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

versa I disappointment in that no luodiiication lias been made 111 the method cf taxing fho incomes of limited companies 'J'lie point at issue alloers.the principle of the taxation of companies which has been in vogue in New Zealand foi many veals. It Ss not new;. It was raised before the war when income t».xation was not such a serious matter. It has been brought into prominence with the lieai ler -ates of taxation which it has been necesary to imposo during the past four or ve vears Successive Ministers of 'nance have admitted that the ] ra (ls to anomalies, and it ■as confidently hoped that this year l ere would have been such a revision of Sod* in the taxing of companies as rould at least reduce these anomalies o Hie minimum. There is 110 doubt hat "rave injustice is inflicted upon ieraras of moderate means who invest , ,' , ain lanre companies. lhe 11-hiciplo followed ill New Zealand is ha because a company is a largo cominr and ninst of necessity have a largo rf lmA ii shall be taxed upon a gradu"ted scale on the amount of its income 'respective of the percentage return on ho capital invested. iNo doubt the fail - ■st method would be to add each indmlua shareholder's interest m the profits f a company to his own income, and nx the amount so arrived at. Commercial men quite Ten we that this would i. „ simple method ot collection— -hit at*tlie present time the Taxation Department would refuse on the ground jf the uncertainty of the likely return, i- Tiovmif of such a method. In addio P eim J. ~ pre j s no question that the ?lniplest and suMst method is to tax the ncomo at the source: that is. collect o income tax from the company, as is V i-onf done But snrelv there are other methods which could be adopted Would t not be fairer to tax companies at a flat rate' on an amount equal to, sav 8 per cent, on the actual capital emj in the business (i.e., on the paidup capital and 'he reserves) and then ■ imnosca graduated tax on the surplus impost a company was smaK profits? Ihen, u a , )agj3 0r '-InHn" the percentage of profit RP rnpd" The Canadian business profits tax was lev Ted on a somewhat similar m ''Tf° d B uch a system were introduced it n llrn nnlv fair that small, private, would a . companies should be in of being considered partfor the purposes of taxation It" is true that legally. a small limited company is considered in law ono percompany . nQ reatfoll foi f° n V^mirnoses the small companies taxation P P ( partnerships, parr lo, l U .i n those cases where all the Wehllders are actively engaged in the sharilioldu . unfavonr--8h"?t may be urged that! relief Is afforded i° n be C called a statutory acknowledgment* of tho hardship imposed, but it is amount to a very email sum. exceeding IiOO, and only if the dividends ™ less than 6 per cent, on.ilhe amount 'aid up on their shares. Again, it may paui upio m ., an i es as a matter of be urged that compj» flf jncomo hfS bv them. No doubt this is flrue K extent and in some instances, bnMwom- tax is really an appropriation of profits: it is that pprilioii of n. payer's income appropriated to the use of the general Government. i, nnr)r i "The business commnni v had hoped wl-iv to°X"CwhoTe question of land Sirsfifs vm ment'and""!"^thm familiar Iwith tho problems .»»'ohpd. fe ling assured that such a commission TOidd have evolved a more equable sjstern Present methods in company taxation need revision: income tax as now imno=ed through com'ianies does not fall with the sama incidence unou the sam eC of taxpayers. It is believed that mo'lhods could bo devised which would nrovide the necessary revenue and jet eliminate many of the anomalies. It l. realised that no system of taxation can f 0 Sect. From the verv lies system Equalities of some, lands, w. T l ave no hesitation m saving that the present proposals will, merely accentuate the. dissatisfaction which exists. "Retarding Pronress." Mr J. T. Martin said he considered tho increasing taxation in New Zealand was SspVMffis gress of this Dominion, giro a to industries and trade, it could not have succeeded more than by into effect the new income tax propo.aU. "The proposals are the moiv surpTieinK to i!ho mercantile community, he added, "in view of the representatons which have been made to the Government towards reducilngf the previous taxation of 7s 4d_ in the pound." He quoted, the effect! of the increased taxation on joint •S companies. From futures in his po'session ™e estimated .that for every i! 100 of "toss profit previous to the war S exited from £SS to MI m expenses. To-day for every £ 00> gross profit it was taking from |75 to |Bfl in expenses, leaving fiom .£2O tto ±-» net profit. The increased taxation which it was proposed to enforce, together with the increased rates in the Tost and Tel n-raph and Railway services, the mcreasin" cost of general expenses such as cars nnd pe'lrol. would probablv mean that for everv XlOfl gross profit J?00 would be consumed'in expenses, leavutr £10 net profit This would mean a reduction lln dividend' and a consequent hardship on the «niiall investors, who in co-nperah>« concerns supplied th» mom source of capital. M.r. Martin also deprecated the S d taxation on kW and cheese f,c ories. descrWng them a.s co-operate and for' the benefit of the suWiers. . Tt was finallv 'decided to hoid a special meeting of the cliamVr this evening to discuss the Bill in ttoto.