LAND AND INCOME TAX

Dominion, Volume 9, Issue 2810, 30 June 1916, Page 7

LAND AND INCOME TAX

BILL IN COMMITTEE THE MORTGAGE TAX STATEMENT BY SIR JOSEPH WARD The Land and Income Tax Bill was committed. Mr. Speaker, at tho request of, Sir. Joseph Ward, directed that tho proceedings of the committee on tho Bill be reported-in full in Hansard. SIR JOSEPH WARD (in charge of the Bill) made. an important statement regarding the mortgage tax question. He said that a point had been raised on the second reading of. the. Bill in rcgard to the abolition of the mortgage tax, which was proposed in the Bill. In substitution for the repeal, of the mortg-ige tax, it was provided that, the income derived from mortgage was to be assessed for income taxi - In giving effect to tho repeal of the mortgage tax, it was quite e> iijent that the Bill went farthor than v. as contemplated. He had looked into 'he matter very fully, and had taken the advice of tho law officers of,the Crown, and to him it seemed almost impossible to give effect to the repeal of the mortgage tax so as to relieve mortgages from taxation —a concession which had been arited for for very many years—and to'allow tho amount of tho mortgage to be deducted from the assessment, tor ordinary land taxj in the case of those not affected by the income tax imposed upon farmers last year.' It was quite clear that if tho right of deduction of mortgages for the assessment of land tax was to be continued in tho legislation, it would le impossible to have the income lax applicable to portion of those who, until tbo alteration was made in the income tax last year, were paying their mortgage tax. To muke the deduction now and to repeal tho mortgage tax would mako it possible for tho Taxing Department to bo deprived of the. necessary amount of revenue required. In the Bill as it stood tho right of deduction of tho mortgage in tho assessment of land tax v.as not given. "It would bo impossible lo' allow the deduction and abolish the mortgage tax,' because this would entail a considerable loss- of .revenue.

' Mr. Pearce: Why? Sir Joseph Ward: Because you would have bogus mortgages all over the country, on lands not now mortgiged, and the Taxing Department would not get the requisite tax. Mr. Pearce: It would get the income tax on the bogus mortgages. . Sir Joseph Ward: Yes, but what about those who don't pay income tax? Ho said that his. investigation went to-Show that it" would not ho possible to provide for .abolition of the mortgage tax unless the Tight of deduction of tho amount of the mortgage from the..land, tax aisessment wero surrendered. To do otherwise would mean a double concession, and this was •• not intended by the Government or by the House. Under "tie-circumstances he proposed to ask the .House, to provide for the deduction of tho mortgago.from land tax assessment, but there must be a clear understanding that If necessary the mortgage tax would havo to bo -reinstated. On this point he would mako no definite statement because he was having an investigation mado into tlio figures. He would have liked'to seo the mortgago tax repealed, but ho thought it would be impossible to do so unless the Houso would provide the revenue in another way.

Mr. Payne: Why not put it on to income tax?

Sir Joseph Ward: Thoro are many ways of getting tho Tevenue. We might put a tax on tea, for instance.

An lion, member: Tax picture shows. Mr,/Payne: The income tax is fair It doesn't affect the poor people.

Sir Joseph Ward: As a matter of fact I thought-wo were i putting the income tax up pretty high already. He went on to quoto from a statement (just handed to him)- prepared by the Department. To allow tho deduction of •mortgages for land tax assessment and to abolish tho mortgage tax would mean a loss of the mortgage- tax of J»H,000. As against this thero would be a gain of incomo tax by income from mortgages of .£170,000, and there would thus be a not loss of .£171,000. Ho would necessarily requiro to reviow tho position very carefully, and he might yet have to ask tho House to reinstate "the mortgage tax. The Question Discussed. Mr. W. T. Jennings inquired if relief from taxation upon the full incomo could bo given to those men who had given generous donations to patriotic funds. Mr. G. V. Pearco said that the chango oi the tax from mortgages to incomo from mortgages left unchanged tho old land tax of one penny in the £ on tho farmer. Ho doubted whether tho chango would yield as much revonuo as did tho old method. Mr. Massey: Just about half. Titr. Pearce: I very much doubt that. I've heard the figures, but I doubt tho way they havo been arrived at. no went on to cito cases to prove that on tho higher amounts the new income tax would causo a man to pay 18s. 4d. por XIOO, whereas undor the old flat rate mortgago tax ho paid only Bs. id. This

wonltt "no heavy on the higher gradations. i\Tr. Ttassey: This only for one yoar. Air. rearoe admitted that thero would bo losses on tho iower scales, but ho doubted whether tho loss would bo nR much as wns claimed. Tho figures should 1» worked out moro clearly. Tho exemptions had to be considered. Mr. T). A. Wilkinson said that if the income tax on mortgage monoy would really bo moro to tho individual as Air, Pearce contended, then it. would raise tho prico. of monoy and iulliot a heavier burden on the borrower. He wns glad to learn that it was not proposed to aliolish the mortgago tax Mr. Hindniarsh hold that tho land tax was tho only tax which was not burdensome, because it becamo a permanent rent and fell upon nobody. Members: Oh! Mr. Hindmarsh proceeded to quoto a Harvard University professor in support of his contention. When land- was purchased, ho 6aid, the tax was allowed for. Mr. G. J. Anderson contended that tho Government had mixed up two taxes in imposing tho mortgago tax, which was really a land tax. Mr. Andorson said that if thero must be a land tax, there ought to be a mortgago tax also, for the mortgagee was often tho real owner of the land. If thoro was to bo a land tax. and also an income tax both principles should bo kept and adhered to thoroughly. It was not practicable to mix tho two 6cliemes. Mr. J. Anstcy expressed tho samo opinion. Mr. 8.. M'Callum, opposing tho mort gage tax, said that a mortgago was usually given largely on the security of improvements, and was not, therefore, a substitution for the land tax. Sir Joseph Ward, explaining theoffect of his.amended proposals for.the benefit of those members who' had not been in the Houso when bo mado his first statement,'said that ho did not think •it would be possiblo to avoid the restoration of the mortgago tax. This same question vras discussed at great length by members, many of whom imported into tho discussion thoir own particular ideas about theories of taxation. Progress is Made, Tho short title was agreed to at 10.10 p.m. . Sir Joseph Ward explained that for various reasons he wished to hold over certain of the new olauses in the Bill. This meant that praotically all the Bill submitted to the House was tho consolidating portions. An amendment was moved -by tho Minister to exempt from inoonio # tax companies engaged in soheolite mining. Thero was no very speoial objection to tho amendment, but the clause was not favoured by members, bevcral of whom protested against tho_ exemption of rich profit-earning companies. Mr. Payne called a division on the amendment, which was carried by 40 votes to 6. It was no longer possible to delcto the clause, but Mr. Payne moved an amendment to mutilate it and make 1 it nonsensb. The amendment was defeated by 35 votes to 10. Opposition was offered also _to the clause providing for tho exemption from income tax of snipping companies' prolits earned for trade outside of Now Zealand. The clause provides that profit on New Zealand trade shall bo assessable for income tax. Mr. Payne and others objected to anything that even looked liko a concession to the Union Company, but the objection was not pressed to a division. Progress was reported when all the clauses except those held over had been passed. The House rose at 0.15 a.m.