INDUSTRIAL RESERVE FUNDS

Waikato Times, Volume 194, Issue 22244, 13 January 1944, Page 2

INDUSTRIAL RESERVE FUNDS

When thousands of men and women have to be reabsorbed into industry at the end of the war much will depend upon the condition of industry to face the task. Then,’ as now, the industries will be expected to perform an urgent national service. The question then arises what is to be done to preserve the capacity of industry to employ greatly increased numbers in peacetime operations. That problem has been occupying the attention of the New Zealand Manufacturers’ Federation, among others, and proposals have been made to the Government that the income tax laws should be remodelled to permit the setting aside of certain reserves for specific purposes after the war. There is no desire to avoid contributions to the country’s wartime revenues but there is serious anxiety because of the effect of the present taxation system upon the ability of industry to perform the duties expected of it after the war. It is probably not generally recognised that income taxation as at present applied does not make provision for adequate depreciation or for reserves for capital replacements. The State’s need for revenue is obvious, but it is also clear that industries in time will fall into difficulties in these circumstances. Machines wear out, especially * under wartime strain, buildings have to be replaced, and business firms normally find it necessary to maintain reserves for these and many other contingencies, as well as for the extension of operations. One proposal is that firms should be permitted under the income tax system to provide a reserve fund which should be invested in war bonds and should be earmarked for specific expenditure. If the fund is not expended accordingly within three years, it should be subjected to income tax at the rate existing when the fund was set aside. There are other methods in operation or under consideration in other countries, and close inquiry into the proposals is warranted.