Wairarapa Times-Age WEDNESDAY, AUGUST 2, 1939. A BUDGET OF NEW BURDENS.

Wairarapa Times-Age, 2 August 1939, Page 4

Wairarapa Times-Age WEDNESDAY, AUGUST 2, 1939. A BUDGET OF NEW BURDENS.

* MOST people are agreed that what New Zealand needs m order that it may overcome its present difficulties and attain the highest, possible level of prosperity is an unhampered expansion ofCproduction in primary and secondary industries. In a passage of his Budget presented last evening, the 1. rime Minister. Mr Savage, summed up the position very well. Observing that borrowing from the Reserve Bank Lor housing, public works and other purposes had the effect of increasing internal purchasing power, and that the usefulness of this method of finance is conditioned by the volume of production, he added: —

In present circumstances, when sterling funds are short and imports have to be restricted, this type of finance, while justifiable and beneficial under certain circumstances, has obvious limitations during the current year. In fact it must be clear to anybody who studies the position that we are not suffering Horn a shortage of money in New Zealand, but from a shortage of what money will buy.

A shortage of what money will buy sums up the existing state of affairs quite admirably. There is, as Mr Savage has said, no shortage of money in New Zealand, but the people of the Dominion in general are not benefiting by any means in proportion to the extent to which nominal purchasing povyci has been increased during the last year or two.

Particularly when account is taken of the restrictions that necessarily are imposed now, and .must be imposed for some time to come, on our imports from abroad, it is evidently to the greatest possible increase in internal production that we must look for a solution of our problems and for the establishment of assured and stable prosperity. It would be an optimist indeed who would claim that the Budget opens the way to that solution and to those benefits, or for that matter would ventuie to deny that in a definite degree it tends to close the dooi upon them.

The first and most essential condition of an increasing output, of the things that money will buy is that industry and production should be hampered as little as possible.. The outstanding feature of the Budget, however, is a series of substantial additions to an already enormous burden of taxation. A. state of affairs in which production and trade are already handicapped to a serious extent by the direct and indirect effects of high taxation is io be accentuated.

Taxation under all headings levied in the Dominion in 1938-39 amounted to £37.7m, as compared with £24.7m in 1934-35. Additional taxation announced in the Budget is estimated to produce £2,500,000. If tire yield of existing taxes were maintained, this addition, together with the Social Security tax of Is in the pound in place of the preceding employment tax of 8d in the pound, would have raised the figure of total taxation to approximately £43in.

Some falling off in the yield of existing taxation is anticipated, but even so the figure of total taxation now brought into immediate prospect is staggering. In his Budget, the Prime Minister estimates that taxation in the current year, other than Social Security tax, will yield £32.3m. If the yield from the Social Security tax is a little over £Bin, the total taxation yield this year will be £40.5m, or approximately £25 2s 6d per head of our population, including Maoris. In a country which had in 1937-38 an estimated total value of production of £135.6m and aggregate private incomes estimated at £167.0m, this huge and increasing taxation demand is mildly described as alarming.

From any standpoint, the burden and handicap thus imposed on production is discouraging. It has to be remembered that oiii- existing range of taxation includes emergency taxes imposed in a period of acute depression and then intended to serve only a temporary purpose in tiding the country over an emergency. The sales tax, for example, is incapable of being defended otherwise than as a temporary expedient. It is inequitalile as it affects people of small and moderate means and definitely penalises and hinders trade and production. Our existing system of company taxation, again, has long been open to condemnation as an unwarranted penalty on enterprise and efficiency, but instead of the system being amended, the basic rate of company taxation is now to be doubled.

In defending the increase of the petrol tax from JOitl to Is 21d a gallon, by which it is hoped to secure an additional million of revenue, the Prime Minister observes that a good deal of 1 his impost is in the nature of a luxury tax. In addition, however, this taxation will increase the costs of all commercial i-oad transport, and so of nearly all forms of production and trade and the effect will be felt by every consumer. The tax will increase not least the costs of the primary producers who have been and are declaring vehemently that their working costs, in relation to returns, are increasing out of all reason.

It hardly needs to be pointed out that the increase in the basic rate of income tax from Is Sd to 2s in the pound, and the lowering of the statutory exemption from £211.) to £2OO, will be fell severely by many people of small and moderate means.

Directly and indirectly, in innumerable ways, the additional taxation now to be imposed will hamper and penalise virtually all forms of industry and trade. Adjustment on these lines is precisely the opposite of what was needed in order that the people of the' Dominion might concentrate effectively on producing more of what money will buy.

Taxation no doubt could have been reduced only by cutting expenditure and that admittedly would not be an easy or popular task. A country, however, is under the same necessity as an individual of living within its means and incurs much the same penalties by failing to do so. Any analysis in detail of the wide range of expendit lire provided for in the Budget must be deferred to a later occasion, but even when account is taken of a justifiably heavy expenditure on defence, it is by no means established, for example, that an expenditure of just on £24m need have been made this year on public works. At a time* when it is supremely necessary that the Dominion should husband and make the wisest use ol its resources, it is continuing to jiour out millions on. development and improvement work's which may be classed as quite desirable in themselves, hut hardly as essentials, and on railways, for example, some of which can become nothing else than a burden on the financial xeuources of the hjtate.