TAXATION POLICY

Wanganui Chronicle, Volume 80, Issue 243, 13 October 1937, Page 8

TAXATION POLICY

VIEWS IN PARLIAMENT

THE GOVERNMENT’S BILL OPPOSITION PROTESTS AT NO REDUCTION [ Per Press Association. ] WELLINGTON, Oct. 12. When the Land and Income Tax (annual) Bill was introduced for the second reading in the Bouse of Representatives this afternoon, urgency was granted the measure on the motion of the Prime Minister. The Minister of Finance, Hon. W. Nash, moving the second reading, said the Bill re-enacted the provisions of the Act passed last year and the rates of taxation would be the same. The Government recognised that the hardship provisions in the existing taxation laws were nut sufficient to allow full consideration to be given deserving cases, and it was proposed to bring down a special Bill giving wider powers to deal with cases oi hardship in the payment of land tax. Other taxing legislation would be submitted to the House during the present session. It would be designed to remove existing anomalies and bring the law into line with modern principles in taxation. The Leader of the Opposition, Hon. A. Hamilton, said he would remind the House that it was passing a Bill authorising some £8,500,000 in taxation, comprising £1,000,000 land tax and £7,500,000 income tax. The incidence of land and income tax was always a debatable point, in the present case especially sc as it appeared that the burden of taxation was becoming heavier and heavier. The present measure made provision for £3,500,000 more land and income tax than two years ago. He proceeded to compare the taxation returns to-day with those of two years ago before the present Government came into office, stating that although the increases were not all due to taxation initiated by the present Government, a good deal of it was. He thought the taxpayer would be justified to-day, in view of the general prosperity, to look for some relief in taxation. Total Revenue. The total revenue received by the Government, said Mr Hamilton, was £40,000,000, and the total taxation was £35,500,000. He criticised the Government’s reimposition of the graduated land tax, stating that the fact that the Government had received a quarter of a million less than it budgeted for last year showed that this tax was unsuccessful. He asked if the Minister of Finance would consider embodying in the Bill the same hardship clause as was contained in the 1920 Act, and continued that the graduated land tax could not be justified until lands were classified. Labour, he said, had always contended that ability to pay was the main foundation on which taxation should be based. Speaking of income tax, Mr Hamilton compared the returns under this heading to-day with those of two years, ago, stating that there had been an increase of 81 per cent, in the case of the taxpayer earning £5OO a year, while for the taxpayer earning £9OO it was only 5 per cent. He thought it would be wise for the Minister of Finance to inquire into the problem of the tax on unearned income, pointing out that there weie quite a large number of people living on their savings. That was their form of superannuation, but *t was classed as unearned income. Mr Nash; They get an exemption on £2ll. Mr Hamilton: Well, if they get that, they are no so badly off. Mr Hamilton continued that the bulk of income tax was paid by companies, and said it was not always so easy to adjust the incident of income taxation as it appeared. The Government had stated that they could spend the taxpayers’ money better than the taxpayers themselves, but he wished to cross swords with the Government on that point, and contended that it was wise to leave as much with the taxpayer as possible. The taxpayer, he said, was the most disappointed section of this community, in the Government’s administration he had been confidently looking forward to a reduction in taxation and had nut received it. He reiterated the remark made in his Budget speech that it was dangerous to Keep up a hign incidence oi taxation when revenue was high. What would happen, he asked, when revenue fell? it was easy to make adjustments when you hau the money, but not so easy when revenue Was not there. He thought we might be undermining our wnole financial system if we aid not watch out. lion. I’, i-iaser's Reply. I’he Minister of Education, the Hon. P. Fraser, said that Mr Hamiltons contention that the Labour Government claimed it could spend the taxpayers’ money better than the taxpayer could himself, was new to him. No Government could justify taxes that were not required and could nut profitably be expended, but he challenged tne Opposition to state what taxes the Government was levying Could be cut out. He was certain the Opposition would not be willing to rut the payments on social services, health, education or public facilities, [f they wanted them and were not willing to pay for them then they lame very close to insincerity. Cuuiu the Opposition show them wnere expenditure could be legitimately reluced? If they could point out one item where money was being wasted he would undertake to see that the Baste was stopped. The Government, be said, did not want to levy more taxation than was required, but it would continue to levy taxation for gocial services and public services generally. The Government believed that Its present policy was a correct one |nd would lessen any international catastrophe. Mr H. 8. S. Kyle (Opp., Riccartonj stated that although the amount >£ taxation had shown a marked increase it did not appear that any more Was being spent on social services than last year. Mr S. G. Holland (Opp., Christchurch North) said the Governmen: , was apparently not prepared to show Its hand and state what it would do il the country’s revenue fell to any appreciable extent. The country as c Whole was anxious to get a reply tc

