A Tax on Enterprise

Press, Volume LXXIV, Issue 22510, 19 September 1938, Page 8

A Tax on Enterprise

The Government will be lacking both in wisdom and in political acuteness if it, ignores the protest made - by.,the shareholders of the Kaiapoi Woollen’ Manufacturing Company at their annual’ meeting against the proposal to extend the social security tax of Is in the £ to the profits of limited liability, companies. For this is not the ‘ protest "of a small group of-privileged piersons. Sfost of .the capital, of the .company is - owned,. in- small parcels r (the average- holding is worth about £150) and therefore represents thrift rather than wealth.' - Moreover, both in ■the distribution' of its share capital and in the difficulties-^which.’ it now‘faces as a result of rising taxation and rising overhead costs, the company, i$ .typical of many New Zealand companies and. the grievances of its shareholders are tHegrievances of many thousands of small : investors. Last year, the company paid a dividend ;of 4 per . cent, on its/Ordinary; shares; if it makes the. same profit next yearAand has to pdy the social security taxjrfts dividend will be reduced to (3 perAcent.—-the rate now. payable on savings Hank'deposits. What small investor ; will , risk. his „money in ah' industrial concern for' a return of 3 per cent, when he can obtain the same return without-risk' from a‘ savings, bank and a 'substantially greater return from ■government - 'and*■local;:body securities? . The effect of the proposed tax bri the Kaiapoi Woollen Manufacturing Company, shows it in its true light' as a' discriminatory and, harmful levy on one form" of investment. Its effect must be to " divert -the flow of small savings.from productive investment in industry to sterile investment, in bank deposits and government securi- • ties. : Almost allrnembers of the Government, worried probably by the effects of over-import-ing .bri London funds, have lately begun to em- ‘ phasise Heavily r the < need for encouraging the expansion secondary production in New Zealand, v Those who direct secondary industries . and , those who provide the capital, are pardonably weary of a Government which so persistently .proclaims its, solicitude for iridus-, tries the expansion of which it is preventing' by its policy of high taxation and high costs.