INDIVIDUAL INCOMES

Wanganui Chronicle, Volume 74, Issue 241, 12 October 1931, Page 7

INDIVIDUAL INCOMES

MAXIMUM OF NEW TAXES OVER 8s 3d AT £lO,OOO LEVY ON INVESTMENT INCOME AUCKLAND, Oct. 10. Official information was obtained last evening regarding the proposed application of the “special emergency tax” on unearned incomes of individuals. According to the Financial Statement, this tax was to be “onethird of the income tax payable,” and this was interpreted to mean that it would be calculated on the tax exclusive of surtax. The Government’s intion, however, is to add one-third to the sum of tax and surtax, so that the total levy on unearned income will be 173 1-3 per cent, of the 1929 rates. One obvious effect of the proposed increases in the taxation of individual incomes is that they set a new maximum rate of tax. The graduated scale which has been in force since 1927 rises to a maximum of 4s 6d at £B7OO With the surtax of 30 per cent., ths maximum rate for companies will be 5s 10.2 d. Individual incomes may be subject to taxation at much higher rates. The extreme limit would be reached on incomes derived wholly from taxable investments —such as Government and municipal bonds, mortgages and rents. In such cases there would be a supertax of one-third of the total tax, raising the maximum to 7s 9.6 d In addition, such incomes, after the exemption of £5OO, have to pay a flat rate of 4d and there is also the unemployment tax, at present equivalent t « 2d on the whole income. The thooreucal maximum is, therefore, 8s 3.6 d, though the whole of the fraction would never be egectivc since the £5OO exemption applies in every case. An average rate tf 8s 3|d would be payable on an une.vi.ed income of £20,000. At £IO,OOC the income taxation would be £4058 Bd, to which the unemployment tax auds £B3 6s Bd, making a total equivalent to 8s 3.4 d for every pound of income. The most important concession now open to recipients of large income! from taxable investments is the insurance allowance, which is limited to 15 per cent, of the income. An income of £10,235 claiming the full exemption would be taxed at the maximum rate of £B7Ol and would pay 4d on £9735 and 2d on the total income. The aggregate taxation would be £3640 19s 6d, equivalent to over 7s 3d uver the whole income. The composition of incomes of the same amount derived from different sources will make wide differences in the amount of taxation. For instance, an income of £lO,OOO of which half is derived from taxable and half from non-taxable investments would be charged the maximum rate of 93.6 d on £5OOO, 4d on £4500 and 2d on £lO,OOO, a total of £2lOB 6s Bd, or an average of 4s 2.6 d per pound of total income. If the non-taxable portion is £4OOO and £lOOO is earned, the taxation becomes £5OOO at 93.6 d, £lOOO at 70.2 d, £5500 at 4d and £lO,OOO at 2d--a total of £2417 10s, or 4s 10.02 d average rate. Wholly earned incomes are not subject to the supertax of 33 1-3 per cent., so that the maximum rate is 5s 10.2 d, the same as for companies, plus 4d on the excess over £5OO and 2d on the total income, giving a theoretical maximum of 6s 4.2 d. At £lO,OOO the total tax would be 6s 4d, or £3166 13s Id.