TAXATION OF COMPANY INCOMES

Dominion, Volume 14, Issue 266, 4 August 1921, Page 5

TAXATION OF COMPANY INCOMES

CRITICISM OF PRESENT SYSTEM.

“The methods of assessment of income tax on tho incomes of companies has been a constant source of complaint", said the president of tho Wellington Chamber of Commerce (Mr. M. A. Carr) in his address to the annual meeting of the chamber yesterday. “In my opinion the method adopted in New Zealand of imposing graduated income tax is entirely wrong as it is applied to the incomes of companies. "Tho idea underlying graduated or progressive taxation is that a heavier burden is put upon the wealthy. It Is based upon the theory that the greater the income of the taxpayer the greater the sacrifice he can make. Many industries ana commercial concerns in New zXnd can be carried on only after very large capital expenditure and as limited companies. To tax such incomes on a graduated scale simply because they hard large incomes ia inflicting considerable injustice on. the shareholders of such companies. The great bulk of these shareholders cannot be regarded as-capi-talists. It must be a very insignificant proportion that have inherited any wealth. What they have ■ invested in companies is the result of their savings acquired through hard- work. "It is perhaps true that during the war period it was possible for many of these companies to pay heavy graduated tax, and continue to return dividends to 8n ar ©holders. A now era in trading s» however, arriving; a period of keen competition in prices and a lower margin ot profits Any tax which is likely to be so onm-ouß aa to prevent a fair return on | capital is surely against tho interests of the community. If the present system of imposing graduated income tax is to he continued it should be safeguarded by first allowing capital a fair return, and imposing graduated taxation only upon the surplus over that fair return. "I quite realise that it will bo neceseary for many years to oome to obtain a verv large revenue from income tax, although it must be evident to us all that for the next few years the return will be very much less than it has been in the past three or four years. There is a limit to the taxation of Industry and. trade and I believe that limit has been reached, in New Zealand. Income tax:v- „ tion, on the present high scale at any rate, can only be continued provided there is very radical alteration in the methods adopted.”