PARLIAMENT

Dominion, Volume 9, Issue 2814, 4 July 1916, Page 7

PARLIAMENT

LAND AND INCOME TAX

MORTGAGE TAX ABOLISHED

MORTGAGES EXEMPTED

The House of Representatives met jit 1 f.30 p.m. ' Mr. T.' M. WILFORI) (Hutt) gave notion to ask the Defence Minister .whether in futnro he will; see that .returned 'non-commissicmed officers, who bav6; no employment, shall be.employed in the different, camps in the districts' whero they enlisted, as drill instructors, if they flro fit for suoli service. LAND AND INCOME TAX. SOME IMPORTANT AMENDMENTS. - Amendments .to the Zend and Income Tax : Bill were introduced by Governor's Message. • SIB JOSEPH WARD (Minister of Finance) made an explanation of the effect of .the amendments. The 'honourable member for Eastern Maori, he said, had raisrf. a question about the definition of halfcastes. The'honourable member had expressed tho opinion' that the definition) in ■. the Bill was -likely to . put Native lands in a 'different position.,make tho' position perfectly clear, he proposed to ask the House in Committee, on. the Bill;to have the definition of- half-casto . . onij-.ted, and' the definition, of Native amended,: in order that a half-caste should iiot be 'deemed for the of. tho .Act. to be a' Native.' .These alterations .■would keep the law .exactly as"it.'Sras. The other important joint- raised in! the' cohTse of the. discussion, was relative.'to tho deduction' of' the' amount of.. mortgages from the assessment-for land , tax, a provision which wae omitted when :the Bill was before Committee. He - pro- . posed to ask the (Xmmittee'to restore the privilege now possessed by land- tax payers of deducting ' from 'unimproved yalue . the'amount , outstanding itf respect of mortgages. He .also to ask the House, to provide for the- abolition of the mortgage" tax, si provision already ia the Bill. This concession 'would entail a loss of revenuo of from to J3170,000, but. after going very, thoroughly into tlie matter he had decided that he could make up. for 'this by saving in expenditure. In this way, a great 1 benefit would. be given, to . the people .of this country, and people, who . had mortgages.; running over a-period of years . would'be relieved from, hardship'/ ' General Approval., .Mr. G. WlTTY"{Riccartonj congratulated the Minister of Finance upon the abolition of M:he mortgage tax as originally proposed.' ' Mr. T. K. .SIDET (Dunedin South) • said the, amended proposal Was illogical. . . The exemption of mortgages "from , nnim- /' proved value unreasonable because 'mortgages were secured'very largelv-on 'improvements.' To remove the mortgage t'ax and to allow exemption from • land tax of the amount of the mortgage was an inducement to'evasiori, and he'wanted to know how the Government was going . -.; to get over this. .

Mr. A.' H. HINDMARSH (Wellington South) said that to eav that the original proposal would have_ been the ruination of farmers was ridiculous. A proper system of land taxation would preyent •land speculation. He wanted, to know why the Government did not gather in 'some of the unearned increment when properties weTe sold. Mr. R. irCALLTBf (Wairau) said he "was grateful • for - the amendments • which 1 satisfied-the farmers and did justice to 1 the email mortgagors. The Minister,- how- . ever, \vas faced with a loss in revenue S and in order to compensate for that ho asked the Minister if "he should not differentiate between earned and-^unearned-increment in reference to taxation. 'A'eliding scale might .well bo nflopted so that as tho . income Trent up the exemption should go. He suggested • -that a man with -£3(10 income be allowed lull, exemption,- a 'maif'lHth'.£4so: 425 exemption; .£SOO, .£SO exemption, and. s PJJ nt V "a man with' an inoome of should allowed no exemption llVf n/+i ' this would save °ltlie expected loss.' Mr. W. H. FIELD said that the fanners £ 0 T «7 ea Tily taxed at present, and +Lr>!) * <llllte . vinous to them if *=J*?,, p , ay j l P Pon y in the pound, ns ordinary land fax, without. being permitted to deduct tho amounts of their mortages. Mr. Hindmarsh, he said,' had described this statement as an exaggeration, tut it was a fact that the farmer "*vas m a most unfavourable position m compared with the rest of the community. • at the present: legislation applied equally to all classes, but the farmer had received such a shock from last, year s legislation that he felt that he had had about enough. It seemed to be forgotten that whilst tho farmers may have made profits during the war they had had to pay their share of the increase in the cost of commodities, which they, in common with tho rest of tho community, consumed. They also had to pay enormously increased prices for fencing wire' and.a hundred other things that those who were not farmers did not have to buy at all. It must also bo Tememtered that the increased prices that the farmers wore now mtting for their produce would cease ■nt the end of the war, when probably flicy would fall to a point lower than the pre-war prices. ;YV NQSWRTHT -(Ashburton) commended the Minister upon carrying out the proposal in the Budget .to abolish the mortgage tax. He would be' prepared to assist the Government to env extent it might think fit in providing penalties to prevent bogus mortgages. - D - BUICK (Palmerston) considered :irproposai a very fair one. Mr. W. A. VEITCH (Wangauui) said inrn?,L co , rrect l to , say. as some honourable members had said, that a farmer was taxed on his equity in land. Ho was taxed on the unimproved value, canitoiV? ° f th ° mort B a B<!, arid the capital value was very much above the f^i! np #° v 1? ? u ?' the difference being f- of all taxation. However, ho be- • P^P 052 . 1 k> take taxation th ,® derived from a mort- « « rather than by a flat rate tax on the principal of the mortgage. He would suggest that the exemption for unearned incomes should te reduced to JilfiO a year. , Farmers' Profits. Mr. E. NEWMAN (Rangitikei) said ho was very pleased that' tho Government M b Ss n , a y e to-abolish tho mortgago ta.\. He did not agree with the «imnonly expressed opinion ■ that farmers! were making hugo war profits. The only class of farmers so fortunate were largo pastoralists. Last year agriculturists had done very well, but this year they had lost all tho profits made year. Ho believed tho time "was approaching when iarmers in the House, and representative farmers, would have to got together to resist tho imposition of lurther taxation bin dens until tho rest of tho communitv paid a fair share. He had never been in favour of setting.town, against country, n ' as Bet 80 DOW » but ho feared that a determined «IForfc was to lie,made to put upon farmers far irioro than their snare of the cost of tlio war. The farmer did notLOhject to pay a fair share. Mr, J. CEAIGIE (Timaru) said that ho hoped tho Government would lie'cautious about trying to tax unearned incomes specially.' It was extremoly hard to draw the line in many cases. Often the so-called unearned income was the incomo from the result of a life of hard rk.. He feared also that the exemption °J mortgages from taxation would help the land-jobber, who was the cursa of the North Island. Mr. C. A. WILKINSON (Egmont) said that instead of the Government having been kind to the farmer they had been over-kind to the capitalist. The abolition of the mortgage tax would not necessarily Tcduce tho rate of interest'andeo help the farmer, but it would inevitably Relieve tho money-lending capitalist from taxation. Mr. T. M. WILFORD (Hutt) maintained that the business man in the city paid more taxation than tho man on the land in the country making the same amount of money, annually. Taxing of Thrift. The Bight Hon. W. F. IIASSEY (Prime Minister) said he wished to congratulate the Finance Minister heartily and sincerely on his proposal to abolish the

