INEQUITABLE TAXATION

Dominion, Volume 11, Issue 41, 12 November 1917, Page 4

INEQUITABLE TAXATION

It is not at all surprising to find that questions of taxation will form an important part of the business brought fonvafd for discussion at the coming conference of Chambers of Commerce. In normal times, when the rates of taxation were comparatively low, little attention was given by the public generally to the incidence of taxation. It is true that there had been a demand, which was partly mot, for graduated taxation, with the object of throwing a larger share of the burden on people with largo incomcs, and thero bad also been a graduated land tax designed to hasten the cutting up of large estates. But generally speaking very few people troubled to examine at all closely tho basis of our taxation of incomcs. Especially was,this tho case in the matter of joint stock companies. Such companies were, and are, taxed on their total earnings regardless of may be loft for distribution amongst the shareholders, who provide tho capital which enables the income to be earned.. The individual incomes of the shareholders are not taken into account, and tho man with an income of £500 a year is taxed, _so far as his incomo from his sharo interest in the company is concerned, at the'same' rate as a fellow-share-holder with an income of £5000 or more a year. Moreover, a company with an income of .£SOOO or £10,000, or any greater amount, has to .pay practically the same rate of taxation as a single individual with the samo income, in spitn of tEe fact that tho company income is divided amongst perhaps 100 or 300 individuals. Then again, a company which pays its shareholders a 20 per cont. dividend may be taxed at a lower rate than a company which pavs its shareholders only 5 per cent. The fact that a company consists of a number of individuals each differently situated as to tho amount of their incomcs is practicably ignored under the existing law, and all shareholders in a company are taxed at the same high scale. It is true that shareholders with incomes ■ up' to £400 can claim a refund on that portion of the tax paid by a company on their share of the company's earnings, bub that dons not materially affect tho generally inequitable nature of the existing basis of company taxation. We have on previous occasions discussed this matter in some detail, and it is not necessary to again cover the ground at the present time. The main point is that tho State, in tho collection of revenue by means of income tax, should concern itself with the ability of each individual to contribute to the needs of the State. Each individual should be called on to pay in pro-

portion to tho amount of incomc be personally rccoivcs. The rate of taxation may bo on an increasing scale, according to tho_ size of tho income, as is the caso in New Zealand now. It is manifestly unjust, howovcr, when a number of individuals join together in order to develop an industry or to expand a business, which no one of them could find the capital to do singly, to tax each and a!/ of them at a rato based on tho total income earned by the wholo of their investments in the industry or business. That injustico is accontuated when in war time tho rate of taxation soars to tho high scalc it has reached in the Dominion to-day. The Stato of course must have the revenue it needs, but it should obtain it on an equitable basis, each individual paying in proportion to his means. It usually happens that suggestions for placing taxation on a fairer "basis are thrust upon the Government at a time when there is little opportunity for giving them full consideration, and less likelihood of any radical change being made. The Chambers of Commerce of the Dominion aro on tho present occasion taking time by the forelock. It is proposed that they should offor suggestions to tho Government at an early date, and thus allow ample opportunity for examination and consideration before tho next sitting of Parliament. Tho matter is one of very great importance not only to existing companies, but to tho country generally; for as things aro thero is a very real danger of enter- ' prise by means of joint stock companies 'being checked and progress in the way of industrial and business development seriously discouraged.