The Wanganui Chronicle. MONDAY. JUNE 8. 1931. TAX FREE SECURITIES

Wanganui Chronicle, Volume 74, Issue 133, 8 June 1931, Page 6

The Wanganui Chronicle. MONDAY. JUNE 8. 1931. TAX FREE SECURITIES

'T’HK decision ul tlic Premiers’ CoiiL'erciiee to recommend a lax of 25 per cent, being imposed on tax free bonds not converted into the new 4 per cent, loan, is a deliberate breach of contract and as such it is to be condemned. It must be remembered that the tax Tree securities were issued by the Government of Australia at the time. At the time of their issue the members of die public had equally the right to take tip the bonds. Those bonds have since changed hands, possibly many times in some instances. Their value was estimated at the return they made to the investor. This class of security naturally favoured those people enjoying large incomes, for the higher their rate of income-tax the greater would be the advantage ol investing in tax free securities. On the face of it. then, the proposal has the appearance of taxing the wealthy tor the benefit of the poor, and for that reason, despite its illegal and nequitable nature, the end justified the means. tint as is usually the case with these propositions, the taxing of tax exempt securities is not quite such a simple proposition. The mutual insurance companies—whose policy-holders are the shareholders would naturally incline 1u these tax free securities. A reduction in the value of the assets of a mutual insurance company is really a reduction in the value of the. policies held by the. members. Were the Premiers’ Conference to propose to tax life insurance policies there would doubtless be an immediate and widespread outcry against such an attack on private property. I lie uiifaii'ness of the proposal would strike home to the man in the street. When the roundabout method of attacking his own property, camouflaged by calling it an attack on the larger incomes, is resorted to. the outcry is likely to be less emphatic. The long view, too, should be borne in mind. Sanctity of contract runs to the root of our dealings. The investor loses faitli in the State which breaks its contracts, and when a State exchanges its credit status for a point or two of interest it makes a bargain for which it will indeed pay dearly.