mortgage tax. He answored in so.me' detail the argument from figures to show that tho city man paid inoro taxes than the farmer, ltegarding the discrimination between earned and unearned income, which some members had proposed, ho said that such a distinction might operate most unfairly in a neiv country like ouis, although fairly enough in old countries.. A groat injustice- might bo done by submitting ' to special taxation those incomes of retired men who lived in their declining years on tho fruits of a life of hard work. Very 'few people iu this country lived on incomes derived from inheritances.

Mr. L. M. ISITT (Christehurch North) said that he thought "tho whole thing" (meaning the debate) was no credit to the House. While honourable members wero supposed to sot an eyitmple to the country in sacrifice and patriotism, they were "whining and-whining" about an unduo burden ot' taxation. Ho believed tlio tanners ware thn chief offenders in this; It",was fcis intense conviction that 110 niembisr'could claim to be a patriot who was not willing to livo .as plainly as possible, and to give everything he earned above his bare living exponscs to help the country during tho war period. Minister in Reply, ■ SIR JOSEPH WARD said lie agreed Willi eome members in their desirn tu have provision made to secure to mortgagors the. benefit of the abolition of the mortgage tax. This; however, would be impracticable at present. The real ejfect of the abolition would not be apparent for ■ a year or so. Then ho thought, it would operate to keep" down the prico 'of money, and this whs a most important tiling to tlie countryl Ho was of opinion that if evasion was practised or attempted by '.means of bogua mortgages steps .could be taken to prevent it by tho fixing-.'"of "heavy penalties for this kind of lraud. : Iu reply to the modbor for Tima.ru, lie said that the present Bill would not help the land speculator, but Tather' tho reverse. _ He warned the House also that.any differentiation between incomes, earned and unearned •would be extremely difficult and scarce ly worth while. ' A short while ago he had worked out what the effect would be/of-.reducing the income tax exemption to i£lso : a year. This would bring into existence'2oo,ooo extra income taxpayers. And the extra tax would be only w£97,000! This .would not beenough to pay cost of collection. -' He quoted these figures to show that it would be absurd in practice to'differentiate between earned and unearned incomes. .It might be that there were rich people in New Zealand, but' th«y were few, and the idle rich wero very few. .And in any case it .must-.not'lie.supposed that these people escaped taxation, _It might . be that after the war the incidence of taxation would havo to be reviewed. When this was done some of tho points Taised would have to be put through the crucible and reconsidered in every possible way. -But this Bill did not suggest any change in tho incidence of taxation, except in the matter of the abolition of tho mortgage tax. For the present the Government, must have tlie' amount of money named in the Budget for war purposes, and this was the whole object of the Bill., It was impossible to say' Whether wo would have a surplus this year, but the figures allowed for a marMii of safety, such as ought to bo allowed. If he had not been of opinion that ..the concession of- .£174,000 made by the •iijoHtioii of mortgago tax could be made up otherwise, the concesison could not have, been made. '

The amendments were referred to the Committee on the Bill and agreed to ■without discussion. The Bill was reported with amendments. ! THE FINANCE BILL. The Finance Bill was introduced by Governor's Message and read a first time. ■ The House rose at 11 p.m;