TAXATION PROPOSALS

Wanganui Chronicle, Volume 74, Issue 244, 15 October 1931, Page 8

TAXATION PROPOSALS

BIJJ-S BEFORE HOUSE DISCUSSION OF PROVISIONS EXPLANATION BY MINISTER [ Per Press Association. ] WELLINGTON, Oct. 14. In the House of .Representatives today, on the motion of the Hon. Downie Stewart, urgency was accorded the passage of the Land and Income Tax Amendment and Land and Income Tax Annua 1 Bills. It was agreed to dise>M the provision of both Bills in the course of the debate on the former.

Moving the second reading of the Land and Income Tax Amendment Bill, Mr Stewart first referred to the debate which had taken place on the introduction of the Bills on the previous day. He said that the main question which had given rise to the discussion had been the abolition of the graduated land tax. and reference had been made by the Leader of the Opposition to a statement whick he (Mr Stewart) had made in his Budget in 1928. Mr. Holland had indicated that there had been a change of view on the part of the Minister of Finance. Mr Stewart said he had looked up the Budget and -so far as he remembered the whole paragraph had not been quoted by the Leader of the Opposition. It was quite obvious from the 1928 Budget that his mind was moving then towards a reconsideration of the problem. It should be remembered by the House that when the graduated land tax was imposed, there was no tax imposed on incomes from land. The farmer was now complaining that he had secured no relief in bad times owing to the necessity for paying land tax whether he made a profit on the year’s working or not. Mr Stewart said that as a matter of principle and equity, the true basis of taxation should be the capacity and ability of a man to pay according to his income. Referring to the land tax as it affected cities. Mr Stewart remarked that there had been a danger in a city like Wellington of a man becoming too big a landlord but any danger in that direction seemed to have disappeared in Wellington owing to the enormous increase that had taken place in rates. He had that day received a deputation from shopkeepers who had complained that they were being driven out of business by high rents brought about by high rates. Mr Barnard: Is not the case of Wellington rather exceptional? Mr Stewart: Yes. I think Wellington is exceptional.

Lowering of Exemption.

The Minister went on to refer in detail to the various clauses in the Bills. Referring to the lowering of the exemption to £260, he said it was still high compared wi*h most countries, and pointed out that the exemption would now disappear at £BOO instead of £9OO as formerly.

In referring to the provision which brings into assessable income taxation —free debentures, Mr Stewart remarked that this was being done so that the rate at which a man should pay could be fixed. Representations had been made to him from various quarters throughout New Zealand to impose a direct tax on tax-free bonds, but he held the view that the State had contracted not to tax these bonds and it would be a breach of contract if direct income tax were imposed on them. At any rates, he could sec no answer to the charge of breach of contract. He had consulted the best taxing authorities he could get, including the present Commissioner, and they had agreed that it would be no breach of contract to bring in debentures for the purpose of ascertaining the rate at which a man should pay on that part of his income which was alreadv assessable. Instancing the case of a taxpayer with a salary of £560, Mr Stewart said that after the statutory exemption had been made he would pay tax on £4OO. If he had £5OO in dividends from taxfree bonds the inclusion of these would bring his income up to £lO6O and he would be taxed on £4OO at the £lO6O rate.

Mr T.ysnar: You arc making no extra charge on the banks? Mr Stewart: Their income tax has gone up. They are getting twice ns much imposed on them by way of additional income tax as they are getting relief from land tax.

Mr Stewart wont on to give specific instances of the way in which various incomes would bo affected by the alterations in the Bills. Taking a man whose assessable income was £lOOO and who had exemption for children of £lOO and for life insurance of £5O. he said the taxable income would be £B5O. The tax payable in 1930 was £44 5s sd. With the addition this vear of the 30 per cent., or £l3 5s 7d, the total would bo brought to £57 11s. In addition to this there was a special tax of 4d in the £ on £5OO. bringing the total taxation up to £65 17s Rd. The same man in England, according to the conclusions of the Tax Department, would pay £lll 17s 64. If the income was unearned the tax in New Zealand would be £B5 while in England it would be £l6l.

Tn the case of a man with an income (earned) of £2OOO. the tax in New Zealand would be £241 and in England £336. On an unearned income of the same amount the tax in New Zealand would be £313 and in England £4ll.

