INCOME TAX

Wanganui Chronicle, Volume 75, Issue 142, 18 June 1932, Page 8

INCOME TAX

ASSESSMENT ON BANKS AN UNFAIR SYSTEM BAD DEBTS NOT INCLUDED WELL IN GT ON Juno 17. “It has been mentioned on previous occasions that the system under which the banks are assessed in New Zealand for income tax, has for many years been extremely unfair,” stated Mr. Olli ver Nieholsdn, chairman of the Bank of New Zealand, speaking to the annual report and balance-sheet at the meeting of shareholders to-day. “At present, owing to the abnormal amount of bad debts incurred.” said Mr. Nicholson. “it is operating with particular hardship. It will, come as a surprise to most people to learn that banks are not permitted to include bad debts in the various deductions allowed in assessing their taxable income. For instance, if the New Zealand profits for the year were one million, or half a-mililon, or none at all, the same amount of income tax would be payable; or to put it another way, if we hud earned 7 per cent, on our advances no greater amount of taxation would be payable than if we earned only 54 percent. Were we taxed as a joint stock company we would be assessed on our actual earnings, bad debts being deducted. Irresponsible persons look upon a reduction of 1 per cent, in interest rate as being somewhat trifling, but in the case of this bank it represents a reduction of profit by about £llO,OOO a year. Such reduc> tion of profits, as I have said, would, under the present ssytem of taxation imposed upon banks, carry no reduction of taxation. Last year we paid the Government £49,985 more taxation than in the previous year, and our total rates and taxes on the whole of our business shows an increase for the year of £56,950. I may add that of this year’s profits of £587,023, no less than “£310,925 was represented by interest from free of tax British, Australian and New Zealand Government securities. These securities, of course, carry’a lower rate of interest than those that are subject to tax. It is recognised that in times like the present taxation must necessarily be heavy, and that wealthy institutions must expect to be heavily burdened. There must, however, be a limit to excessive exactions. ’’