PRICE OF TOBACCO

Wanganui Chronicle, Volume 83, Issue 287, 5 December 1939, Page 3

PRICE OF TOBACCO

TAXING THE SMOKER MANUFACTURER'S handicap “Never have we passed through a period so full of worry and anxiety as in this last financial year,” reports Mr. Gerhard Husheer, chairman of the National Tobacco Co., Napier. “The economic position has gone from bad to worse, and it is really a matter for congratulation that we have been able to extricate ourselves practically unscathed from all pitfalls | and difficulties. The burden we manuI facturers are carrying has become [heavier every year.”

[ Mr. Husheer, in reporting to share- . nolders in the company, refers specifically to the increase of taxation of tobacco by 25 per cent. Although the price to the consumer was increased, yet it was not commensurate with the additional tax. New Zealandgrown leaf, whicn costs, say, 2s per lb., carries an excise duty of 5s 7id per lb. Combined duties, excise and relative proportion of Custom;-, amounts to 7s 2d per lb. or lid for a 2oz. tin; with sales tax another Id is added., so that of every 2oz. tin for which the smoker pays Is 9d the sum of Is goes to the Government, leaving the manufacturer 9d to cover cost of leaf, processing, manufacturing tins, canisters, containers, paper, and other packing material, freights, distribution, and wholesale and retail 1 profits. In brief, 55 per cent, of the I purchase price is taken by the Slate land 45 per cent, is divided between grower, manufacturer, merchant, and retailer. That is not all. The Commissioner of Taxes demands for income tax 10s in the £. The price paid for leaf grown in New Zealand is 2s per lb., against under 9d per lb. for tobacco of a similar grade bought on the warehouse floor in the United States. Fancy Prices Paid Mr. Husheer concedes that “conditions here can hardly be compared with those in the tobacco-growing districts in the States. Our farmers would not be able to compete owing to the higher wages here, but there is a limit beyond which even we manufacturers here in New Zealand cannot go. We ! are willing to pay the grower well | lor quality leal. “We have been doing this all the time, paying him fancy prices, but we find it increasingly difficult to make use of the lower grades comprising indifferent and faulty leaf, and it would undoubtedly lead to more satisfactory dealings and better re!turns for the grower if he would specialise in quality instead of producing crops that arc only partly fit for •manufacturing.” i Difficulties were experienced in o'o•taining the necessary exchange to lin- * ance imports from overseas. “At i one time the positic i took such a serious turn that the waf tobacco markets in the U.S.A, had to close down because the British manufacturers had peen compelled to withdraw their 1 buyers for want of exchange.” says Mi. Husheer. “The markets remained closed for a month, but opened again upon the Federal Government undertaking to finance part of the crop with the ultimate object of relieving their ow n growers. "However, we are not only concernled with exchange. It is the high cost of I the dollar in relation to the £ sterling •that debars us from operating as free'ly as we would like to and sets a definite limit to our purchases.” Notwithstanding all the diliiculties, the National Tobacco Company’s trading for the year had been satisfactory and its turnover had grown appreciably.

Disappointing Business Concluding hL review , Mr. Husheer states that ’‘though we have done a larger this year, our finings are again disappointing; they ’are in no proportion to the tremendous efforts we have been making. Stall and machinery have been kept going at top speed all the year round ana the i quantities of tobacco that have passed through our hands is demonstrated by the amount of excise duty we have paid during this period, and which amounts to more than £250,000. Compared with this figure, how insignificant our profits must appear, for £16,451 is all we can show, and of this we have to hana over more than hall (£8900) to the Commissioner of Taxes, leaving us £7554 as the net profit for the year. “Disappointing as the result may be, it is an improvement on last year’s, and in view of our large reserves and the decidedly brighter prospects for the current year, the directors recommend the distribution of the same dividend as last year, namely, 8 per cent, on the preference shares and 10 per cent, on the ordinary shares, and as I this will absorb £0229 18s lOd in excess of the available profits, to draw for

this deficiency upon the reserve account. ’