Evening Post. THURSDAY, FEBRUARY 9, 1933. THE ACCOUNT RENDERED

Evening Post, Volume CXV, Issue 33, 9 February 1933, Page 10

Evening Post. THURSDAY, FEBRUARY 9, 1933. THE ACCOUNT RENDERED

The first decided repercussion of the Government's high exchange policy Is the increased taxation which conies into operation to-day. Ministers may seek to avoid the issue by claiming that the sales tax was proposed a year ago and that sugar and tobacco are not more heavily taxed than in Australia and England, but there is no gainsaying the fact that higher taxation has become imperative because of higher exchange. The Dominion will end this financial year with a deficit of about £700,000 and with a reserve of taxable capacity. It might have done the same next year with a deficit still definitely manageable without imposing additional taxation, or with a Budget within sight of balance if tax reserves had been tapped. But the high exchange load of almost four and a half millions made it hopeless to pile more on to the Budget. ."art of the load had to be shouldered by the taxpayer. Tl\6 great blessings which (according to the high priests of inflation)'will descend in s-owers from high exchange do not, unfortunately, include anything of such clear and immediate cash'value that it can be put on the "credit side of the Budget. The credits, in Mr. Stewart's words, are "distant, doubtful, and speculative." The debits are "direct, immediate, enormous, and inescapable." The credits may be inflated by rhetoric, but when hard, cold, solid facts ~ are . under calculation for the Budget the i Finance Minister goes elsewhere for i his taxes. 'We cannot blame tlie Finance Minister for thus discounting his own optimistic expectations of early benefits from the high exchange. A Budget balanced by high hopes and optimism would topple over the edge. A deficit of £4,500,000 is bad enough, but £6,900,000 ' w.ould be worse. So the higher taxation had to come. But that does not mean that it is inescapable. It is inescapable only as a consequence of the initial inflation blunder. With-' out that blunder it could have been avoided, at least in part. To plead lin excuse, as the Finance Minister did, that Australia, Canada, and several Continental countries already have the sales tax is not to prove its justification. Not one of the countries imposing the tax would I claim that it is not a hindrance to' trade and therefore an obstacle to ' recovery. Nor does it make.. the I position any better to point out that this tax was recommended by die Economic Committee a year ago. It may even have been considered by' die Government at ihat time, but high exchange had not then put on additional 15 per cent, on to the cost of all goods. Now the Government has imposed this 15 per cent, burden; (making 25 per cent, in all) through exchange and has added 5 per cent, more through the sales tax so as to extract from the general taxpayer the Government's share of the farmer's subsidy. . The farmer has five shillings added to his pound and the consumer, in addition to paying this five shillings on imported and London-parity priced j local products must ,find another j shilling in the pound. A year ago, the Government thought it worth I while to make a special effort to avoid this, to give business a breathing space for recovery. Now thebreath has been knocked out of the body of business by exchange, and tlie sales tax is another blow. The most that can be said in miti-' gation of condemnation _ that the* method reveals anxiety to lessen the severity^ and inconvenience of the impost. If a sales tax had to come its incidence and the method of collecting it have been made as reasonable as possible. The burden, both of sales tax and new duties, will not be heavy on the relief workers or others whose money is spent principally on the necessaries of life. The Labour protest on the score of taxing the poor was overdone. Admittedly the sugar duty and the sales tax which will be collected on clothing will make life a little harder for many whose lot is already hard enough. But the in: direct effects of the taxation will be worse than this. Business will be under another handicap and a further expense, and that section of the community to which, as Mr. Stewart pointed out, the country musti look to sustain the Budget will have its ability to do so greatly diminished. Apart from this effect, it is to be feared that the extra threepence a gallon on motor spirits will accelerate the operation of the law of diminishing returns. Motoring for pleasure will be curtailed and motor transport business will slacken. The Government may hope to make good the loss thus entailed by increased railway business; but this is the wrong way to seek such redistribution of traffic. We have always held that transport charges should be fixed to promote the economic distribution of business, but the taxation should be based on road use, not on consideration of the ease with which money can be extracted from a particular class to relieve the general Budget position. Rural industry and rural products

are almost wholly exempt from the sales tax. It is acknowledged that the exemptions are not limited to rural products and requirements, but, nevertheless, the general effect is that this is another tax on tlie towns. The most notable exception to this rule lies in the imposition of a gold export duty. Though this _ j __* away only the increment added by exchange and will be collected on old gold from jewellery .and bank holdings, it is a little anomalous that the primary industry of gold-winning should alone be deprived of the exchange benefit. In excuse it may be argued that the price of gold has, risen while the return from "other primary products has fallen; but the Government has been endeavouring to profit by this rise through the encouragement of gold-mining to relieve unemployment. Apart from this' item the general principle governing the new taxation appears to be that which has been much too marked in recent Government policy—that the towns can still bear burdens, but the country must be relieved at all costs. There is an obstinate refusal to realise that the load oh urban _ population is already crushing, and that the towns have not shared in special statutory and subsidy aids, except the minor concession of the building subsidy, and in rent and interest reductions in which the towns gave more than they gained. Otherwise tlie towns must be content with the cold- general comfort of the oft-re-peated assurance that they will prosper when the farmer prospers. In the meantime they must pay-because a Government dominated by rural interests seems incapable of realising that the national welfare can be promoted only by a national policy which considers equally the rights and needs of all classes.