THE LAND TAX

Waikato Times, Volume 121, Issue 20230, 26 June 1937, Page 27 (Supplement)

THE LAND TAX

(Continued from page 26.) their debts. The young man who tackles a big block of poor country without much capital behind him is plaoed at a disadvantage as compared with a wealthy man who can pay off a place and is therefore not taxed on his mortgage. Production Being Checked. “The present tax means that marginal land is being forced out of production and an increase in unemployment, as in many cases only a limited sum is available for expenditure, and if the Government takes a considerable portion of this the farmer has to reduce his expenditure in other directions, and naturally maintenance is the first item to be reduced as this reduction is not immediately reflected in lowered returns, but nevertheless it ultimately lowers production seriously. There is the further fact that apart from the justice of its application the land tax imposed on olty lands ultimately has to be borne by the farmer. The graduated land tax in 1929 caused so much hardship that a special Royal Commission was set up to deal with applications for relief. In 63 per cent, of the cases investigated by the Commission the tax was remitted in full; in 17 per cent, of the cases the tax was partially remitted, and the Commission gave no relief in only 20 per cent, of the cases. I This tax was not so heavy as the pre--1 sent one. j “The farming industry is only now 1 recovering from the full effects of the slump and much expenditure needs to be made to restore properties to their pre-slump standard of efficiency. Even with the improvement in prices the farming community as a whole is not | in as good a position to-day as it was I in 1929. It should be further noted j that the 1930 Commission noted a ! marked variation in values in respect ! of land of the same carrying capacity ' situated in different localities. There is every reason to believe that this variation still exists. Taxation levied on income automatically adjusts such factors and is a fairer means as bej tween individuals of raising revenue. j The Best Basis. i “The Farmers’ Union is opposed to Ihe graduated land tax. and it is sub- ; m it ted that there should be no class | or occupational distinction in the levy- ' ing of taxation, and that the contri- ; button of each citizen towards the upI keep of the State should be according 1 to his income which most accurately j reflects his ability to pay. Ability to | pay should be, we maintain, the basis of all taxation. Should land tax be retained in the thM union claims that'

the tax should not be a graduated one, and that the amount of taxation so paid should be deductible from the amount of income tax payable. The amount of land tax payable should not only be allowed as a deduction for income tax ‘purposes but the amount of tax paid should be deducted from the net amount of Income tax payable. Should land tax be retained exemptions should be given to farmers for the full extent of their mortgages. Under the present system a landowner may be taxed on land which he does not really own, and the union considers that full exemption for mortgages should be allowed when land tax is being levied. Graduated Income Tax. The union expresses its opinion that a system of graduated income tax is the fairest means of obtaining the revenue required by the Government. Graduated income tax can be so levied that the burden imposed by it on each taxpayer is only such as is his just share, and as he is able to pay. It would appear that as far as income tax is concerned, New Zealand was the highest taxed country in the world. The lower incomes being taxed appear to be carrying a much heavier burden than some of the higher ones. It would appear that the tax burden was not fairly borne, and it was suggested that an investigation be made of the incidence of the income tax on the different income groups of the community. In view of the variable nature of the yearly returns in farming, it is suggested that taxation should be levied on the average income over the preceding three years. This was the practice in Australia. Calculating Depreciation. Losses of fencing by fire or flood, which at the present time were regarded as a capital loss, should be regarded as a revenue expenditure. The rates for depreciation appeared to be fairly reasonable except with regard to implements and machinery where 5 per cent, was allowed on the diminishing value of the implement. The union considered the calculation of depreciation on diminishing value to be a very grave injustice, as was also the restriction to only one-quarter of the total depreciation in the case of a farmer’s dwelling. It was felt that at least one-half of the dwelling should be considered as being devoted to the carrying-on of the farmer’s business, especially where dwellings were valued at (new) less than £IOOO. ! The depreciation on implements and 1 machinery should never be assessed on the diminishing value, but always on the original value and the union recommended the following rates of depreciation:—Seeding and harvesting machinery, 74 uer cent, on original

cost; cultivation implements, 6 per cent, on original cost; fixed machines (shearing, milking, etc) 6 per cent, on original cost; miscellaneous machines (corn crushers, root crushers, etc.), fl per cent, on original cost. It might be to the advantage of the Government (in view of the general opinion that an increased population is desirable) that exemption should be made for the purposes of income taxation of a certain sum, say £2O, for the year in which the birth of a child occurred. This period was always one of expense and the method suggested should help to lessen the burden in this direction. Unemployment tax payments should also be exempted, as their non-exemption amounted to double taxation. Farm Accountancy. “There is a further point in regard to the question of income taxation of farmers, and that is the matter of the desirability of tieing up income taxation with farm accountancy,” concludes the statement. “The results achieved by the standardisation of accounts of dairy factories has proved of very great assistance in the examination of the performance of different dairy factories, and there is no reason to suppose that three or four simple accounting forms could not be used by farmers in the same way. This could be arranged by drawing up a standard form in two or three styles—say one for sheep-farmers ; one for dairy-farmers; and one for mixed farming, which would become part of the income taxation assessment form. By this means a check on the depreciation, etc., in the income tax form would be made very easy and could be compared from time to time. “Such a standardised form should result in a saving of time by accountants and farm accounting associations, and should be of material assistance to the Department.