PARLIAMENT

Dominion, Volume 9, Issue 2822, 13 July 1916, Page 6

PARLIAMENT

FINANCE BILL FINANCE MINISTER REPLIES TO CRITICISM AMENDMENTS PROMISED Tho Legislative Council mot at 2.30 p.m. yesterday. In tho unavoidable absence of the Speaker, tlio chair iv<is taken by tlio Hon. T. Thompson. LAND AND INCOME TAX BILL. The Land and Income Tax Bill was put throufjhits Committee stage, and read a third time and passed. LOCAL BILLS. Tthe following local Bills, which wore reported by tlie Local Bills Committee, without were put through all their remaining stages without alteration:—Wanganui Borough Council Street Access Empowering Amendment Bill, Auckland Harbour Board Empowering Bill, City of Nelson Loans Conversion and Empowering Amendment Bill. The Council rose at 2.55 p.m. THE HOUSE The House of Representatives met. at 2.30 p.m. Mr. K. M'Callum (Wairau) gave notice to introduce the Wairau Harbour Loan Enabling Bill. PUBLIC SERVICE COMMISSIONERS. Mr. R. Fletcher (Wellington Central) asked Sir Joseph Ward, m Ihe absence of the Primo Minister, when tho Public Service Commissioners' report would be brought down. Sir Joseph Ward replied that ho would make inquiries, and intimate the result to the House. Mr. Fletcher:. It was reported in tlie Press the other day that it was ready. Sir Joseph': Yes, it is in charge of the Minister of'lnternal Affairs, who is absent.

FINANCE BILL SECOND READING DEBATE AMENDMENTS PROMISED The adjourned .debate on tlie second reading of the Finance Bill was resumed. 51r. J. A. Young said that he thought that all persons with incomes under <£300 a year who had paid income tax on dividends should have tho sum so paid refunded. The special tax of fivo per cent, on all incomes whether great or small was'wrong in principle; it should he graduated. It had been suggested thai a tax should he placed on amusements, hut if this were done the question should "be approachcd in a careful way. Ho thought that the rich man should be given the banie consideration as the poorer mran on the small stages of his income, but that lie should pay more on the higher stages. High individual incomes with every increasing «£2OO or JjUOO should be regarded as increasingly luxurious. He thought thai in tho'cWe of persons receiving an income of over c£lo,ooo the excess should be taxed to such an extent that it would bo of so littlo use to him that ho would be inclined to distribute his estate or to give other people an opportunity of earning a. portion of . his income. In referring to the surplus war profits ihe said there was no provision for discriminating against what was actually war profits and what was tho ordinary profit that would have been earned if there had been no war. Ho drew attention to would prove a source of hardship in levying the excess profits tax. Ho instanced tho caso of a firm wliicli may have, placed a sum of say «E3OOO aside before its last balance -was laken, for tho of meeting bad debts as required. Such a firiy would now have to pay tho -15 per cent, tax on the 4:3000, although that sum might represent bad debts actually ascertained. vSir Joseph Ward: Supposing such a firm put aside .£IO,OOO to meet bad debts, where would wo be? Wo would get nothing.

Mr. Young: I do not think that the amount should be taxed if it vopreaented ascertained bad debts. In the case in question would have to pay the excess profit tax 011 its loss, in addition to tho ordinary income tax of 2s. Bd. in the £. It really meant that the firm would make a loss of .£4,150, of which ,£1350 would go to tho Government. The allowance; of 6 per cent, on income from the investment of capital ivas, ho urged, not- sufficient in some coses. Provision should be made for the appointment of a Board of Referees as was done in Great Britain, whero the standard had been fixed from 6 to S per cent. Ho quoted from a letter he had received, and the writer of which stated that during tho past three years it had been difficult to borrow money under 7 per ccnt. As the .correspondent stated, it was (rarely worth something additional to tako the risk of establishing a manufacturing business. - In such a ease tho allowance of 6 per cent, was obviously insufficient.

llv. Young also referred to the principle of the exemption of incomes derived from interest on Government debentures as unsound. This would mean a saving in taxes of .£l6 18s. 4d. oil every .£2OO over or a saving of Bs. Id. on every £5. Tho income from debentures wak thus increased to ,£5 Bs. 4d. per cent, on investments of over iGfiOO, as compared with 5 per cent, from other investments. As a man's income became larger, tho exemption would bo equivalent to a still higher rate of interest. The effect would be that the middle wealthy classes, deriving tiieir incomes over J;3CO from salaries, industry, trade, or investments other than war investments, would pay the increased taxation. The war debentures would probably get into the hands of large firms, and the sum that would bo lost in income tax in such cases would be very considerable. Ho thought that a higher rate of interest should l>e offered, and that the currency of the debentures should be shortened and made redeemable within live or ten years at tho longest.

