TAXING-INCOMES

Dominion, Volume 8, Issue 2560, 7 September 1915, Page 8

TAXING-INCOMES

HOW COMPANIES ARE AFFECTED Mr. D, J. Nathan- wroto to tho Wellington Chamber of Commerce, suggesting that the qnostion of incomo taxation was ■ out 'that should bo brought undol- the notice of tho. council, and enclosing, a.; leading article, from nI J Dominion, entitled ."Penalising Small Incomes." Oil this subject the secretary, Mr.. H. D. Victory' presented an interesting memorandum to tho council. It read as follows: — "Tho basis of tho imposition of income tax in New Zealand is that the profits of each year are taxed. Sections 78 to 8-1 of the Land and Income Assessment Act, 1908 (with later amendments) set out w'hiit incomo shall bo taxed. | Tho tax provides that tl"> income made by a company shall bo subject to incomo tax, and tho tax :s paid by the company. In late years incomo tax has beon assessed on a graduated scale; larger incomes paying proportionately moro than smaller incomes. At present .the graduated scalo 'roaches Is. 4d. in- tho £; under tho prosont Hudgct it is proposed that this Ik> increased to 25., with the imposition of a- supur tax of 33 .1-3 per cent., tho highest tax being 2s. 8(1. in tho £. Wlulo this is an easy method of collccting taxation, it is evident, when a company's capital is considered as being tho combined capitals of a number of persons; an in-; justice is apparent. Many induttrios can only bo carried on' because of cooperation'in tho omployment of capital. Tho consequence is, therefore, th«»h a small shareholder with, say, £ shares, in a company of, say, £200,000, making a profit of ,£20,000 a year, will pay. incomo tax (through the company) at the rato/of 2s. Bd. in the £. _lt. may ,be tbat..the company is. paving only 6 per cent,, and-that tho shareholder's dividend .from, the company would be, say,. £15 (plus an interest in undivided profits). If this shareholder had gone into business with his £250, and made .10 per cent, profit, he would pay no tax at all, unless, of course, his incomo were over £300, and in any case lie is not likely to pay anything like, the same rate as tlie largo company, of •/which ho is a shareholder. It has been suggested from time to, time that tho method of -assessing incomo in New Zealand .'should bo' altered, and, that the taxation should be imposed; on each shareholder according to his interest'in the profits-of the company, or on the dividend tliat he "receives from the company. -If the method were altered, no doubt tho rate of income tax would require to be increased. It is also evident that under'the suggested alteration, income 1 tax would not be so simply collected ; j the returns would bo moro complex.. .' Tho loading article in. The Dominion of September 2 sets, out the ■unfairness ,of. tlie present, system; and tlio effect it has in discouraging investments.in co-operative concerns." , The president i said, that they iwere so few at • the meeting that lie did not know yiiether -what. they, said would carry -inucbS weight;'- "After- -all," lie said, "it. is;,'a ; >var tax,' and .it was not a time to-.'alter 1 principles in taxation. I don't think anyone snould make complaint at the present ;time about taxation. • -Tboy _snould consider it an honour and' a privilege, not an occasion for grumbling from one end of tho land to the other. A,; 1 '• 'On the motion of Mr. F. AV. Manton it was. resolved' that the present was not ail opportune time to interfere with war taxation.. , ". ;. •