TAXATION ANOMALIES DISCUSSED

Dominion, Volume 35, Issue 288, 3 September 1942, Page 3

TAXATION ANOMALIES DISCUSSED

Vigilance Committee MINISTER REPLIES TO DEPUTATION

The Taxation Vigilance Committee, working under the Associated Chambers, of Commerce, recently waited on the Minister in charge of Ixiud and Income Tax, Mr. Kordmeyer, to discuss anomalies in the incidence of taxaThe chairman of the committee said that the object of the deputation was to discuss with the Minister giave anomalies and to press for correction of Injustices under which certain classes of taxpayers were suffering.. The commercial community was graie--3y concerned about the weight ot taxation and about the relative propoitions of the national income spent, on the prosecution of the war and in other directions, Ibut realized the necessitj, while the war continued, for taxation up to the limit of taxable capacity, and did not wish to embarrass the Government by criticism that was not cons true tive. * ■' * Replying to representations about the taxation of non-resident traders, the Minister says that both the United States and Canadian Governments have been informed that the New Zealand Government is prepared to enter into agreements similar to that made with the United Kingdom. He understands that the High Commissioner for Hr. Riddell, is arranging to forward submissions to his Government with a view to concluding, if desired, a similar agreement. ■ „ ■Discussing the double taxation of overseas companies, the deputation said that some such firms trading in Neiy Zealand were taxed more than 20/.- in £1 on their profits, which, it was submitted, was fundamentally wrong. Hie Minister, in reply, says that the prob- < lem appears to be capable of solution only by appropriate action by the United Kingdom Government. Fronts made in England by New Zealand firms are exempted from tax in New Zealand if they are subject to tax m Great Britain. "This exemption follows the principle that the country where the profits are made is entitled to the tax. If Great Britain is prepared to grant a similar exemption for profits made in New Zealand by firms in Britain then the anomaly would be removed. He adds that representations are being made to the United Kingdom authonthe subject of earthquake damage the deputation said that those, who.were fortunate enough to be insured against it . had, throughout the perilod durim, which they had been insured, deducted from their assessable income the premium paid by them. When they repaired damage today the actual cost had been deducted from their assessable mcoiw. Those who were not insured had to beat the full cost of repairs, and it was an iniustice that they were not permitted , meantime to deduct . this expendihire from their assessable income. The md vidual taxpayer .was not insured at his discretion, because insurance had in the past accepted only a limited amount of earthquake cover and . many neonle had been unable to insure. the Minister says he recognizes that an anomaly exists. The <teT>artmeht would not have -any difficulty ?n differentiating between earthquake damage and capital improvementss if -t were decided that earthquake <Tfr to be permitted as a deduction , difflcul y, however, lies in the fact that an -undesirable precedent would be created if losses due to earthquakes were Pelted to be charged against business profits. He in tends to make further, inquiries to see whether a remedy is available. . The deputation objected to the method of assessing taxation on recipients of earned, “unearned and non-assessable in come under the Finance Act (No. 2), 1942. One speaker said. .We c^ n . the justice o£ singling out certain men for a penal tax well over and above that heine paid by men with the same income. replies that the new system was adopted «« a temporary expedient to avoid complications which would have arisen from an increase in the percentage war tax- If. investigations disclose that a more satisfactory method is available it will be. adopted „ Referring to section 7- of the Lunance Act 1942, a member of the denutation said : “This section not on, y, p ’ ac^ t obligation on all employers and creditors to collect arrears of income tax, but gives the Commissioner of Taxes the rightt mortgage any and every man s income, even when he has paid all taxation due from him, to meet future. taxation that may. or may not, be assessed. Why give such a wide power to the Commissioner. This clause also places the Commissioner s in a preferential position as a creditor against all and every other creditor, without recourse to the. Courts, withoutp of indebtedness and without afford in., the creditor any protection against what may prove to bi an arbitrary and wrong decision of the Commissioner. I very much doubt whether, if these powers were exercised, they would be found to be valid. We think there should be some modification which does not make the Commissioner a preferential creditor Replying, the Minister says. Ihe sec tion ™ adopted because the department found considerable difficulty in collecting income tax from the wages oftoxpayers through the usual channels. The 6ect ' aa provides for the deduction of income tax , in arrears and also an amount sufficient to cover income-tax for the current year which may not then be due The reason for this is that a person who was a defaulter in one year might unfortunately ;be a defaulter in the succeeding year. A -certain amount of criticism has been I made of the powers of the Commissioner under this section, but I am satisfied t(iat the Commissioner will exercise his authority in a just and) reasonable manner. I am informed that the department in practice is not at present applying that part of the section which refers to tax Sot then due. Possibly your suggestion that employers deduct tax from their employees on a voluntary basis would remove £he objection which you make, but against this suggestion must be considered the possibility that such a voluntary, basis would not adequately meet the difficulties with which the department is faced. However, this question will receive the close consideration of the Government when in Ihc course of time experience has proved the merits or demerits of the clause.” ,