A REPLY TO CRITICS

Dominion, Volume 14, Issue 96, 17 January 1921, Page 6

A REPLY TO CRITICS

MR. MASSEY ON INCREASED TAXATION

“ THE OTHER SIDE OF THE

LEDGER ”

Asked on Saturday if he had anything to say in reply to criticisms which have appeared in some newspapers recently in regard to the legislation of last session providing for increased taxation, the Prime Minister stated that he had no doubt a good deal could be said in this connection, but he would take the opportunity tb deal with just one or two of tho points raised. It seemed, for instance. to be imagined by the critics referred to that once the war had ceased all expenditure in connection will'll it would at once cease, but, as a matter of fact, there were enormous liabilities left after the war had come to an end. For instance, interest and sinking fund on war loans, war pensions, increased salaries and bonuses caused by the high cost of living, amounted to many millions per annum additional, as compared with the pre-war period; and there was only one way in which these liabilities could be met, namely, by taxation. The statement that Government and Parliament committed an error last session by increasing taxation without making the slightest attempt to check the growth of expenditure was quite contrary to fact. The Government had been engaged ever since the elections in one continuous struggle against demands from all over.the Dominion for increased expenditure, and also endeavouring to reduce the expenses of administration. • With regard to the latter, he expected later to be able to show Vhat during the present half-year the burden upon the taxpayer had been reduced by several hundreds of thousands per annum. With regard to the section of the Act passed last session which provided for the next collection of land and income tax, it was necessary to bear in mind ihat the increase in the total maximum rate, from 7s. Gd. to Bs. 9d„ was not so heavy as would appear from a superficial comparison of the rates, and, by the way, this increase, if It was required, would not come into operation until, in the case of land tax, November of this year, and in the case of income rax, February of next year —just about the time when, according to present appearances, increased revenue might be urgently required; The existing taxation was 3s. in the £ ordinary income rate, levied on taxable income, and 4s. 6d. in the £ levied on assessable income, that was income before exemptions had been deducted (the proposed Bs. 9d. was assessable income only). The tax was admittedly heavy, but he thought that the probable effect had been greatly exaggerated. Certainly the rates in New Zealand were much less than in 'England. The statement that taxation on the scale now proposed would have the effect of checking enterprise was contradicted by the, fact that there had been a very large increase in the number of companies Registered during the last year, accompanied by an urgent demand for capital for ilie extension of business, over 600 new companies being registered during the year with a capital of nine and a half millions; but, as usual with adverse criticism, the other side of the ledger was conveniently ignored. For instance, important alterations were made by way of 'exempting the smaller mortgagors from land tax up to the amount of their mortgages. There was better provision for the exemption of widows with children; exemption from income tlax in respect of dependent children, and also in respect of insurance premiums. There was also discrimination between earned and unearned income, and exemption in respect of income tax on property held by trustees for the maintenance and education of children. As a matter of fact, there were so many exemptions that a doubt had been expressed whether the increases would be equal to them. It was necessary to- remember, too, that :'he taxes to which objection had been tafen could not be collected until after the passing of the Land and Income Tax Bill of next session, by which time he would have a vety much better idea of the amount of money required than was possible at present. He would have, much more pleasure in substantially reducing taxation than in maintaining the present rates or increasing them, but the country’s obligations must be met.