INCIDENCE OF TAXATION

Dominion, Volume 21, Issue 130, 1 March 1928, Page 8

INCIDENCE OF TAXATION

AN ANALYTICAL SURVEY BURDEN OF LOCAL RATES PROBLEM FOR GOVERNMENT Dominion Special Service. Dunedin, February 29. The ramifications of taxation generally were surveyed by the Minister' of Finance (Hon. W. D. Stewart) in the course of his public address here to-night. The Minister claimed that on the general question, no fair critic could come to any other con. elusion but that taxation in New Zealand was light, and comparafive figures and a wealth of facts were quoted in support of that contention. Reference was made to last year's revision, company taxation, and the burden of local rates, the Minister expressing the opinion, with reference to the last-named matter, that one of the most serious problems the Government had to face is how to help the farmers where the special rates are so burdensome that it is impossible for them to carry on. “To sav that taxation in New Zealand is £l2 ss. 7d. per head is jio indication of whether taxation in New Zealand is high or not,” said the Minister, who declared that the real burden of taxation could onlv be measured by the’ actual rates of taxation and not by the aggregate vicld of taxation divided by tile population. According to the year book, Customs revenue in the last ten years rose from to over £9,000,000. In the Same period the value of imports rose from about £25,000,000 to £l9,ooo.ooo—in a far greater ratio than the population. “This does not mean, however.” said the Minister, “that Customs duties have been trebled; we know. as a matter of fact that the actual rates of taxation have been reduced. The Customs revenue goes up because the imports have risen. These imports have risen either because the purchasing- power of the people has risen or tliev have become more extrn-n-ant. But if the critics, who base their attack on the principle of the rate per head of taxation and relv on *he increased revenue from Customs tariff are correct, the easiest way to show' a lower rate o' taxation per head in New Zealand would be to double the rates of dutv under the Customs tariff and therein' shorten lit) the imports. A Comparison. “So far from the high revenue per head from Customs bein" an evidence of Increasing burdens, it is only an evidence of increased wealth and spend,.Ower on the nart of the nublic. If therefore, we wish to see whether th- neo-fle of New Zealand are high v taxc'l through the Customs the only sound wav is to compare the actual rates of dutv imposed on articles imported into New Zeeland with the actual rates of dutv charged p” articles imported into, sav, Australia. We know in fact that our rates of dutv are substantially lower in New Zealand, any vet the vicld per head of population is ennal to, if not greater than, that in Australia Tt certain l '' seems a paradox to allege that under these circumstances Customs taxation 1« high 111 New Zealand whereas, ns tariffs co. New Zealand has a k»l tariff. Nevertheless, economists and others b'.’sp their charge that New Zealand is hcavilv taxed noon the fact Hint imports are hmb an therefore the vield nor head of the tax is high. nß’-oiigh the actual rates of duf’' are low. “T have dealt with Customs revenue because it makes up over 50 ner cent, of the tax revenue. Bui' there are other items that are incorporated in order to arrive at the taxation per head in New Zealand, such as land tax. hmome tax, death duties totahsator “and other taxes. TnViim each of these in mm, how cyn .t b e arrnred that the land tax in New Jealand .s hiMi when out of about 30,009 farmers over 55,000 pav no land tax at all. nor do ffiev pav income . tax. “Tf the land tax- is high., it all falls on the shoulders of a verv " nn, ; - her of lar-e land owners.. ? here it mav be hi“h. but c’-en this is m dispute, and if it is hitffi it was. .apparenth made so to prevent n Sgre"ation of laud rf then the Customs rates of taxation are low and the land tax- is so framed that over two-thirds of the fanners escape pnvment of it. we have not yet found the grievous burden of taxation that is continually being denounced.

