Railway Department Pays No Taxes

Chronicle (Levin), 13 December 1949, Page 6

Railway Department Pays No Taxes

/ * AUCKLAND/' Dec. 11. Whether a Government transport servich, by reason of its not having to pay income tax, shouid pass on the sav- , ings made because of this to the users, 1 o r. shouid be permitted * to keep the, savings as a.prolit in. excess of whai • a private operator cquld make in identical cireumstances, ' was one of the main points argued in an appeal before the Transport Charges Appeal Authority yesterday. The appeal was brought by the Railway Department against the decision of the Transport Charges Conu mittee in a case coneerning fares on the /oad services befween Auckland and Pukekohe and Auckland and Tuakau. Mr Meredith said that the charges committee had' agreed t-hat fares shouid be increased, but had fixed a net in••oine and directed appeila'nts to pre pare a new fare schedule to yield that income. He disagreed with the ainount of increase allowed and disputed the methods used by tlie committee to arrive at ; its figure for net income, cspeeially in regard to taxation, de preciatioh and the refusal to allow an amount of £5000, paid as goodwill to the previous operator, to be taken into .account. „• The committee 's attitude, said Mr Meredith, was that the railway road services shouid not make a larger ret.urn thayi an ordinary operator wouhl do aften he had deducted taxation. "Our - submission is that the equivalent taxation shouid not have been taken off at all," he said, "-and that, in any case, the amount taken was too large. The Railway Departnient shouid be treated as an ordinarv operator." If this were not done, said Mr Mer*di^h, the Consolidated Fund was deprived oL.t'he.monev to which it was en titTed." This money wonld go baek into 'the/ Consolidated Fund whether the department paid taxation or not. Tln dapital to ruri the service came oul of that fund, and it was entitled to a reasonable return on capital. Thc figure termed goodwill was actuallv a suni paid for administration expenses. Basis of Depreciation A . submission that the decision of the committee was fair and reas^mable and shouid stand was made by Mr Huband. If a Government department were not required to pay income tax it shouid be eontent, he said, as long as its service paid reasonable interest on the capital usefully emploved. Anv savings through not paying taxation shouid be passed to the users. It miglil be argued in some cases that this wonld cre.atey unfair competition through undercutting private operaters, but in this particular case there were no private operators in the area. Mr Huband contended that the de-' pakment had not proved that its basi-, of assessing deprecation was rig'ht and propef/and argued that the £5000 paiil in goodwill was not capital usefully em ployed, especiallv as the service' pur chased had been losing money when taken over. Mr Inder supported Mr Huban's contentions and said that the Railway Department had no riglit to allow depreciation at a fictitiously • high ratc since, as a Government department, it had no need to build up large reserves. The committee 's findings, he said, shouid stand. Decision was reserved.