THE NEW TAXATION BILL

Dominion, Volume 9, Issue 2816, 6 July 1916, Page 6

THE NEW TAXATION BILL

Sir,—Having failed to elicit an answer to the riddle, "Why provide for exemption of mortgages from ordinary land- tax and restore the mortgage tax?" and having noticed a sort of explanation of the issues involved appearing in the columns of one of your contemporaries, where it was stated that tho fanners in their income returns had been refused exemption of interest upon capital from profit, upon tho grounds that they were already exempted, from mortgages in thoir land tax returns, and therefore if exemption of those mortgages wore cancelled the farmers would bo unfairly treated, I feel called upon to show that such, an explanation as a reason for restoring the mortgage tax would only confirm the impression. that tho Minister of Finance "has become hopelessly mixed through confusing ordinary land tax with income tax, which is to be a kind of surtax. Does not interest earned upon capital invested, either upon mortgage or'otherwise (including interest exempted from profits of business and not shown in returns of profit), come under the ban of the 5 per cent, income tax upon income in excess of =6300 ? This income tax is to affect merchants and other businesses in just the same ,iray. Any exemption of profit in whatever stylo of business must be ascertained in order to arrive at the income in excess of ,£3OO. It appears that in the past farmers and other land-owners, who have borrowed upon mortgage on their land, have been enjoying a special exemption called exemption of mortgages from ordinary land tax, while those who did not borrow were given no exemption. It acted as a very l decidod incentive to borrow as much as possible upon the land, and invest their own money elsewhere. The farmer who could raise .£20,000 on his farm would receive a rebate from revenue of the State, of Id. in the .£ on land tax for ,£20,000, a. rebate of per annum. It is quite clear that both tho exemption of mortgages from land tax and the mortgage tax should not be provided for iu Sir Joseph Ward's new Bill, and that the supposed flaw in the Act is only a mare's nost after all.'

There is another matter affecting income tax that requires immediate adjustment. In the past we liave such an absurd anomaly occur as that of bankruptcy because of income tax. In the existing form, supplied by the Commissioner of Taxes for return' of income, there seems to be. no provision made for lossos that might occur in any of the operations a taxpayer may be identified with, that are outside of his principal business, for, oil the front page is provision only for profits. To provide so that cf'UOO per annum were set aside to enable liiin to provide for himself and family before becoming liable for income tax, it would bo necessary to allow him to show his actual position. He majbo earning .£7OO a 'year, out of which ho pays .£SOO per annum in rates, land tax, interest, and other losses, and have to support a family and pay income tax at the same time. I would "suggest that the front page of the income tax form be rearranged so that profits and losses of all operations may be estimated so as to arrive at a taxpayer's true position. Tho provision for taxation of war profits is likely to lead to much hardship and unfair treatment amongst those who would become liable under that head. So far as I can see, the only feasible method of taxation of war profits would l>e upon a basis of prices, otherwise a fanner or merchant who extended his business by increasing his capital might be chargcd 45 per cent* wax tax oil his' ■ profit, while ho actually sold his goods at a lower price than he did with lesr capital, prior to the war. A farmer in the same way would be treated" if he brought in more area of his unimproved farm, and the man who commenced farming after the war, how would be get on? Would ho be exempt, or would fn? tax be attached to the farm, and not to the owner? Then what, iii the event of sales of farms, would tho position be? It is refreshing to find the Tinanco Minister prepared in his Bill to cut out, instead of patch up. as has been tho policy of tho past. .Hating and taxing upon the unimproved value wants cutting out. If taxation were computed upon the value in earning capacity instead of upon tire unimproved value, there would be. no necessity for the pruning and patching up that has boon resorted to in the past, nud is still required under the existing system. Thanking you for space,—l am' etc..

0. V. BEEVES. Wellington, .Inly 2, ll'IC.