Mr Barnard: Is not English taxation almost the heaviest in the world? Mr Stewart: Yes, I think it is.

The Minister wont on to quote figures showing how much in the £ would be paid by various classes of taxpayers (in each case without children). These figures wore as follows:—£300. 1.6 d; £4OO, 2.5 d; £5OO, 2.87<1; £6OO, 4.6 d: £7OO. 6.4 d: £BOO. 7.5 d; £lOOO. 8.5 d; £2OOO, lOd; £3OOO, lid; £5OOO, Is 1.9 d.

Fair Distribution.

In conclusion, Mr. Stewart said that he had endeavoured to distribute the burden of taxation in directions in which it could be most reasonably borne. He knew some members held very strong views regarding a graduated land tax but he thought its repeal was reasonable and just. Mr. Savage said thar the Government wa- giving a remission of taxation to the large landowners to enable them to go on aggregating land. Settlement of land was receiving lip service and nothing further. Continuing, he said the taxable balance had increased by nearly £11,000,00(1 from 1922-23 until 1929-30, and asked why the Governments had not gathered in the necessary money

during those years. They had been busy reducing taxatio. on the plea that they were giving relief to the farmers, who were making large profits, with the result that taxation had to be heavily increased now that the taxpayer had very little to pay with. While that wa: being done members were being asked to pass legislation to give remission of taxation to wealthy landowners. If a graduated tax could not be paid it simply proved that it was doing what it had been framed to do.

Mr MacMillan said that it was admitted that the farmers were suffering and the rest of the community was suffering as a consequence. Proposals were before the House to give relief tc farmeis and Labour members evidently did not understand the position. Mr McCombs: Relief is not being given to the small farmer.

Mr MacMillan said that the small farmers were being helped by subsidies and the large farmers who were working on reserves were also entitled to a certain amount of relief. There was only one profession in New Zealand that could not be overdone and that was farming. Every effort should bo made to keep the farmers on the land and put more on with them. It was evident that some members of the Opposition did not desire to help the country but simply to destroy the large man.

Mr Barnard: You’re not serious! Mr MacMil’an said that it had always been claimed by Labour members that taxation should be based on ability to pay, and now they were arguing from the other side. He, as a farmer, welcomed the proposals brought down by the Minister of Finance. Mr Hogan’s Views.

Mr J. T. Hogan said that no political party could discard the graduated laud tax for all time, and for that reason he •considered the measures iu the Statute Book should not be lightly altered. He knew many farmers could not pay the tax at present. The operation of the graduated land tax should be for the purpose of bring about subdivision, aud only those who held land unsuitable for subdivision should be given relief. The land should be classified and relief given only after hardship was proven. There was no need for a repeal of the Act. The best way to give relief would be by reduction of interest rates.

Mr McCombs said that landowners already had the protection of a hardship clause. Mr Hamilton: It doesn’t operate. Mr McCombs: Probably there has been no need for it to operate. He said that if the clause was not effective there was no reason why it should not be made effective without repealing the whole tax. There was justification for land tax because it encouraged production, the farmer having to produce to pay his tax, and there was justification for graduated land tax because it prevented farmers from bolding large areas in a more or less idle state.

Mr Langstone said that the farmer with land below £5OOO in value would get no relief and for that reason he could not see why the large landowner should get relief. The House adjourned at 5.30 p.m. and resumed at 7.30 p.m. The debate on the taxing bills was resumed by Mr Lysnar, who said that he was disappointed with the proposals contained in the Supplementary Budget. He considered that insufficient provision had been made for the assistance of primary producers, but he welcomed the abolition of the graduated land tax, which, in his opinion, caused a great deal of harm to the country. Mr Endean, while endorsing the principle of giving farmers assistance, said that he had not seen any evidence of the burden of taxation which was being taken off the land being fairly and squarely distributed over those who had to pay income tax. Legislation which was brought down hastily would cause great hardship to many people, out of all proportion to the purpose for which it was designed. Mr Barnard: Are you going to support it?

