DEATH DUTIES ACT

Dominion, Volume 3, Issue 887, 5 August 1910, Page 6

DEATH DUTIES ACT

OPERATION ON BIG ESTATES. IS THE MEASURE OPPRESSIVE? DR. FINDLAY REPLIES TO CRITICISM. Regarding recent criticism on the Death Duties Act, the Hou. Dr. Findlay, upon being interviewed by a Dominion reporter said:— ■ "I notice, that most of the criticism has proceeded either upon a wrong interpretation of tho Act or-a plain oversight of what I said. Mr. Beauchamp stated in Auckland that under the new Act an estato of £40,000, left to relatives paid 20 per cent, to the Crown in estate ,and succession duty, and he also stated that as sons' probably helped to contribute to the wealth their parent had to leave 'it seemed to him a little hard ..that sons should be taxed so heavily upon their own enterprise, industry, and ability.' He then proceeded to add that few people would object to .10 per cent, in the shape of estate and succession duties. What Widows and Children Pay; "It was to these statements and these figures only that 1 was replying m the public reference 1 made to the Death Duties Act—l then pointed out "(a) That if an estate of forty thousand were left to such relatives as suggested —that is, for example, to widow and children—to children: or grandchildrentile total amount of duty payable to the Crown did not amount to even ten pur cent., but only to eight per cent. "(b) As an answer to the suggestion that sons might have helped the parent to earn his wealth, I pointed out that each son (indeed also the wife and each child) was entirely exempt from succession duty up to £20,(100 of the share taken by each,, but that if the sum so left for any ono of theso exceeded .£20,000 theu 2 per cent, was charged on the sum so loft. "(c) That if £40,000 were left to" strangers (reference to the newspaper report will clearly show that I used the plural —strangers), then the total duty payable was 18 per cent. "I need scarcely refer to the well-known elementary rule of construction that where money is left to two or moro persons without defining their shares they take equally. 1 now desire to say that each-of these statements is beyond all question accurate. With respect to statement (c), I have been told that it is wrong, because if the whole .£40,000 were left to one ( stranger the duty would be 23 per cent. But I was expressly assuming thut the estate went to.at, least twostrangers, and on that assumption' the rate 1 mentioned (18 per cent.) is strictly accurate. So much then for what I said in reply to Sir. Beauchamp. Only Extremo Cases Cited. "My attention has since been called to an interview which Mr., Cotter, a prominent lawyer in Auckland, .gave a.few days ago to the press. At thia interview Mr. Cotter made a general assault upon the new Death Duties Act, and contrasted it unfavourably with the old Act. Most of Mr. 1 Cotter's criticism, however, is based upon extremo cases, seldom or never, as I will show, found in practice, and wholly misleading as to the general effect and operation of the statute. For example, Mr. Cotter, in order to show that the duty payable under the Act might bs as high as 35 per cent., has to involso an illustration absolutely unparalleled in our history—namely, that of .£150,000 being left to a-stranger. Similar results are drawn from similar assumptions. Lot me meet this branch' of Mr. Cotter's criticism, that' the rates fixed by the Act aro excessive and impose harsh and unjust burdens, by, what I think is a very fair test, an appeal to experience. .We generally date the commencement of our death duties from the Act which came into force •on January 1, 1867, over 43 years ago'. I have asked the. Stomp Office : to inform me how many deceased estates, out of all the thousands that havo'been,' left during the Inst '13 years would hav'o paid to the Crown in total of estates and succession duty more than 20 per cent, hod this new Act been in force over since 1867, and I am informed that the number of these estates would have been three, and that none of these three would (under the new scale)'have paid more than 25 per cent. / " * Heavier Rates May be Escaped. "This it will be remembered is taking the very long period of 43 years, during which testators would leave very large, sums to .one individual without exposing his estate to the cumulative rates provided, for in the. new Act. With, the provisions of the new' Act before him—or rather before bis lawyer—we may be fairly sure that the testator now will eo distribute his estato us to escape the heavier rates of the present statute. These facts seem to me to make the imaginary cases taken by Mr. Cotter rather futile. Now let me contrast the old and new Acts for' a moment. (1) The new Act lightens the burdens on the small estates; over 70 per cent. of. all the people in Now Zealand who die possessine propertv leave less • nan £1000. . Under the old Act, if a man left an estate of .£SOO to his children it paid duty at the rate of 1J per cont. on .£4OO. Under the new Act the estate is entirely free from duty. If an estate going to children amounted to £1000, it paid under the old Act £11 ss. Under the new Act it pays £10. Under the old Act, if an estate of £10,000 were left to children it paid duty at the rate of 3j per cent.' Under the new Act the dutv is 5 per cent. Under the new Act if an estate'of £5000 goes to a widow it pays no duty whatever. If the 1 estate amounts to £10,000, she is allowed an' exemption of £5000 (absolutely free of dutv), and is taxed on the remaining £5000 at 5 per cent. Under the old Act, if a widow were left any sum, say, £350,000 (I am quoting an actual case), the Crown, got no duty whatever. I submit that neither children, grandchildren, nor widows will,suffer any hardship whatever under tho new Act. To talk of it as penalising a widow who lias been left over £100,000, if the tax leaves her with only £84,000 or £86,000 to livo on, is'surely to betray a pretty strong prejudice. Typical Case of a Big Estate. "Another point," ' continued Dr. Findlay. "Practically tho very largest estates are- usually left to widow and children, and not to anvorie person. A fair test and example of the burden the now Act throws upon a large estate is'what would be paid by: an estate of £40,000, of which £20,000 was left.jto the widow aiid the remaining £10,000 .to each of two sons or daughters. I have already shown that the "whole duty would amount to 8 per cent, and no more; and even if the ostate amounted to £100,000. and £20,000 went to the widow, and £20,000 to each of four children, the total duty would be 12 per cent, and no more.' Can these rates of duty bo called harsh and oppressive? The purposes of the new Act were (a) to remove tho old burden on tho smaller estates; (b) to induce' greater subdivision of wealth; and (c) to obtain reyenuo for the necessary purposes of government. Death duties, it will be remembered, leave the owner's property untouched and untaxed throughout his life, and only on his death, when it is passing to ha-nds which in the . vast : majority of oases did nothing to earn it, a portion of the wealth eo passing is taken as revenue. Thus tho tax is admittedly a tax upon wealth, but it is more than tbis. In final.analysis itwill appear that in roost cases the State is taking, in the shape of death duties, only a portion of the wealth which it has itself created in private hands. In this country most of the largo deceased estates aro landed estates, estates which have grown rich largely owing to that unearned increment in value which has accompanied the progress and development of New Zealand as a whole. If the facts are cttTofully and impartially investigated, they will prove that the amount which tho State will toko under the now -Death Duties Act from many of tho, largest deceased estates is only a portion of tho increased value which the people as a whole have added to these estates. Who Should be Taxed?. "The people /of this country," added Dr. Findlay, .."require money for the purposo of education, for the purpose of old ago pensions, for national annul Ucfor assistance in maternity; cases, and for /

all the other humane and proper purposes by which we hope to elevate our people and improve their material condition. Whore is. this money to come from? Are we to tax through the Customs tie great masses 'of the community who are without wealth, or are we to make the wealthiest classes contribute a fairer shave out of their abundance, for the protection, and advantage' which the advance and development of this country has conferred upon them? I have saicl so much in view of the w-idespread newspaper criticism I havo. seen, but I do not intend to continue any further controversy on this topic." . '