The Dominion WEDNESDAY, JUNE 20, 1917. FINANCE. AND THE WAR

Dominion, Volume 10, Issue 3115, 20 June 1917, Page 4

The Dominion WEDNESDAY, JUNE 20, 1917. FINANCE. AND THE WAR

—: « The most important question to be faced by tho National Government during the coming session of Parliament will be that of finance. We have seen from, recent cable messages tho unhappy position into which Australia has drifted, mainly, of course, as the result of the war. The past year's operations in the Commonwealth disclose a deficit of about three millions, and on top of this the Treasurer has to make provision for tho curront year for an increased expenditure of something like ten millions. About one-half of this increase is provided for by the heavy war taxation already imposed, but tho balance will have to be made up by further additions to the. taxes. Any economies which may bo effected—and plainly from the figures- disclosed there is room for economy—will not be likely to do more than counter-balance' the . loss of revenue due to tho f alling-ol'f in Customs 'receipts consequent on tho shipping! shortage. We in New Zealand have not tho formidable problem to face which confronts Sir John Forrest. Happily the financial position of the Dominion is strong. The Financial Statement ' laid before Parliament iast session showed a surplus on tho year's operations of over two millions. This huge surplus was due mainly to the special war taxation imposed jn ' 1915. Tho great prosperity enjoyed : by tho country as tho result of the' high prices ruling for our primary products and the heavy loan expenditure on the equipment of our troops helped to swell the yield produced by the increased rate of taxivtion, and this factor must not be overlooked in estimating tho future. In 1916 a further increase in taxation was imposed, and the so-called , Excess Profits Tax, added,' so that in spite of the heavy additions lo the expenditure arising from interest and sinking fund charges, war pensions, etc., the Minister of Finance should bo able to show an- : other large surplus for the year ended March 31, 1917. So far' good. Thero has been a buoyant revenue, and the Government can also point to economies in various directions i which command respect. v In spite, however, of the results achieved and the strong financial . position foreshadowed by tho returns . so far available, It may bo conn- '■ dently expected that with the return of Mr. Massey and Sir JosErn Ward Cabinet will be called nn • to consider nropusals for changes of a radical nature in mir , present taxation. For one thing tbo Excess Profits Tax, the yield

from which has not yet been disclosed, has been almost universally condemned by those who havo given the matter any consideration. No ono could fairly object to the taxing of war profits on a high scale, and any objection if made would meet with little sympathy from the Government or from anyone else. But the so-called Excess Profits Tax has proved far wider in its scope than was anticipated, and has been a causo of injury and led to injustice which should not bo permitted to continue. The Government therefore may bo expected to bring forward some other method of securing tho revenue it requires in a fairer way. It is possiblo that an attempt may bo made to tinker with the Excess Profits Tax and narrow its application, and no doubt tho Prime Minister and his colleague the Minister of Finance havo gathered experience in England on this point which should prove of valuo in leading tho Government to a sound decision. It may be hoped, however, that ono effect of their visit to tho Motherland will bo to inspiro them to a bolder handling than hitherto of the problems with which they will havo to contend. They cannot fail to havo been impressed by tho courago- shown by tho Imperial Government in calling on the peoplo of Great Britain to make tho sacrifices necessary, not only to securo victory hut to ensure as far as possible tho future financial stability of tho nation. Equally thoy must havo recognised how splendidly tho people have responded to that call. Wo hero even now do not sufficiently rcaliso tho financial strain that has been imposed on tho individual taxpayer in Great Britain in connection with the war. Hero overy penny of our actual war expenditure has been paid out of borrowed money. In Great Britain a very substantial amount has boon paid, out of revenue raised by taxation, and yet the soundest financial experts in England deploro tho fact that still more of the war cost is not mot out of taxation. A summary of War Timo Finance, published by the Economist, gives the following illuminating figures: Britain's War Tiaie Finance. August 1, 1914-Apiil 14, 1917. Total spent 4,348,241,357 Increase in Exchequer balances 17,021,353 Grand total since beginning o£ -war 4,365,262,710 Raised by rcvonuo 1,106,821,555 Not borrowings , 3,258,441.154 4,365,262,710 TJio expenditure includes loans to tho Allies and Dominions estimated, to amount to £964,000,000. Parliament will havo to, consider whether wc 'in New Zealand aro acting wisely in loading tho future with the whole of our war expenditure— whether it would not bo wiser in view of the great prosperity wc aro enjoying as the result of war prices to meet at least a portion of tho expenditure out of revenue, and so> lighten the burden of taxation in tho days to follow tho war, when prices may fall and.our ability to meet the strain may bo less. Tho Economist's comments on 'this point, though referring, of course, to conditions in England, aro well worthy of attention hero:

It is only by increased taxation that the Chancellor of tho Exchequer will have enough in hand when peace comes to reduco taxation. When peace comes and the courso of industry is -uncertain, it is most desirable that taxation should be as light as possible. In war when the Government demand absorbs so much of our production the industrial problem is comparatively simple, and taxation can in some respects bo borno more easily. ... It may be said that the cost' of this war is so great that it is impossible to reach the old ideal [40 per cent, of the cost out of revenue]; on the other hand, it may bo argued that the higher tho cost of war tho higher the proportion of its cost that should be borne by taxation, because otherwise tho pressure of after-war taxation must inevitably be tho more severe during the difficult time of reconstruction.

There aro other grounds than those mentioned above on which we may expect to find Sir Joseph Ward introducing now taxation proposals. There must bo a .shrinkage in the Customs revenue on account of the reduction in the number of vessels in the New Zealand trade, and also a considerable falling' off in railway revenue consequent on the curtailment of services. Viewing tho, situation broadly it must be evident that in spite of the heavy revenue returns of tho past two years and the strong financial position disclosed, the readjustments for tho current financial year' are likely to be far-reaching in their effects, and a further increase of taxation may bo regarded as inevitable.