STATE ECONOMY

Waihi Daily Telegraph, Volume XXXIX, Issue 9520, 8 May 1940, Page 4

STATE ECONOMY

EMERGENCY DEMANDS OF IHE WAR BIG TAXATION YIELDS LOWER EXPENDITURE URGED “Reduction in public expenditure must be made in view ol tbe emergency demands ol the war and may require troublesome adjustments, states a bulletin prepared by tbe Canterbury Chamber of Commerce in consultation with tbe department of economics of Canterbury University College. “On the other hand,” the bulletin continues,” the taxpayers need no introduction to heavy and burdensome taxation, and the high revenue resulting, more than double that of any normal year before 19 33, should provide large funds for war purposes. “Again, export prices have risen, export receipts and national income are substantially higher than in any year before 193 0, import and exchange control has been in force for some time, and it appears unlikely that imports will be available in full exchange for exports. Hence money is likely to accumulate internally. MONEY COULD BE RAISED “In addition, the credit expansion policy followed in the last two yearo has increased the internal supply of credit, bank deposits are exceptionally large, and, given a financial policy that appears reasonably sound to investors, there should be little trouble in raising substantial sums by internal loans. Moreover, when internal loan money is spent in New Zealand it sustains the income which

is the source of taxation, assists the yield of taxation, and remains in the hands of the community from whom it can be borrowed again and again. After emphasising the need for increasing production for export and discussing the various possible sources of war revenue, including internal and external loans, the bulletin states:

“Unless substantial economies can be achieved, or production considerably increased, the expenditure of a larger part of the national income on war must necessarily result in leaving less for the community, and hence in lowering the general standard of living. In 19 37-38, the latest year for which official figures are available, following a year of record high export receipts, the aggregate of all private incomes, which is the closest approximation we have to the national income, was estimated at £167 millions. It is unlikely to have increased since, except by* reason ol State created credit and the associat - ed using up of reserves. EXTENT OF TAXATION “For 1939-40 the estimated State taxation was £41.55 millions, to ssl which must be added £3.7 2 millions 1 for additional war taxation for a full || year, and about £7.5 millions for local 1 body taxes. These amounts total \ £52.77 millions, or probably about 3 0 j per cent., Gs in the pound, on the i present national income. At the | present time, too, State taxation, ex - | eluding special war taxes, is more than twice as high as it was before I the depression. f “If expenditure from the present \ ordinary State taxes could be reduc - I ed to approximately pre—depression I levels, more than £2O millions a year I would be set free for war expenditure without resort either to additional taxation or to loans. In view of all the circumstances, which are admittedly difficult, the most fruitful source of revenue for war purposes is to be found in drastic economy in £3 present Government expenditure.”