TAXATION LEVEL

Ashburton Guardian, Volume 70, Issue 113, 25 February 1950, Page 4

TAXATION LEVEL

BIG DROP THOUGHT UNLIKELY VIEWS OF MR A. J. DANES (P.A.) AUCKLAND, February 24. The opinion that it was absurdly unrealistic to assume that New Zealand was soon going to be in a position to make significant reductions in taxes was expressed by Mr A. J. Danks, M.A., senior lecturer in economics at. Canterbury University College, in a paper read to the sixth convention cf the New Zealand Society of Accountants to-day. He said the paper was written while he was in the United States before the change of Government, but the election notwithstanding, he was “going to stick to his guns.”

New Zealand had a form of the socalled welfare State, which might be loosely described as a structure which took certain goods and services out of the ordinary market, making their distribution dependent upon status rather than effort, and substituting some sort of priority of need for ability to pay, said Mr Danks. The development of such systems was responsible for a considerable part of the great increases in the turnover of State revenue. Added to the welfare State policies was the enormous growth in Government expenses arising out of the recent war and the scarcity problems attendannt upon it. “All indications at the present time seem to favour the view that the welfare State is here to stay,” said Mr Danks. “There may be some flabby thinking in this desire for ‘security,’ ‘insulation,’ ‘full employment’ and the like may be accompanied by a bitter antagonism to taxes and an increased belief that the nebulous ‘wealthy’ class can foot the bill. Harassed Finance Ministers may be expected to meet allround increases In various security avenues without inflation or high taxes. At times of full employment and ‘maximum’ production, fixed by a pretty generous view of necessary leisure, they cannot, but in the roseate times of elections much may be promised and many prospective voters take little persuading that economic stringency is more the result of the machinations of the opposing political party (hail of man’s struggles with an unkind nature.

, Taxation Reform “Some argue that the current levels of taxation are ruinously destructive to business enterprise and msut be reduced,” Mr Danks said. “What is to oe done about it? A big retreat from present commitments is unlikely and heavy defence expenditure looms close ahead. In view of this I am firmly of the opinion that taxation reform must aim at maintaining the level of receipts. “The most popular type of proposal for taxation reform has usually consisted simply in passing the buck. In contrast to this a disciplined and worthwhile attitude would be to assume a total tax yield as a given datum and proceed to work out how it could be maintained with less friction, waste and maladjustment. We must mould working rules opportunistically to a changing view of social and economic ends contemporaneously. This means finding very heavy taxation revenues. Income tax, personal and company, was probably the best and most flexible fiscal instrument yet devised, Mr Danks said. Its operation was largely in professional hands at the . paying and receiving ends. In his opinion it of fered the best avenue for meeting the needs of the times, tt might well be the best way of carrying a heavier taxation burden.

Sales Tax Dealing with sales tax, Mr Danks said exemptions or differentials should be viewed most critically. New Zealand seemed better off than Great Britain, where the style of. purchase taxes and subsidies (negative taxes) seemed to attempt too much m trying to combine a complicated system ot ends and means. “There is little statistical evidence that fatal disincentives exist in heavily taxed economies,” said Mr Danks. I am out of sympathy with the more noisily maudlin prophets of economic doom by way of this route. In Great Britain, for’ instance, very heavy taxation has not prevented physical output from increasing 30 per cent, above pre-war levels. The problem is there, but we must not exaggerate it.” Public accounts must be fitted into a larger framework of national accounts. said Mr Danks. Here was a field in which accountants had an important role to fill. New Zealand Public Accounts by no means satisfied competent observers.. There had been a notable advance in the national income assessment, reflecting very, great u edit, upon the Census and Statistics Department.