Mr Endcan said he would use his discretion as to that. He inquired whether the Government was holding the scales of justice evenly between all sections of the people. Mr Fraser: Not on your life. Taxation Comparisons Mr Endcan joined issue with Mr Stewart on the comparison between the conditions in Britain and New Zealand with regard to taxation. New Zealand was on a different basis. He hoped Cabinet would not display too much of an agricultural bias. The man in the towns had, in a large measure, borne the heat and burden of the financial depression, but the Government’s aim seemed to be to show consideration to the farmer at the expense of the man in the town. He cited the case of a man interested in city property whoso income tax last year amounted to £l6O, but which, under the taxation proposed, would be £548. The saving from land tax would be £9B, so that the additional burden in this instance would be about £3OO. He asked that more consideration be given taxpayers in the towns and cities.

Mr Ransom said that he hoped to have the privilege of introducing this session a bill to help those landowners in possession of undeveloped lands to bring them into production. The Minister said that because the graduated land tax had been in operation 40 years some members seemed to think that justified its continuance for all time. It had been shown that in actual practice the graduated land tax had not accomplished what it had been designed to do, namely, breaking up estates. He had advocated, and still advocated, that farmers should be taxed on income and not on land. In normal times, when wool and stock were bringing normal prices, the amount of income tax payable would exceed what was now paid in land tax. There had been ample evidence during the debate to show that sheep farmers were in a difficult position. Few farmers to-day were able to meet their interest charges. An authority had recently informed him that he considered that event with careful farming there were only 30 per cent, of farmers in a position to meet their obligations, and that another 30 per cent, were in a position to carry on with assistance. It was the duty of the t| ate to do all it could to help the remaining 40 per cent, to keep their holdings. If some relief was not given in respect to graduated land tax there was no chance of undeveloped lands being developed in the future. He even thought the Government would be doing a wise thing if it removed the tax altogether, but unquestionably it was a right thing to reduce it to a penny flat rate. Labour Accusations Mr Sullivan asserted that there were members of the United Party wholly opposed to the repeal of the graduated land tax, and he wondered whether

they would slavishly follow the Government’s lead. He accused Mr Ransom of having changed his views on the subject and of using any argument which suited the necessities of the moment. It was not fair to Parliament that the Minister should play ducks and drakes with the facts of the position. Mr Sullivan said that while the Government was making great gifts to wealthy landowners many workers were suffering the direst distress. The Government had no mandate for its present policy and the people had a right to express their opinion on the question of abolishing the graduated land tax.

Mr Forbes said that it had to be admitted that the farmers had been harder hit by the depression than any other class of the community. There had been references to Mr Ballance and his colleagues, but Mr Forbes declared that had they been faced with the present circumstances they would have been the first to say that the Government should do anything in its power to assist those people m distress. The whole prosperity of this country was built up upon the welfare of the' farming community, both large and small. He spoke of the part played by the Canterbury farmers in the life of the Dominion, and said that there was not one of those sheepfarmers who to-day could not show they were carrying on by payments out of capital and with the assistance of stock and station agents. Mr Barnard: Why don’t they sell some of their land?

Continuing, Mr Forbes, said that it nad been claimed that the Government had no mandate for the present legislation. “The welfare of the country is its mandate,” he said. Mr Semple: Are you prepared to seek a mandate from the people? Mr Forbes: “The people of this country no doubt have commonsense. 1 have been receiving hundreds and hundreds of letters from throughout the country commending the Government for what it is doing. 1 can remember no other time when the opinion of the people had been expressed so freely in commendation of the Government’s plans. It gives me the greatest coniiedence in the determination and commonsensc of the people that in spite of the sacrifices they had to make they recognise the Government is acting for

the good of the country. I am a New Zealander and am naturally proud of the manner in which the people are responding. I have no doubt that difficulties will be overcome and the people will then look back on the hard times and will realise tnat they brought out the best that is in a community of British people.” The debate on the taxing bills was continued. Hon. Coates’ Speech.

Mr. J. G. Coates, speaking after midnight, said that he knew of instances where land had actually gone out of occupation as a result of the graduated laud tax. He considered that it would be beneficial to the country if, as a result of reduction in taxation, it became possible to induce capital to be investigated in unoccupied lands. It had been said that there were few farmers prepared to sell laud at valuation. There were hundreds of farmers he declared, who would be only too ready to sell land at valuation, and he was afraid it would be a bad thing for the country if it took over their land at the Government valuation. Left Sitting.