UNTAXED ENTERPRISES

Wanganui Chronicle, Volume LXXXIII, Issue 19505, 5 February 1926, Page 10

UNTAXED ENTERPRISES

AN UNJUST SYSTEM. GAS COMPANY CHAIRMAN’S CRITICISM. Tn moving the adoption of the accounts and annual statement of the Auckland Gas Company at the meeting of shareholders the chairman (Mr J. H. Upton), dealt at some length with the subject of rates and taxes. He said:— “ Included in taxes is an item of £24,372 for income tax and it is this which merits your serious attention. The income tax charge, necessary as it is, involves to us a gross injustice, owing to circumstances which I will relate. We are purveyors of light, heat and power. As you are aware we have a keen competitor in the Electric Power Board,, who also are purveyors of light, heat and power, but while this company pays an income tax of £24,372 the Power Board is exempted. All economists uphold that maxim that every industry should bear the cost of its administration, and if it cannot, it is being conducted at a loss. Taxes are a necessary part of the cost of administration. the Power Board pays no taxes, and, therefore, pro tanto, their business is conducted at a loss. Who pays that less? None other than that overburdened victim the general public, of which gas manufacturers form a part and gas consumers a very large part. Both services supply precisely the same commodities; the one is taxed to the tune of £24,372 a year, equivalent to 5d per 1000 cubic feet of gas sold, the other is exempted. But that is not all. Both the Power Board and ourselves require to import large quantities of manufactured material, but the Customs duties arc so arranged that whilethe greater part of our importations of such material are dutiable, those of the Power Board are almost wholly free. It seems incredible, but, unhappily, it is true.

“The question may be asked, how can you assess for income a concern that does not show a profit? The answer is very simple. A company is taxed on its profits, that is, substantially its dividend. A Government or municipal concern has no shareholders’ capital, but is carried on on borrowed capital; the interest it pays on such capital is the equivalent of shareholders’ dividend and should be taxed accordingly. The Power Board has borrowed £1,722,500; the interest on that sum at 5| per cent, is £94,867 on which income tax ought to be paid; the amount would be about £21,345. But even that is not all; they add insult to injury, for when they borrow money your property is pledged as security for its repayment; they are now proposing to borrow a further £650,000, for which, of course, your property is pledged. The Associated Chambers of Commerce have given their verdict on this matter, declaring that: ‘All State and public utility trading concerns which come into competition with private trading concerns on similar lines should come under the provisions of the Land and Income Tax Acts and be charged land and income tax to the same extent as private enterprises.’ To this nothing can be added except to say that the Power Board exemptions arc equivalent to a subvention of not loss than £30,000, or, including the new issue, £40,000 a year; and that an industry that requires stimulant to such an extent suggests that there is a field for the activities of the prohibitionist.

“Oh, but, it is said, this Power Board is for the benefit of the whole people and thus renders universal service. Well, that is simply not true; the board renders service only to those who use its produce—who arc not by any means the whole people—on the rest it is a gross imposition. But has this company rendered no service? How about the state of things 60 years ago when a few patriotic citizens formed it? Why the Act under which they were incorporated gave them power to pay 20. per cent, dividend, so risky was it thought to be; it is a proud record of this company that it has never availed itself of its authority to pay even onehalf of 20 per cent, on the capital actually paid up by shareholders. Does anyone think that a great business can be carried on for any other reason than it renders service? The dividend is incidental; the real test is service. What says the Rotarian motto ‘Service above self —He profits most who serves best.’ That is true of every large successful business. “Having said this much about competition combined with, unjust taxation, you naturally ask how it is affecting our trade? Well, in one sense, not at all, we have increased our output an I we pay our dividend as usual; in another, to the extent of that taxation it prevents a reduction in the price of gas.”