LAND AND INCOME TAXES

Dominion, Volume 13, Issue 296, 8 September 1920, Page 8

LAND AND INCOME TAXES

THE AMENDING BILL

S@ME IMPORTANT CHANGES

RELIEF FOR THE MORTGAGOR

NEW PRINCIPLES PROPOSED

The Land and Income Tax Amendment Bill was introduced in the House of Representatives last night. This Bill, which has been before the Finance Committee of the House for some t-iiue, deals with next year's taxation, and propose* some important changes. The Prime .Minister said that tho first point to which he would ca'.l attention was the proposal made in clause 3 to relieve mortgagors to a certain extent from a grievance that they had suffered from for a long time. Ho had been unable to give lull -relief, and _ had not gone as far as he would hiu£ Jilted. Ho referred to the grievance of tlie man who had a mortgage on his land and who was compelled to pay land tax on his debts. The position under the present law was that a- man with _ mortgaged land wns exempt from taxation up to iiISOO unimproved value. This XISOO gradually disappeared until it went altogether at ,£3OOO unimproved value. Tho proposal in tlio new Bill was that tho man with land should bo granted coin, plete exemption to £4000, and then the exemption would disappear on a sliding scale at .fSOOO. This gave a considerable advantage in favour of the mortgagor. He did not. doubt that many people would consider that the Government had not gone far enough. He had gone an far as the Treasury, the Finance Committee, and lie himself thought advisable.

COMPELLING IMPROVEMENTS. Tho next proposal of importance in the Bill was clause 6, and referred to unimproved land which was capable of improvement. Members were aware that land of this kind was being held in nn unimproved state in large blocks m various parts of New Zealand,! The Bill was telling the owners of such land that if they did not commence to improve their holdings they would havo to pay an increased rate of taxation, at the rate of 50 per cent, over tho ordinary taxation. THE FAMILY MAN. Section 11 of the Bill provided for an increase of tho exemption from income tax in the cases of men with families. The present exemption was JL*25 of incomo for each child. Tlio Bill proposed to double that exemption, thus making it .£SO for each child up to the ago of eighteen years. If the taxpayer happened to be maintaining his mother, an exemption of ,£SO would bo allowed. There were also exemptions for insurance and superannuation. He thought that the exemptions would be regarded as fairly liberal. EARNED AND UNEARNED INCOMES. The Bill discriminated, for tho first time as far as he could recollect, between earned llncomo and unearned income for purposes of taxation. Tho exemption in the case of earned income would disappear at ,£2OOO per annum. Above that level, earned and unearned incomes were i|o bo treated ulike. The advantage in the case of tho earned income would be 10 per cent. Section 18 of the Bill dealt with shipowners, who had escaped income tax to some extent in the pasv. 1 If a shipping company with its headquarters in Now Zealand had steamers trading and earning profits between ports outside New Zealand, it would become liable under ilho Bill to pay incomo tax on income so earned. An alteration was being made in the system of taxing income from debentures. Tho holders of debentures escaped some part of thoir fair sbaro of taxation under the present law. Tliev were (taxed on income from debentures at a flat rate of Is. in tho pound, plus a war tax of Is. 6d, in tho pound, making a total of 2s. 6d. in tho pound. The Bill propscd that this itacome shonld be taxed in the ordinary way.

THE LAND TAX. The land tax was being amended. Where the taxable unimproved valuo of tlio land did not exceed ,£IOOO (tho exemption being ,£500), the land tax would bo at tho rate of Id. in the pound. Tho rato was to be increased by graduations, and ho believed that ' tho aggregate amount produced by the tax would bo ilncreased. The highest raie of taxation was reached under the present law in tho case of land having an unimproved value of ,£192,000. The Bill proposed that the highest rato of taxation should be reached -when, tho unimproved valuo of tho land amounted to dfiJ3S,OOO. This meant of course, that an increased number of estates would pay the maximum tax. No increase was being made on estates up lo oGIO,OOO unimproved value. There was a slight decrease in the case of estates below .£9OOO unimproved value. Tlifc old rafes and tho new rate woro about equal at -CIO,OOO unilmproved value, and there was no serious increase in taxation until a value of ,£30,000 was reached. Prom .£30,000 up to .£138,000 the rate was increassd.

Tho Bill amended the incidence of the income tax. The graduation stopped at present at i!6!00. The Bill proposed to continue the graduation to .£IO,OOO. The payment of incomo tax would not. ston at 7s. in the pound. There would lie twenty per cent, to be added in some cases, in addition to tho 10 per • cent, nllowed off in the,cases of earned incomes. "A Great Improvement." Mr. Massey added that ho regarded tho Bill as a great improvement, on the filiating law. It did away with various anomalies. He had not aimed at increasing tho rovenuo of tho Stato from land tax and incomo tax, but ho lu-t/ allowed a margin, and thero woun; .jz no reduction in the revenue. Th« »;ll 'provided that trading departments of local bodies and also the Government Trading Departments should pay incomo tax, iu the same way as the businesses with which they were competing. Mr. J. M'Combs (Lyttelton) suggested that landowners would liable to escape taxation by means of bogus or unnecessary mortgages. Air. Massey: We will take care of that Mr. T. M. Wilford (Hutt) said that ho would not care to discuss this Important Bill until he had been able to consider it. Tho members of tho Financo Committee had already studied the Bill and would have an advantage in debate. Mr. -Massey applied that members would havo plenty of time. Ho commended the work that had been done by the Finance Committee. 'J'he Bill was a simplor and bettor measure than when it first reached the committee. Referring to the point raised by Mr, M'Combs, the Prime Minister 6a id that the principlo of taxing a man on his debts was utterly wrong. He had said that for years. Mr. M'Combs: Not on his debts. On the land ho holds. Mr. Massey: "On his debts." There had been exemption for mortgages for years, but at tho beginning of the war the exemption had been done away with, because tho 'Government at tho time needed all tho money it could collect. The higher rates of taxation, added tho Prime Minister, should not apply to land, and had nover been intended to apply excopt for burstjng-up purposes, The tax designed to burst up estates should not apply-until tho taxable value hud gono beyond tho ordinary farm, The Government had been (axing tho farmer oil high rates of land tax and had also been charging the farmer income tax. Ho had not been able to touch thai point in tho present Bill. But as prices, came down he thought that adjustments would have to bo made. In tho meantime tho alteration of the exemption would be found a great improvement from the point of view of tho small farmer. He felt that tho Government would have mado a great inistaio if it had not soized the opportunity to assist the

