A SPECIAL TAX.

Auckland Star, Volume LXXIV, Issue 229, 26 September 1940, Page 9

A SPECIAL TAX.

EXPERT'S OPINION.

"NOT GOOD SECURITY."

"Tke full details of the methods of applying the compulsory provisions are not yet available, but on present infoVmation the method adopted does not appear to be a very happy solution," said Dr. H. A. Cunningham, of Auckland, an authority on taxation, when asked to-day his views concerning the compulsory loan. "Wliat has been done is, in effect, to levy a special income tax on those who in February, 1940, paid over £50 of income tax," he said. "In other words, it is levied on those who had a taxable income then of £380 or over. It is not merely a loan, because the stock that is received in exchange, being free of interest for the first three years, and afterwards carrying only a low rate of interest, is not worth anything like its face value. That represents a serious added burden in the case of many taxpayers, particularly in the case of those business people who have recently been assessed under the new provisions relating to valuation of stoek in trade. They have already had to bring in an abnormal amount of income because of this added valuation of stocks and to pay tax 011 it 111 this current year.

Excess Profits. "Then there is the further excess profits tax concerning which nothing is yet known except that it will be a tax of 100 per cent on whatever is deemed to be excess profits; yet on top of all this taxpayers are given only three weeks in which to pay the first instalment of £30 per hundred to this loan. If this is really intended to be a loan to be subscribed according to the ability of persons to contribute, it should be based not upon income tax but upon capital. The 1938-1939 income may have been an exceptional one, which will, by this time, no doubt have been spent, but in any case it gives no indication of a person's present ability to contribute towards the war loan. "The only thing which is relevant in that connection is the assets at present owned. It is true that during the last war there was a compulsory loan, also based upon income tax, but that loan carried approximately the market rate of interest and was a good security. The present loan is not.

Question of AppeaL "Ic may also be noted that it is left to the Minister of Finance to decide I whether a person has subscribed in due proportion to his means. Jn the previous compulsory loans taxpayers could appeal to a socially constituted Board °f Appeal, which heard the evidence in private, and a further appeal might be made from the decision of the board to a judge of the Suj re me Court. It is to be hoped that the Government will reconsider the basis for computing the liability to these loans. It is a proper thing that all persons should be required to contribute in proportion to their ability, but the method outlined by the Minister makes no attempt to achieve this result."