Mr. J. M'Combs (Lyttelton) said he could not congratulate the -Minister of Finance upon the constructive statesman-' ship displayed in the drafting of the measuro, The provisions for taxation seemed to be on haphazard rather than on scientific lines. The chief failure of the National Government was to deal with the cost of living. . Upon this text Mr. M'Combs expatiated at considerable length. | Hard to Understand. Mr. C. E. Statham (Dunedin Central) found fault with the Minister of Financo for not introducing an 'explanatory memorandum in connection with the Bill. It was hard enough for lawyers to'understand tho measure, and an explanation should be given members in black and white. Further, he held that such an important- Bill should first have been considered by a Select Committee of tho House. He disapproved of the fiat rate as applied to tho special five per cont. tax upon incomes, and hoped that the Minister would restore the principle of graduation. He was sorry that tho Government had abandoned the principle of. taxing war profits and adopted tho principle of taxing oxcess profits. This was most unfair to many members of the community. The Commonwealth Bill dealt with "war-timo profits," and lie urged tho Minister to bring.our Bill more into lino with that measure, which was of a much more comprehensivo character. For instance, the Commissioner of Taxes was thore given power to modify a tax in tho case of out.stanilfng injustice, whereas tho local Hill provided merely for time being given in which to pay. Tho Commonwealth's method of arriving at tho amount of capital was also preferable to ours, which might lead to fictitious sums being recorded. He irtis gla<l that the section in the Bill referring to mortgages was to be struck out. Tho provision for paying for lands by debentures was dangerous, because if the Labour Party got into power they might nationalise the whole of tho land by issuing these debentures. (Laughter.) If too many of these debentures wore, issued, their value would decrease, and tho time might possibly

muib when each 41 debenture would 1)0 worth only 10s.

Sir .Tosoph Ward: Tho country would be bankrunt then.

Mr. Stathani: It' our friends opposite got into power that might happen. Tho Jlouse, Mr. Statham further doolared, seemed to have, lost sight of necessity for giving relief to the married maii with a largo family, for extra taxation was being piled indiscriminately upon married and siugle alike. He approved of the idea of an export tax as a temporary expedient in war time. The establishment of a reserve in London was a prudent action, and tho peoplo hero slioul<l .also be encouraged to put aside reserve;! for the future, as dart, days might come wlien the war ended. The only way to encourage that thrift was lo discourage luxuries, and for that reason' he endorsed tho idea of somo restriction being plaoed upon amusements and an additional tax upon beer. The Bonus Deprecated. Mr. H. G. Ell' (Christchurch South) held that the 5 per cent, flat-rate on incomes would hit the small man hard, and it should bo imposed on a graduated scale. , He strongly condemned the bonus to Civil Servants, while widows' pensions and children's allowances were on such a miserable scale.. The country was marvellously prosperous, and more attention should be given to social services. So far as the .£400,000 to be given to Civil Servants was concerned he would support in Committee a motion to limit the payment of the bonus to those receiving not more than .£215 a year , instead of tho present proposal of .£315 > year. He felt that the House could not justify this payment in view of the smaLlness of the sums that wero , being paid to widows and the dependants of those fighting for tho country. "My feeling in tho matter," ho said—"l don't know how the members of the House are going to face it—but I feel that Parliament has i no right to give any bonus to men receiving m'ore than £215 a year." A. contrast was drawn between the assured, position. of the Civil Servant, with his regular income and increment, anil the man in the street, who lived as ho could. It was high time, said Mr. Ell, that .something was done for this member of tho community. Ho endorsed tho demand for economy, and criticised tho Government for extravagance in regard to the police buildings in Wellington, and also in connection with tho delay in the completion of the new Parliament buildings.

