Such a tax operated very harshly on city businesses particularly those with branches throughout the Dominion. As Mr Downie Stewart had said, it was because of this hardship and because of the fact that the special allowances for depreciation on buildings had been done away with, that the deduction from income of 5 per cent of the capital value had been allowed. It was true, too, as he had remarked, that anomalies arose, but unless the operation of the graduated land-tax in the cities was dealt with, the effect of the proposed amendment would be to intensify the hardship already existing, operate against the extension and development of business and increase unemployment. _ The general manager of a great institution owning many business premises and sites throughout New Zealand, emphasised the extreme pressure o fthe graduated tax on their Dominion aggregate value. He held that it would be fairer if the tax were levied on, say, district or provincial aggregate values. The head of another business, with several

branches, instanced the harshness of the graduated land-tax by pointing out that the amount payable on a value of £IO,OOO, after allowing for mortgage exemption, would be £6O 8s 4d, or approximately 12s per cent. But if there were five branches with land of equal value, the tax payable on the £50,000 would be £7lB, or, roughly 28s per cent. A consensus of opinion was that many businesses would, particularly in lean times, be forced by the increased taxation to scrutinise closely every item of their outgoings and overhead charges, and reluctant as most of them would be to shorten hands, redundancies in staffs would have to be taken into account.—Dominion.