The Dominion TUESDAY, AUGUST 7, 1917. LOANS AND TAXES

Dominion, Volume 10, Issue 3156, 7 August 1917, Page 4

The Dominion TUESDAY, AUGUST 7, 1917. LOANS AND TAXES

nun 11 / with which the and ? 11 ., was brought forward fiTL throu S ]l thtt House of nn. cs w * s P° rila ps cxcus1. \ •'■no money is wanted: evcrvS°T S S at ifc must 1)0 obtained, ana that the necessary authority must be given tbe Government: and though exception might be taken to too terras oil which it is proposed t J! ls °,. sum required, it is doubtful if 1 arliament would have cared to amend the Finance Minister s proposals even if it had been given fuller time for consideration. At the same timo. it is most undesirable that financial measures of such great importance to tho country should be forced through the fjouf n °f Representatives without title iuUest possible opportunity being- given for their consideration and discussion. The expenditure wo are called on to make in connection with the war must be faced without any faltering, and few indeed will begrudge tho sacrifices entailed in such a cause as we are fighting for so long as they are satisfied that the money is obtained on the best possible terms and spent to the best advantage. At the end of March , last, the net indebtedness of the Dominion had mounted up to the enormous figure of £125,572,000, and the amount proposed to be borrowed this year will bring tho total to over £150,000,000, entailing a further heavy increase in our annual interest charge, which has to be met out of taxation. In a week or two's timo Parliament should have before it tho new taxing Bill with which the Finance Minister proposes to add to his revenue for the current financial year. Sir Joseph Ward has already intimated the form tho new taxes will take, but the details of tho measure have yet to be mado known, and the Government owes it to Parliament and the country to see that. ample time isgiven to study the provisions of tho Bill before members are called on to express their opinions on it. In the Budget Sir Joseph Ward intimated that ho had in mind a proposal under which thoso with inc6mes of over £700 a year who had not contributed to this or the previous year's War Loan would bo penalised by means of heavy additional taxation. It is promised that this idea will bo fully explained when the taxing proposals arc before Parliament. Presumably there will be reasonable allowance made for tho personal and private financial obligations of those who have not seen their way to take up any part of tho State loans, and in this respect it would bo only just to see that contributions to patriotic funds are taken into account. It is only fair and reasonable also, in view of tho proposed heavy increases in taxation, that thoso who have given their excess profits or any part of them to patriotic funds should not bo called on to pay income tax on the part they have given away.

There is another matter that calls for serious consideration in connection with the very heavy rate of taxation proposed to bo charged in the case of large incomes. An individual with a large incomo is justly called on to pay in proportion to tho amount he receives each year in profit from his business and in return from his investments. The position, however, is very different in the case of public companies. An individual with an income of £6-100 or more a year can lose the 37 per ccnt. proposed to bo taken by tho Stato and still havo some £4000 a year for tho maintenance of himself and his family. A company with, say, a capital of £100,000 and 100 to 200 shareholders is less fortunately situated. Assuming that it earns a taxable profit of £g<loo, it can ordinarily pay its shareholders a 5 per cent, dividend on their investments. That is to say, big and little shareholders alike receive 5 per cent, on whatovcr amount' they may havo invested in the company. If under tho new scale of taxation proposed by the Government public companies arc to bo treated as in tho past on practically the same footing as individuals, then a company

i in the position mentioned above will lose over one-third of its income in taxation, and instead of paying a 5 per cent, dividend will be fortunate a ltpays its shareholders :i per cent. At lirst sight, looking at the company as a company, this mav not . seem a very exceptional hardship in war time. But a company is made lip of a collection of individuals who have invested their savings for a common purpose and who in many cases are small people with' ■.modest incomes. These small people with incomes ranging from £150 to, say, WOO a year would lie taxed at the highest rate, lis though they •each had incomes of £6400 a year. 1' or example, a mail who held £500 worth of shares in a company siich as wo have quoted for tho purposes of illustration would normally on his 5 per cent, dividend receive'£2s. Unless public companies are dealt with in some reasonable fashion tho will now take over, £9 out of his £25 of income by way of taxatiqn. And this injustice will bo perpetrated in thousands of cases throughout the Dominion on people of small incomes who have their savings invested in public companies. To be lust and equitable the income of each individual in the State should (subject to the exemption limit) bear taxation on a'progressive scale in proportion to its size.' Under tho method of company taxation the- man with tho smallest income, tho man with, say, £100 or £150 a year from his investments, pays as high a rate as the man with an income of thousands a year. In other words, because a number of people pool their capital in some industrial enterprise or business undertaking tho total earnings of their enterprise or undertaking aro treated as though they were the earnings of ono man, and each of tho number is compelled to pay taxation on his individual share at as high a rate as though his income instead of being only a small part were tho wholo of tho income of the company. It is an old injustice, but it will press very harshly under tho very heavy scale of taxation pow proposed. Tho Finance Minister, anxious as he is to secure all tho revenuo ho can, is not likely to view favourably- any suggestion that the incomcs of tho individual shareholders of companies and not the combined incomes of the shareholders should constitute the basis of his taxation of public companies. But it would bo a matter of simple justice to so frame his proposals that when assessing the incomes of public companies for the purposes of taxation- due allowance would be mado for the amount of capital invested in each separate concern. A company with a capital of £50,000 with profits totalling £5000 a year- obviously is in a better position, and it would lie more equitablo to call on it to pay a higher rate of taxation than a company with £100,000 capital which only earns a similar amount.