MUNICIPAL TRADING

Dominion, Volume 13, Issue 309, 23 September 1920, Page 6

MUNICIPAL TRADING

THE PROPOSED TAX PROTEST FROM LOCAL BODIES PRIME MINISTER TO BE INTERVIEWED i i Strong opposition to the Government's j proposal to tax municipal trading con- ( cerns was expressed at. a meeting of the ; executive of the Municipal Association, ' held in tho Parliamentary Buildings ' yesterday afternoon. Mr. J. P. Luke, 1 M.P, (Mayor of Wellington) presided, , and there were also present: Dr. Thacker, M.P. (.Mayor of Christchurch), llessrs. Begg (Mayor of Dunedin), E. P. liisliworth (.Mayor of Lower Hutt), J. A. Nash, M.P. (Mayor of l'aimerstou Ncrth), T. IC. Sidey, M.P. (Dunedin), 11. A. Wright, M.P. (Wellington), and T. 1\ Martin (solicitor to the Municipal Association). Mr. Luke said that clause 23 of the Land and Inccine Tax Amendment Bill was the provision which brought municipal trailing concerns into line with private companies so far as taxation was concerned. He contended that municipalities should not have to pay taxes on their trading concerns, because such services were run solely in the interests of the people, No special privileges were conferred upon anybody in respect to these concerns, and the responsibilities of local bodies were that they should give services at a minimum cost. Not one of the municipalities was out for profit, and what profits were made from its services .would go back into the undertakings for tho purpose of effecting improvements. If municipal authorities wero to lie taxed simply because their concerns competed with these of private companies, then he said most emphatically that there would be _ very little encouragement to local to establish trading services at all. If it were right to tax tramways, electric light, water, or milk supply undertakings, then, clearly, it was proper to tax post offices and railways as,well (Hear, hear.) He believed that strong representations should lie made to the Government on behalf of the municipalities, pointing out that the proposed legislation was a very retrograde step. Such taxation would be burdensome, and would have the effect of raising the charges on the people. It was most important that they should be very solid in their opposition to tlie Bill. To his mind, there was a difference between a municipal electric light concern and a private gas company. Mr. Nash: One is making a profit for the few. „ , Mr. Luke: "Exactly." The two services were different. As a medium for providing light, gas was a vanishing ele-ment-it was being superseded bv electric light-but for cooking and heating tho use of gas was increasing. No one could assume in Wellington; for instance, tlmt for cooking purposes electricity was goih" to be generated by the use of coal -that was out of the question. The present was tho most inopportune time (if it was ever opportune at all) for bringing down such taxation proposals. He knew that the Government must have money, but he did not think it right that such m-cney should be raised by taxing tho trading or industrial concerns of local authorities. Mr. Luke moved: "That the members of the executive wait on tho Prime Minister and stress that the proposal to tax local bodies' debentures and undertakings is inimical to the best interests of the people of the Dominion, and respecttuliy urges' the Government to dclct© the proposals from tlie Bill." Hardship on Small Investors. Mr. Martin said the cffect of the Bill was to place the debentures of local bodies on tho same footing as the debentures of companies, and a tax of 3s. in the X was to be paid on them. The Government would collect the. tax direct from the local body, which would deduct the amount of the tax when it paid tho coupons. Tho debenture-tax was to he paid on coupons honoured in London. Mr. Massev had stated that that was not intended, but as tlie speaker read the Bill that was the effect. The proposal to tax debentures placed a hardship on small investors, because a largo number of debentures were taken up by people with small means. . Mr. Begg remarked that the Bill-was likely to hit Dunedin pretty hnrd. The municipality there was not in open competition with anyone in its trading concerns, and the residents wero being supplied with sorvices more cheaply than in "any other part of the Dominion. Based on last year's figures, the, incometax that tho Dunedin City Council would have to pay, exclusive of the renewal fund and depreciation, would bo something like .£21,000. It was quite right that a private company engaged in similar services should have to paj[ such a tax, but under present conditions the ratepavers and the general publio were getting the whole of that money back. "We won't oppese the tax if the Government will let us tax all their property, added Mr. Begg. He maintained that Government Departments were not entering into fair competition with locai bodies. The Dunedin City Council tried to get some hydro-electrical machinery imported free of duty, but' without success. Eegarding the suggested payment of income tax on debentures, Mr. Begg said that his council had been negotiating for the renewal of .£IOO,OOO at 5J per cent., but the effect of tho proposed tax would be that the council would have to pay Gl per cent. Within the next 12 months his council would liavo to renew .£400,000, and, in tho next two years, close on ,£2.000,000. so it w*-uld be realised what the effect of the proposals would be. Dr. Thacker said that the Government should be compelled to pay rates on its Departmental buildings. Finance Will be Crippled. Mr. Bishworth said tho propceals of the Govcrntaent simply meant that the finance of local 'bodies would be crippled. The rato of interest would become so high that anything in the way of development work would be hampered. Of course, Lower Hutt might bo absorbed ill tho city of Wellington— Mr. Luke: If I stay there you soon will be. (Laughter.) Mr. Bishworth remarked that at present local bodies were hampered by tho fact that all Government property was exempt from taxation. If the Bill weie passed as it stood, local authorities would experience serious difficulties in raising loans, as the rate of interest would be affected. Mr. Luke stated that the Mayor cf Auckland was unable to attend the meeting, but he had indicated that ho and ' his council wipre entirely opposed to tlie proposals in the Bill. The Mayor of Auckland had expressed the view that ■ if tho Government persisted in its proposals to tax the profits of trading < e- ' part',nients of .local bodies, it should make it clear that only such profits, and not the income from general rates or water charges 'should be taxed. Mr. Luke's moticji wns carried, and it wns arranged that the executive should place its views.before the.Prime Minister at U o'clock this morning.