that question. He challenged the vote of £ISO,DUO for wheatgrowers, stating that the Government bought wheat at 5s a bushel and sold it to the millers at 4s 9d, a transaction which cost the country £150,000. This was not to protect the wheatgrower but was to cover up the Government’s own loss.

The Minister of Industries and Commerce, Hon. D. G. Sullivan, said if that £150,000 were taken from the pockets of the wheatgrowers, men who had served the country faithfully and well and deserved the fruits of their labours, and it was passed on to the public, it would cost the country the sum of £300.000. That was because the price of the two-pound loal would have to be increased a hallpenny, which was the smallest coin we had in the currency. He also stated that the cost of living to-day was J owes than during the 1920-30 period. The Government intended to reduce taxation when possible. “Punishing Thrift.” Mr. W. J. Broadfoot (Opp. Waitomo) urged the lifting of the gold tax to enable the development of gold resources of the country on a fair basis. The Government* he thought, was endeavouring to hamstring private enterprise by high taxation and was using it as a new method of punishing thrift and enterprise. Instead of attempting to defend the Government’s taxing policy, said Mr. W. A. Bodkin (Opposition, Central Otago), the Minister of Education had raised a smoke screen by talking about social services. The civil servants had had their cuts restored but their increases had been swallowed up by higher costs and they actually were worse off than under the previous Government. Taxation was, in the main, he said, paid by trade and industry. It would expand under free trade or protection but not under uncertainty. The graduated land tax was a penal tax and he knew of cases where properties that could not be subdivided were bearing far too heavy a burden. Where the farmer could show he was suffering a hardship and his property could not be subdivided, relief should be given.

Mr. W. P. Endcan (Opposition, Parnell) also criticised the gold tax which, he said, must tend to discourage mining enterprise. He hoped the Minister would soon have placed on the Statute Book a hardship clause which would give real relief to the overburdened taxpayer. The cost of living had increased enormously and increases in old age pensions had all been swallowed up by higher costs. Our taxation per capita was staggering when compared with that of other countries. In conclusion, he said, he thought the Minister should make provision for increased family allowances. Hon. J. G. Coates said he was amazed at the Government’s evident desire to hurry the present measure through the House. Members of the Government had evidently received instructions not to speak on the measure and were obeying their orders implicitly. He thought the reason why there should be all this hurry was because the Prime Minister and Minister of Finance felt guilty. (Laughter*. He went on to state that the Prime Minister, before the last election, had promised to adjust taxation.; What must the public think of the leader of a large party who had promised to adjust taxation and had not done so? It seemed to him that the Government had done nothing else than scheme out how they could increase taxation and the people wanted to know how far the Prime Minister would go with it. Mr Coates said he had been flatly contradicted when he stated in the House a little time ago that share pi ices had fallen. They had fallen, he said. The great block of industrial shares had fallen on the New Zealand markets. High taxation was bearing down harshly on the people with small incomes and he asked if it were the Government’s desire to drive out or drive to other means of living people who depended on small incomes from savings. “Slump Must Come.’’ There was nothing to be gained, he said, from the argument that we were going to have good times always. Slumps must come. We couid not help it. Just get the idea moving that things were not stable and it would spread throughout the country. The Opposition Government had had that experience during the last slump when the money on which they were depending for employment had closed up. He urged the Government to allow industry to build up reserves sufficient to carry them through difficult periods ahead and stated that New Zealand seemed to be the highest taxed country in the Empire. It was certainly taxed on a higher rate than the United States, where taxation was comparatively low. The debate was interrupted by the adjournment at. 5.30. Mr. Coates, continuing his speech when the House resumed at 7.30 p.m., said the cost of administration was pyramiding taxation to a very considerable height. The Prime Minister had said that New Zealand led the world. She did, said Mr. Coat f ?s, in respect of taxation. The graduated land tax, he contended, was a capital levy which made it impossible for the landowner profitably to carry on his farm. Mr. W. J. Polson (Opp., Stratford) said the taxpayer had every right to feel troubled about the prosent position. The taxpayer, he thought, would not have very much left when the Labour administration was finished with him. The Bill was another evasion or violation of the pledge that taxation would be reduced. Tax reduction always increased spending I power but this Government had reintroduced in all its savagery all the worst points of the taxation measures. The graduated land tax, he said, could not be defended because it frequently taxed a man on his mortgage indebtedness. The worst feature of the Bill was that young men were not being encouraged to take up land and ability to pay should be the basis of taxation. Mr. A. C. Sexton (Indept. County Party, Franklin) said that company taxation in the Dominion was exceedingly heavy and was being passed on to the public which dealt with the companies concerned. Anything that would tend to reduce high costs was worthy of consideration. Just at present, said Mr. Sexton, we were experiencing god prices for wool, mutton and lamb but if prices fell and taxation was maintained at its present level then the farmer would find himself in considerably straitened circumstances. Company Taxation. Mr. C. A. Wilkinson (Opp., Egmont) said that company taxation was so

