The Dominion MONDAY, JUNE 19, 1916. CONSCRIPTION OF WEALTH

Dominion, Volume 9, Issue 2800, 19 June 1916, Page 4

The Dominion MONDAY, JUNE 19, 1916. CONSCRIPTION OF WEALTH

A close examination of tho Budget proposals should gladden the hearts of that section' of the community which calls so stridently for what it terms tho conscription of wealth. Tho National Government proposes not only to reach out and grasp war profits a.nd a larger proportion than ever of' ordinary incomes, but it also intends to reduce house rente to the pre-war standard, and to control and restrict the private financial business of the country in a most sweeping fashion. All these aro acts of compulsion by the fatato directed against tho income or tho wealth of the individual— mainly tho man of means. So far as war profits are concerned, tho only possible objection that can bo raised is the method of assessment proposed. As explained by the Finance Minister in the Biidget, war profits aro to bo ascertained by taking tho average profits realised for each of the three years previous to the war and comparing this average with the returns made since tho war commenced. The excess, if any, is to bo treated as! war profits, and the State is to take 45 per cent, thereof. Tho chief recommendation this method has is its simplicity. It allows .nothing, : however, for the. fact that many people have already given away a portion, and in somo cases all, of their war profits to patriotic funds; and it does not provide in any way for cases in which businesses have been conducted at a loss or on a baro margin of profit while passing through a legitimate process of development. A new company or a new business firm ordinarily expects to show littlo or no profit during at least the first year or two of its existence, and under the proposed method of assessing war profits any gradual and normal increase since the war would, in such case, be treated as war profits, and excessively taxed, even though it might not represent more than ia modest interest on tho capital invested. We merely mention these possibilities of injustice being- done under the proposod methods of assessment of war profits in the hope that some means may bo devised of preventing what all must regard as a just.principle being made to operate unjustly in individual cases. With the general principle of the taxation of war profits we are, of course, in entire sympathy.

The Government's proposals to placo restrictions on tho business finance of tho country will call for careful consideration. Two of them arc very sweeping, and may prove very far-reaching—perhaps unexpectedly so—in their results. They are, first of all, the proposal to restrict the rate of interest that may be paid on deposits, and, secondly, the decision to prevent private individuals' and banking or financial institutions in the Dominion sending'their money abroad for investment. The two things really hang together. If . those with surplus money available • are not permitted to receive the open market rate of interest on their deposits within the Dominion, naturally they would send some part of tho money at least to better fields for investment, —or the financial institutions would 'do so—unless prevented by an amendment of the existing law such as is now proposed. The purposo of tho (government, as explained by the Minister, '. is to prevent a general increase in the rate of interest, and at the same, time to ■compel the investment of local money within the Dominion. Both objects are, in existing circumstances, most laudable, but artificial restrictions of this nature do not always work out as expected. Much, of course,' will depend on the rate of interest which the Government considers reasonable, and also on tho nature of the restrictions imposed on financial institutions, business houses, and others having financial interests abroad. The task which the Government has set itself of preventing investments abroad is not so simple as it may at first appear. It is true that it is facilitated for the time being by tho heavy paymonts which _aro_ being made within the Dominion instead of in London for our meat and cheese, but unless very drastic provision indeed is made, it will be very difficult to prevent a gradual dwindling of the funds now held in I New Zealand by the various finan- ! rial institutions .if they wish to transfer them elsewhere. We should imagine that before deciding on the steps now proposed, the Government would tako tho precaution to obtain the views and enlist tho sympathy and support of tho banks t and the larger financial institutions most concerned. Unless this has been done, or some satisfactory understanding is arrived at, this interference with the money market may prove far from satisfactory in its results. It is a form of- "conscription of wealth," if wo may use

a popular phrase, which, if pressed too far, may react to the detriment of tho community it, is designed to benefit.