Let Off Lightly. Dealing with income taxation, the Minister' said that a comparison of the rites of taxation on individuals in New Zealand with those of other countries demonstrated beyond doubt that the individual income ax payer nN Zealand got off much more ligltly than in -uiv State in Australia, and mucn moreiightly than the English taxpay« One example would suffice. A man wirn £6OO a year in New ' Zealand - Against 0 ; £lB 7s. 6d. in A ictoria. £-15 9s. 4d. in Queensland. £22 Ils. lOd. in South Australia, and £32 Bs. Bd. in England. "That is Io sav, he pays twice as much in any Australian State and three Huies as much m Great Britain,” Mt- Stewart said. Anyone who takes the trouble to compare income tax in New Zealand with that ot other countries will see how- extremely fortunate the New Zealand taxpayer 1S- The real fact is that an examination of the rates of ‘ axa ‘'« n ’ “ S apart from the yield of the tax, whether it be Customs, land tax, or income tax, will show that taxation in New Zealand is low as compared with other countries. There are two exceptions 1 make to this- the first is death duties, which I think are high, but which form onlv a small part of the total revenue-less than 10 per cent. Burden of Local Rales. “The other and very serious burden ol taxation in many districts is that of Hie local rates. lhese are often lumped together with the genera .State taxation to show the burden tb e New Zealand taxpayer 1 hey u ' ld “" bted ’- form part of his burden but they are not imposed at the hands of the Government. But so onerous have the loca , special, and general rates become some districts that farmers are ill dancer of being called upon to pay by way of rates more than the full economic rent of the land. One of the most serious problems the Government have to face is how to help these where the special rates are so burden* some that it is impossible for them to carry on. “ft is no assistance for the Governmint to write down the value of their land, as the special rates must be made to vield enough to pay the inter est l and sinking funds on the loans wh.itcve the land may be valued at.” Continuing, the Munster said that although last year’s income tax revision

provoked a storm of criticism, he had not met any fair-minded critic who, when the matter was fully explained, did not agree that the proper thing was done. The Minister recalled how, when revenue was needed during the war the income tax had been raised from time to time, but on no uniform plan, and that when, after the war, reductions were made, the remissions took the form of a general percentage reduction, with the result that some taxpayers were actually paying a less rate of income tax than they did before the war. That meant that those classes of taxpayers were making no contribution whatever towards the cost of the war, whereas other classes were paying up to 250 per cent, more than pre-war. Some Government had to straighten out the schedule. The tact was that our income tax scale had been so ragged and the various exemptions so far-reaching, that the whole burden of income tax was gradually concentrating itself on a few classes of taxpayers. Anv attempt to reduce income tax on the existing schedules would have meant still further anomalies, and where the great mass of the income was no commensurate taxation would have been collected at all. An Exaggerated Statement. The Tax Department estimated that the extra revenue might amount to £150,099, but to make clear that the mam object of the revision was to put taxation on a fair basis, and not to gain additional revenue, in the revision of the Customs tariff the Government estimated for reductions which involved an immediate loss of revenue of more than would be gained by the income tax revision, and which might result, in a loss of levenne of more than twice as much when the full effect of the tariff revision made itself felt.. It was true that the people who received the reductions in Customs duties might not coincide exactly with those who paid more income tax, but he refused to believe that any taxpayer would willingly escape paving his share of the war costs. The published statement that the effect of the revision was to double or treble the income tax of certain taxpayers was grossly exaggerated; the increase in the rate iii no case amounted to anything like double what was paid before. In most cases where a taxpayer showed q marked increase in tax, it would be found that some of liis exemptions, particularly for children, had disappeared. “It is true that company taxation may discourage enterprise where die maximum tax absorbs 4s. 6d. in the £l, added the Minister. “But many of those who are most insistent, on the need for changing over to individual taxation-of shareholders are the same people who denounced with unrestrained violence the modest revision of the income tax made last year. What, then, would these critics say if the company tax is done away witli and each taxpayer, whether a company shareholder or not, has to submit to double his present tax up to at least incomes of £2OOO a year? Such a proposal is politically impossible, and would involve the immediate downfall of anv Government that proposed it. Even if a half-way change over was niaHe, as one commission suggested, the same result would ensue. As a matter of fact, we did afford valuable relief to companies last year by allowing the debenture tax to be collected from individuals direct instead' of from the companies I have evidence that this change has been much appreciated. It may be possible at a later date to extend the same rule to future issues of preferential shares, which would still further assist the companies. But the change over to the individual tax must be a gradual one, whoeter attempts it.” Substantial Reductions. The Minister concluded with the statement that between 1922 and 1926 reductions in taxation which amounted to over £4,000,000 annually had been made That included reductions in land and income tax, amusement tax, Customs duties, and postal reductions At the same time, between 1922 and 1927 the War Debt was reduced by £8,280,001) On the general question of taxation he was satisfied that no fair critic could come to anv other conclusion but that taxation in New Zealand was light.