heavy that more was being paid in taxation than in dividends and to that extent the cost of commodities produced was being kept high. Many companies had been losing money for years and the first year they made a profit money was taken in taxation which should have been used in making up losses. The Government should keep taxation down to the lowest possible extent instead of loading the people with a heavy burden of taxation. Money should be kept in the pockets of the taxpayer. Industry wafc being slowed down by high taxation, which was doing a great deal of harm. He hoped that after the warnings which had been issued by the Opposition the Government would take heed and reduce it and allow the taxpayer money to increase his industry.

Hon. J. G. Cobbe (Opp., Oroua) stated that all this expenditure meant the piling up of a debt for the future. Under the present system of taxation, said Mr. Cobbe, the people were not being encouraged to invest their money in new industry. In fact, it was placing an imposition on the enterprising man and bringing all industry down to the same level. How was the Government going to meet all its heavy expenditure programme if the overseas prices of our commodities fell?

Mr. S. G. Smith (Opp., New Plymouth) asked if the Bill could be taken back to Cabinet and revised to see if any relief could be given the taxpayer. The Labour Party was on the Treasury benches to-day because it had promised to reduce taxation. Not only had the Government failed to reduce taxation, but it had increased it. A peculiar thing was happening to-day. There was the Opposition pleading with the Government to reduce taxation and not a word was being said in reply by the members on the other side of the House. Was the Bill so bad that it could not be defended?

Mr. T. D. Burnett (Opp., Temuka) said that the graduated land taxation gravely affected stud farms. He moved an amendment to the effect that the Bill be not proceeded with. The debate was interrupted by the supper adjournment before the amendment could be put to the House.Mr. Burnett’s Amendment. The text of Mr. Burnett’s amendment was that the Bill should not be proceeded with until the following means of meeting the Dominion’s financial and economic difficulties and placing the national finances on a sound basis was considered by the House: (1) That a full enquiry be first instituted into the effect of the proposed taxes (a) on industry; (b) on primary production; (c) fixed incomes; (d) the salary class; and finally on the employment of labour. The motion was seconded by Mr. K. J. Holyoake (Opp., Motuka) who said the Opposition knew the Government was perturbed about taxation and should welcome the amendment as the time had come for a competent investigation into the incidence of taxation in this country. The Leader of the Opposition, Mr. Hamilton, speaking to the amendment, said this was the only cnance the Opposition had had of putting up a strenuous opposition to the Government’s high taxation policy. The amendment was put to a division and defeated, the voting being on purely party lines, 42 to 14.

On the motion of Mr. R. McKeen the debate was adjourned at 11.20 p.m. until to-morrow evening.