The Coming Loan.

Press, Volume LIV, Issue 16158, 12 March 1918, Page 6

The Coming Loan.

We aro very g!ad to learn from tho statement by Sir .Joseph Ward, which we publish in another column, that ho intends to make some concessions to the small investor in connexion with the War Loan to be issued in a few days. As in the case of previous war loans, it is to be offered at 4-J per cent, free of income tax. but on this occasion the small investor will have the option of taking up tho loan at 5 per cent., subject to tax, provided that the amount so invested does not exceed £500 in any one case. Our readers will remember that when tho previous loan was issued we urged that an option of this kind should be given, on the ground that the tax-free Joan unduly favoured the large investor, and that it was very desirable, for more than one reason, to popularise the loan, and to get as many of the smaller investors interested in it as possible. We do not agree with the rather hysterical outcry of the Hon. G. Fowlds and other extremists that in making the loan tax free tho Government is allowing capital to shirk its responsibilities while conscripting flesh and b'ood. The first essontial is to secure the very largo sums of money which wiill have to ho raised before the war is over, and this can only be done by making the terms sufficiently attractive. Thero is no dcubt that a tax-freo loan does appeal to insurance companies and wealthy investors generally, and that to secure the same amount of money, while keeping the loan subjoct to income tax, it would bo necessary to fix a higher rate of interest. The hypothetical calculations in which Sir Joseph Ward has indulged seem to us a littlo besido the mark. Only extremists who do not trouble to look at the question from a practical point of view will say that none of tho loan should bo made tax free. At the | same time, there is no doubt that it is undrsirable to lock up more money than is really necessary in securities which will not be subject to taxation in future. In England, where the two options were offered, an overwhelming proportion of tho investors took tip tho taxable issuo in preference to the nontaxable at a lower rate of interest. So long as Sir Joseph. Ward can secure money on a taxable basis at 5 per cent, he will be wise, we think, to favour this in preference to a non-taxable issue at 4J per cent. Wo do not see tho necessity, or oven the expediency, of limiting the taxable issue to £500 in any individual case. On Sir Joseph Ward's own showing, it is an advantageous arrangement for tho Dominion, sinco lie argues that 4} per cent, nontaxable is really equal to 6£ per cent, taxable. It is a fallacy to suppose that tho issue of a taxable loan at 5 per cent, will tend to raise tho general rates of interest more than a non-taxable loan at 4J per cent. What will really affect the rate of interest is the amount of money taken off the market, thus lessening the supply for mortgage and other purposes. If Sir Joseph Ward does not agree to remove tho £500 restriction in connexion with the approaching loan, we venture to predict that ho will bo only too ready to do so at a later date.