LAND AND INCOME TAX

Dominion, Volume 13, Issue 301, 14 September 1920, Page 6

LAND AND INCOME TAX

Taxation of Companies,

CONSIDERATION OF BILL

CHAMBER OF COMMERCE s DISCUSSION [ COMPREHENSIVE ADDRESS BY ! PRESIDENT i i Consideration was given to the I/and and Income Tax Bill by the council of , the Wellington Chamber of Commerce 1 yesterday afternoon, when the president, Mr. : JI. A Carr, delivered an address on j the subject. After dealing briefly with , sections 1, 2, and 9, and sections 3, -1, anil • 5 of the land tax proposals, Mr. Carr ( expressed his views as follow:— _ _ , "Section G introduces a new principle , which is to come into force on April 1, 1923. For the purpose of tho section 'unimproved land' is defined and a taxpayer who holds such 'unimproved land' for more than three years is to pay 50 per cent, .additional land tax, and is to be allowed none of the exemptions provided for in section 4 of the Finance Act of 1917, as modified by section 3 of tho Bill of 1920. The section does not apply to land situated in a borough. The obvious intention of the section is to compel land owners either to sell 'unimproved' land er to cft'ecl. improvements on it efinal to £1 an acre'or equal to one-third of the unimproved value. Income Tax. , In reference to income tax. Mr. Carr 6 "'The allowances in respect of dependent children have been extended considerably in recent years. In 1917 the restriction of allowance in respect of x fivo children only was withdrawn, as was also the provision that the income of the father and mother should not exceed £425. Section 11 of the Bill extends the allowance to £50 in respect of each child, cind permits the allowance in respect of children up to 13 years of age instead of 16 years as formerly. There is one other alteration in that these allowances can 'be made from 'earned' income only. The extension of these special exemptions will be very acceptable to the taxpayer who has an 'earned' income, but it is difficult- to understand why a man, perhaps retired from active business, whose source of income is from the investment of his savings—under the Bill deemed 'unearned income'—should be put in i. worse position than formerly by being denied the exemption of msm-ance piomiuuis. Many taxpayers so situated[ will still have life insuranco policies in foitc. This anomaly could readily lx> overcome by permitting the. special excinptioii io taxpayers having not more than a stipu la ted 'unearned income.' Taxation of Income of Local and Public Authorities. "Section 84, sub-clause (b), of tho Land and Income Tax Act, 191G," sud Mr. Carr, "provides thai, the income of, a local or public authority other than income received in trust 'shall bo """P 1 from income taxation. A local a | ltilol itv is defined as 'a borough, countJ, or other body corporate possessing rating powers in fcew Zealand, and < nj, hai bour board, hospital and chantable board, education board, etc. ; and a pub lio authority means the Public the State Advances Superintendent, and every other incorporated deparanent oi instrument of tho Executive t.overninent of New Zealand. Section S5 of the Land and Income Tax Act, 1910. defines a se,sablo income, and this "'clufe. alia, all profits or gains dome Ifon any business; profits or B nin * from the use or occupation of land, etc., "tnts royalties, and fines, interest, and income derived from, any other jfflm.ee. By tho simple expedient of elimina i 0 sub-clause (h) from section 84 ct tho and Income Tax Act, 1916, provision is made for taxation of local bodies and Government Departments in rcspcct of their trading ,and income earning activi '""The commercial community, for years wist has urged that the trading actjuCof tho Slate and of local bodies should be subject to tho, same taxation 'as taxpavers of whom in many eases valo trading, ventures. This will ciuj a bettor comparison between private and public trading concerns andl no doubt will be an inducement to the manng • ment of both public and municipal hading departments in effect vcadmiiust ation And economical wAuW 11 , ,tt r comes of co-operative ellumm amlb utter factory companies are remoied fiomtho Hat of incomes exempt fiom taxation Section 24 of the Bill permits tho deduction from the sross i,» ot such companies of the amount paid to sup , pliers of milk where such amount is apportioned among supphew in sums proportionate to tho quantity of the nniK SU section' 34, sub-clause (h) of the Act o f 191G, income (terived by per sons not resident in .New Mag g stock or debentures issued b\ the wn eniin en t or by local or public authorities the Interest of which w pavab e out'of New Zealand, is exempt from iaxar Tho vnneal of this sub-clause by section 14 of'thl Bill makes this income now subject to taxation. Presimiably in these cases the amount of dbenture tax provided in the new Bi 1, nmelv 3s in the JC, will require to be deducted before debenture and oi t!ler ,!"" terest is paid. The effect, undoubtedly will be to tend to depreciate the value of New Zealand securities held abicad. It is possible that overseas investors in Zealand securities, will be ! nc '' ne f ( ' ; i° suggest that this is a, breach of faith, and it is just a question whether the amount of taxation derivable fromi this proposed source of taxation is worth ivl-ile as certainly any future loans iloatei ontside New Zealand will be depreciable to the extent of the liability fo ' taxation on tlie interest payable. It is, I however, the fact that other countries do ' deduct income tax in such cases. Rates of Land Tax. "The land tax rates are higher; the ■ fraction of progressive increases proposed being l-20000th part of a penny for every «C in excess of .£IOOO, plus 03 l-3rd 1 ner cent, additional, as against the pre- ■ sent l-32000th part of a penny for every ■ £ ill excess of XIOOO. plus .10 per cent. 1 additional. The maximum rate is now 10 466 d. in the .£ payable on an _nn- ' {,proved value of .£138,000, as ngains ' 10 5(1. in the JC payable on an unimproved i value of .£193,000. i Rates of Income Tax. i "The debenture tax has been increased • from 2s. 6d. to as. in the .£. The new ■ Pill does not differentiate between the ' rates of tax on the income of companies ! and ordinary taxpayers excopt Inat i 'earned' income up to .£2oofl is allowed i a reduction of 10 per cent. The maximum ' rate is 7s. 4d. in the £ plus 20 per • cent., or Bs. O.Cd. in the and this rate ! is payable on an income of ,£IO,OOO. Ihe existing maximum rate is 7s 6d. in the I o payable on an income of £6400. I " "Tlio special war tax in vogue lor the past few years is to ceaso. and graduated rates are provided, to which is to be added an amount equal to 20 per cent. The special exemptions allowed will prclyiblv ease tho taxation for small taxpayers, but the actual rates have been increased. Tho following schedule gives an indication of the relativo taxes payable for the past three years and as proposed under the new Bill.

"There is no disguising the fact," added Mr, Carr, "that there will be um-

Ti-como Present tax. Proposed tax. jt; £ s. d. -A 8. d. In £ *1000 ... 82 16 3 90 0 0 Is. 9.Gd. +1000 ••• 70 0 ■ 3 S 249 0 7 2S0 0 ft 23 M(1 ' 5(ino 532 10 3 570 0 0 3s. 9.0(1. 4000 .. 020 G 3 1.900 0 O 4s. 9.Gd. WOO 1.411 19 7 1.450 0 0 5s. fl.fid. 00(10 ... 2.097 16 3 2,040 0 0 6s. 9/x . 7000 ... 2,557 10 0 2,555 0 0 7 C . 3.G(i. MO 2 932 10 0 3,120 0 0 7s. 9.Gd 0000 3.307 10 0 3,735 0 0 Ss. 3.G(I. 10,000 ... 3.G82 10 0 4.400 0 0 8s. 9.Gd. •Company. +Tnclivitluai.