STATE TRADING

Dominion, Volume 12, Issue 31, 31 October 1918, Page 8

STATE TRADING

AND MUNICIPAL ENTERPRISES SHOULD TAXES BE PAID? An interesting subject eamo up for <liscussioa at the Associated Chambers of Commerce Conference yesterday in the following remit proposed by the Canterbury Chamber of Commerce:— "That all profit-earning Departments of the State, in cases where the whole of the profits are not paid into the consolidated fund, or where they are not already liable for income tax and land tax, should bo made liable for income tax and land tax in the same manner and under the same conditions as private businesses are made liable." "That all local authorities should be made liable for income tax and land tax in respect of their commercial activities." Speaking to the remit, Sir. -W. M. Tyew read the following interesting paper:— "There are certain businesses conducted by the State in New Zealand which are not necessarily the functions of Govern' Jiient. The principal of these businesses are: Post and.telegraph, and telephone; railways, Government life insurance, State fire insurance, the Public Trust Office, the State Advances Office, tho State Coal Mines Department. The en-

.tire profits of the first-named two, the Post, and Telegraph and Telephone Department and the railways, are paid into the Consolidated Fund, and form part of tho genoral revenue of the country. TKe profits of the Government Life Insurance Department are retained as in a private business, but the Depaa'tmeut is assessed for income tax and land tax just as any other iife insurance company is assessed. The State Fire Insurance Office, as the result of agitation, was for the first time raado liable to taxation as a fire insurance company by Section 35 of tho Finance Act, 1917, but its full liability to taxation does not commenco under that section until tho financial year 1919-20. The last three named Departments are at present exempt from both income tax and land tax, viz.:-Tho Public Trust Office, the State Advances Office, and the State Coal Mines Department. The profits from all these three businesses and also from the State fiTe insurancq business should properly go straight into the Consolidated Fund in assistance of the general revenue, of the country, just ns the pronts from the Post and Telegraph and Bailway Departments do. But instead they are retained and held r.s mere Departmental funds.

"The balance-sheet of the State 3nre Insurance Department for the year cuding December 31, 1916, shoved 11' profit for the year of <-C35,G97 Sβ. 6d., and prior accumulated profits of ,£56,217 ]&. 10d. "The balance-sheet-of the Public Trust Office for the year ending March Sl,' 1917, showed a profit for tho year of Jt158,662 2s. Id., and prior accumulated profits cf .£287,763 10s. Id.

"The balance-sheet of the State Advances Office fca , the year ending March 31, 1917, showed a profit for tho year over all branches of i!U8,795. IDs. .- Id., jrnd prior accumulated profits'of .eJOIJjSOO 3s. 2d.

"The balance-sheet of the State Coal Jlines Department for the year ending March 31, 1917, showed a profit for tho year uf <C 18,521 ss. 9d., and a prior accumulated loss of £31,94$ '38. 3d.

"All these four Departments pay no dividend to the State. Only one of them; (the State Tire Office) hns lately teen made lia'ble for taxation, and the other three are at present free of all taxation whatever—and this at a time when the greatest domamls for revenue, and more revenue, are being made by 'ow Government from us all. This is injury, and great injury, to us, but it :Ynot insult. But insult is awaiting ius also, for these foui . Departments are held up to us as models of business management, as instances of how much better a public officers ca,n run a business than th« ordinary business man. 1 think, however, that you will all agree chat if we had no dividends to pay and no taxes to pay.we could save money quite as fast as these pseudo business officers.

"The State's right to carry on a business is its ability to carry it on 'better than an individual can, for the good of all concerned. Such ability is in each case a question,of fact to be tried out by practical experiment where there is a strong prima facie case in favour of trialv If, however, the experiment is not under equal conditions, it is not a true experiment, and is not only valueless, but positively harmful, ae it permits the substitution of a less efficient means for carrying on a business for a more efficient means., It is submitted that each business Department of the Sta.te should therefore be carried on on business lines j that it should be carried on to make a reasonable profit for the State, and that it should; as <ui ordinary' taxpayer, pay all those taxes to. which it would be liable if it were not a State Department. The Government Life'lnsurance Department lias always properly been liable for the same taxation as any other life insurance business. The State Fire Insurance Department will ehortly ( be placed on a footing for taxation sinii-' lar to other fire insurance businesses. The reasons for which the Government Life Insurance Department iind Government Kre Insurance Department are made liable to taxation apply equally to all other business Departments of the State. In the face of the extraordinary claims which are being made, and will 'be made foT many y«ars to come, no taxpayers, it is now as absurd as it is unjust to refrain from making the business Departments of the State contribute their fair 6hare towards the maintenance of the country. The same arguments apply to local authorities in respect of their commercial activities." "■ Mr R. Burns (Auckland) also pointed out how very unfair it was to private enterprise to have to compote with btate and municipal trade concerns which did not have the calk to pay that private companies had to pay. Mr E H. Crabb (Palmereton North) eaid 'ho disapproved of the principle in the romii, and said that there was.not the remotest prospect of it being given effect to. It was a pity that eome ot those who spoke against such municipal undertakings did not raise their voice against it in their own towns. Mr. J. G. Harkness said that the remit ivns very captivating at first sight. There should be a clear lino of demarcation between what businesses State and municipalities should engage in, and. what should be left to private enterprise. Hie reference was to actual monopolies, which should bo held by the Stnie or the municipalities (which were part of this State) for tho benefit of the public. Hβ pointed out utilities such as water, roads, trams, railways, water-power. Would anyone like to hand over our waterpower resources to private, individuals to charge what they liked for it? Mr. Hudson: You won't get it until you do. You'll never get the capital otherwise. Mr Harkness pointed out how much the Wellington Harbour Board suffered at the hands of the Government, who declined to pay wharfage for State coal. Mr. M'Lellan (Wellington) approved []pn remii. Mr. C. S. Owen (Dunedin) said the point that was being missed was that the Department balance-sheets were not put forward in proper book-keeping order. When Ministers rose in tho House aiia said that the profits on this or that" Department were so much, that was not correct, because they did not pay wharfage, taxation, ivnd other dues as private companies did. Mr. J. B. Waters (Dunedin) moved as an amendment that water, light, and transport services should bo exempted. He did not think that anyone would ngroe that- such utilities should bo taxed. Ju reply, Mr. Tyers enid that all local authorities paid incomp tax in England, and he thought that it was the fairest way. If it all wen t into tho Consolidated Fund then the country ua a whole would benefit. The Dopartmonte referred to did publish balance-sheets, and good ones. The only thinij was that it did not pay, taxes—its profits went into Departmental funds, and went into reserves, in tho form of buildings and investments of ono kind and another. Tho remit was carried by 17 to 12.