smaller man, who was struggling under a heavy mortgage. detailsjFthe bill THE LAND TAX. By tho Act of 1917, land tax was to be levied on the total unimproved valuo with tho saving clause tliat where tho value did not exceed .£ISOO t'horo was an exemption for <£500 of that sum, and where it exceeded ,£ISOO there was a deduction diminished as the valuo increased. so as to leave no exemption when tlio value reache,d .£2500. The Bill gives exemption on ifrlOOO, where tho total unimproved valuo does not exceed •fCOfIO. Where the value exceeds the latter sum the amount exempted from taxation is diminished in such a ratio that tlie exemption disappears altogether when the unimproved value reaches ,£BOOO. In cases of hardship the Commissioner was empowered to allow a special deduction for taxation purposes of .£2OOO. where the owner's income did not oxcced .£2OO per annum. The limit of income in this case its to be raised to £M. and tho limit of exemption to .£3OOO.

Unimproved LaniJ, Tho special taxation of unimproved land referred to by the Primo Minister is not to become effective before the financial year commencing on April 1, 1923. Unimproved land is defined as "land on which at the beginning of the financial year there are not improvements equal to one pound per acre or to onethird of the unimproved value, whichever shnll be tho less." This provision 'of tho Bill is not to apply io land situated within a borough. It is to apolv separately to' all lands of a taxpayer forming one continuous area or separated at their nearest points by a distance not exceeding threo miles in a straight line. For the purposes of'this section all exemptions from taxation are not to apply to land of which the taxpayelias been the owner for three years or more. Exemptions Abolished.

Three of 'he completo exemptions from income tax granted by the Land and Income Tax Act, 1916, are entirely abolished. These are: (t) Tho income nf a local or public authority other than that received in trust. (2). The incomes of co-operative butter and cheese companies. (3) Income derived by a nonresident from debentures issued by the Government or any local body and payable out?ido New Zealand, In calculating tho income! of butter and cheese companies for taxation there is to be deducted the amount paid to the suppliers for the actual supply of milk to the companies. The taxablo incomo of foreign insurance companies carrying on business in New Zealand is defined by the 1016 Act as being the incomo derived from investments of anv kind in New. Zealand. This is extended by tho addition of Clio income derived by investments made abroad on behalf of the Now Zealand branch. , r _ ■Assessment of Taxes.

The schedules show, that tho following rates shall be levied as follow:— (a) Land tax, olio penny in the pound. Where the value exceeds c£looo tho rato is to be increased by one-twenty thousandth of a penny for every pound in excess of .£IOOO, but.so as not to exceed seven and seveuteen-twontieth pence in the pound. The whole sum to be paid by way of taxation is then to be surcharged by thirty-three and one-third per cent of itself. (b) Income tax. The income derived by the taxpayer from debentures as described in section 112 of the Land and Income Tax, 1916, is to pay at tho rate of three shillings in the pound. It is provided earlier in the Bill that if on tho graduated scale tho taxpayer would have to pay more for his income from debentures (should that income havo come from another source) than tho company issuing the debentures actually pays as his agent, his incomo from debentures shall be further taxablo as ordinary incomo to make up tho difference, For ordinary income other than that derived from debentures tlie rates are to be one shilling in the pound on taxable income up to .£-100. Between i-100 and •£OOOO it is to be ono shilling in 'the pound, plus one-hundredth part of a penny for every pound in excess of four hundred. On incomes over Jl'fiOOO it shall be five shillings and eightpence in the pound plus one two-hundredth part of a penny for every pound in excess of six thousand, but shall not exceed seven shillings and fourpence'' in the pound. This is plus a surcharge of twenty cent., and reduced by ten per cent, in the case of earned income.

LEADER OF THE OPPOSITION Mr.T. M. Wilford (Hutt) was elected Leader of the Liberal Party at a meeting of tlio Liberal members Inst evening, end lie nmdo his first speech as Leader of the Opposition later in the night. He said the Government had developed a habit of looking to commttees of the House to find policies for it, and mentioned the work that had been done by the Finance Committee, the l)e----fcp.ce Committee, and the Agricultural Committee. Another committee was to be set up to decide how much the people of New Zealand were to pay for their butter. Mr. Jfaßsey: To take evidence. Mr. "Wilford: And make recommendations. Ho suggested tlmt the Government should produce its own policies, and liu proceeded to urge that more taxation should b« placed on large estates, large incomes, and deceased persons' estates. The land tax in its higher graduations ought to be large enough to compel subdivision. He was tired of hearing that tlio large landowners must 1>( given "time to unload."