MINISTER IN REPLY. MANY AMENDMENTS PKOMISED. Sir Joseph Ward, in replying, said that some members had overlooked important points. The five per cent, additional income tax had been imposed for this year only. It wijs put in, not with the intention of its being a graduated tax,, but as a war tax. Last year a change was made in the goneral taxation, but that was .entirely different from what was being done this year. An important point was whether persons in reecipt of incomes of over J3300 a year should not mako their contribution to tho increased revenue necessary for tho war. If any permanent addition were being made to the incomo tax it certainly would be on a graduated basis, but this tax-was not intonded to be levied more than one .fear, if the war ended this year. If the war ceased this year the whole of the taxes imposed in tho present Bill would cease. Afterwards, of course, there would bo a readjustment of taxation to meet the altered circumstances. There lmd been an assumption—which was unjustified— that tho tax&s wore being imposed permanently. Injustices could always lie pointed out, and anomalies were always to 1)0 found. In no country of the world had these bcon eliminated. It was of no assistance to the Government to put on record tho difference between tho increases on large and .small incomes, for> theso were bound to exist. Ho had to keep before himself tho lie--cessity of tho aggregate amflunt required being found by the taxing department. Therefore fhoso gentlemen who criticised tho change from taxing "war profits" to "excess profits" failed to recognise that the British example had been followed by virtue of necessity. Many banking and business firms were making largo profits solely, by reason of the war, but as tney were not handling primary products, what chance would the Tax •Department have of analysing what was duo to "war profits'," if that term had been retained? j.f that term. had been maintained wo might liavo been in tho position of the British Chancellor of tho Exchequer, who, instead of recoiving J56,000,000 war profits, received only jUdO.OOO. Wo could not be in a position to fail to receive tho necessary amount and,' therefore, tho change liad been made, and would bo maintained. The .largo profits which wero being mado all over New Zealand were very largely duo to the war, and the new tax would consist of 90 per cent, of what was due to the war. He did not agree with the members who held that tho increased revenue should bo secured by heavier income tax. If the ordinary incomo tax were trebled it would not yield what' would bo yielded by tho 45 per cent, excess profits tax and the 5 per cent, income tax. This light way • of suggesting that the income tax eliould bo increased was not fair, for it would bo incomparably worse for tho people who had to earn their incomes than the method proposed in the Bill. Members who advocated this course liarl in view a system of permanent taxation rather than a method of taxation dosigned to meet the needs of tlio war period onlj.

Amendments Promised. A supplementary order paper, said Sir Joseph Ward, would be circulated, contaiuing many important amendments. He was quite prepared to make some variations in tho war tux. as far as the income .tax was concerned, and was prepared to make it lighter for thoso receiving from <£300 up to a certain amount, and then have the increases *0 on from that amount. But they should disabuse'their minds fram tho idea that they wero dealiug with an ordinary incren/ie of the ie'eome tax, for they wcro not. ! Mr. Anderson: "Will you make any difference for the' men with largo families? Sir Joseph Ward: I think that Is a matter that should lie dealt with, ill tho Lund and Income Tax Bill. This Irf not a itiiue for us to go into that. We have the inexorable fact before. us that ive have to get the total amount required. Wb cannot now penalise the single and small familied men by letting off tho married mail with the largo family. Referring to the plea that tho Bill should have been referred to a spcc.ial committee, lie said ho did not tigret that this was the wisest 'course to pursue. This House could not follow tho example of tho House of Commons, which had 090 members. These Bills weie sent to Committees, and their report was generally accepted without comment. That hocl never boon done in this country in relation to policy niea-' sures. Tho House as a whole would never havo it. This Bill consisted of policy measures entirely, and for' these the Government wns responsible. The Bill had been published broadcast, and every aspect had been criticised by tho public, by the Press, and by the members. More cases hud come before him privately than had been citcd by members. Neither the House nor the country had lost anything by tho course followed, for every class of business or individual concerned had approached him by letter or otherwise, with the result that in a supplementary order paper many new points would be submitted.

Provision,for Appeal. He liad thought, for instance, said Sir Joseph Ward, that tho ordinary appeal to a 'Magistrate would have sufficed, but ho would now ask the Committee to provide for an appeal, ne would not follow the English example of a Board of Referees, but.it would be promised that there should' be a Supreme Court Judge and two other persons associated with him lo • hear appeals. These, would lionr appeals under any of the headings provided. Another important alteration wonld bo made in connection with the war tax and the special income tax to avoid the levyin® of a do'iblfl tax. He proposed to "move an amendment wlricli would effectively remove this double-banking. The young firms, the young professional men, and the firms that had made losses before the war would all bo dealt with effectively. (Hoar, hear.)

A member: freezing companies as well?

Sir Joseph Ward: I think that is a clear caao tor tho hardship clause. There must be some flexibility in order to see that no injustico is done, and this will b* provided for in the Bill. One member had raised the point of ,£3OOO being set usido for the writing oil' of bad debts. Provision was made for losses, and this would bo clearly demonstrated to those concerned. Every business firm would, however, have to l'ecognißO that TTJiilo the Tax Department would deal with thorn equitably, the money would have to be got in. He proposed to allow tho young professional man J]GOO by way of personal exertion, and this would meet rheir ease, no also proposed to allow tho amount of capital imosted to bo estimated upon a return of or 8 per cent, instead of tho present G per cent., and this would solvo somo complaints. Provision would bo made for a wasting asset in the caso of wood and co.il companies, and perhaps more flexibility would be given to tho Commissioner to meet cases of individual hardship. 'I vcice: What rbnvt the flaxmillers? Sir Joseph Ward: I tliink their easa will be fully met. It is not a wasting industry. Their caso will be mot fairly, but these industries must not run away with the idea that we will make concessions except whero thny are justifiable. (Hear, hear.)

Banking Legislation. The banking legislation was put in «t present to secure that where vo had strong banks—as we havo at present—we would keep them as strong as we cr-uld. This legislation was precautionary, with the addition of provision being made for meeting the demands of tho gold markets These clauses were designed to meet the general needs of the country. The Bill did not interfere with private firm? wliieli were carrying on semi-banking business, because wqre pot carrying on business under banking laws. The Committee the position would be made perfectly plain. He would, however, ask the Comraittea to ensure that private firms should not compete against each other by raising the deposit rotes, and so creatipg dear money. If a company wanted to raise the lato by one per cent, for deposits it would not be aliowed to do it, because it would be the' first step to dear money. Ho admitted that the bankers of the country had followed out their duty very well. / Commandeered Goods. In referring to a suggestion by Mr. Sidoy that tho Government should havo commandeered all the wool, meat, etc., in the Dominion, Sir Joseph Ward said that everyone knew that tho meat was not paid for until it was placed on board tho ship. It was paid' for with British money. No New Zialaud Government could have provided the money necessary to do what was suggested, as tho amount would have been about <£30,000,000. It was easy enough now to .say the Government should have oommaudeered these articles, but it would havo been a very difficult thing for any Government to have attempted it. In regard to tho suggests;! amusement tax, lie said'tliait in the new taxes proposed in the Bill the Government was getting at tho proprietors of places of entertainment for a very largo sum. Whether they should also levy a tax on tTTose who patronised the places -of entertainment was another question. He was not discussing that matter, but'tho proprietors and lossees of theatres, etc., would certainly be called upon to pay their full share. Tho farmer who cleared and grassed and stocked his farm would not be called upon to pay heavily, as was suggested. Unless he had made abnormal profits, it would bo almost, impossible for him to be heavily taxed. No allowance could bo mode for tho depreciation of the value of motor vehicles, as was asked by Mr. Young. As to the raising of money within Now Zealand, the reason why tho Government proposed to free the debentures from the payment of income ■tax was that it desired to obtain the money as cheaply as possible. If it was decided to raako tho debentures subject to the payment of income tax, the rate of interest probably would'go up to six per cent. If tho Government did not make provision for not charging income jtiix, it would have tu pnv a great deal more for its money, and the country would bo worse off.

In reply to an interjection from Mr. Webb regarding the cost of living, Sir Joseph Ward raid that tli© Government was attempting to do all that was I* o3 ' sible in this direction, and had succeeded in keeping down the price of sugar to the extent of about ,£300,000 a year as compared with the price outside tho Dominion.

Half an hour is the time limit for speeches on the second reading, bnt by graco of the Hoii.se Sir Joseph. ' Ward spoke for an hour and cloven minutes. As ho concluded h« was hoartily applauded. Tho Houso adjourned at 11.13 p.m.