TAXATION BURDEN

Hawke's Bay Herald-Tribune, Issue 95, 8 May 1937, Page 9

TAXATION BURDEN

Increasing Demands on Life Offices FACTS OVERLOOKED SYDNEY, May 7. Referring to taxation in hjs address at the annual meeting of the A.M.P. Society, Sir William Hunt, the New Zealand deleggte, said; — "It i? ia matter for some parfcicular regret that the Government thought fit during the year to increase the taxation payable by.life offices in New Zealand. At first glance, it may perhaps be considered that life assurance offices, by yirtue of their large and rapidly accumulating funds, can well alford fhb demands made upon them for taxation. The all-impprtant fact qiust nqt be overlooked, however, that these large funds are not 'reserves' as in the sense of ordinary trading concerns, built up from profits, bur rather do they com prise the aggregate of many small interests of individual policyholders-— the i totals oi the mjnimum amounta which j will, with future premiums and interest, be sufficient to pay future claims when they arise. In other words, these funds are capital surae, or savings, which must eventually be retumed to the policyholders or their dependants. "There are some 600,000 life assurance policies at present in forco in New Zealand, and a large proportion of these policies represent a provision for dependent wives and children, and as every additional expense incurred by the office must necessarily restriot it-s boniis-paying powers, the tax on insur ance Offieds has lnot unjustly' been referred t« as 'a tax on widows and orphans.' The bonuses' paid to pQlicyholders certainly often receive the designation of 'profit e, ' . • but strictly speaking this is an incorrect u?e of th«» word, as they are, fn reality, excess contributions which are retumed either in the form of cash or increased assurance. "The payment of a life assurance bonus is analagous to the case of a buyer receiving 5/- change out of n pound note which he has teudered for goods costing 15/-. If a life assurance office knew. in advance what rate of mortality it was going to experience, what rate of interest it would secure on its investpients, and what expense* would be incurred in the future, there would be smaller premiums chargeable and no surplus for any bonus payments It may well be contended, the'refore. that far from being subject to in-; creases in taxation, life offices should be accorded every possible relief. Under the 600,QQ0 pQlieies I referred to earlier, there are in New Zealand assurances totalling nearly £120,000,000, which represent an average policy of less than £200, and an average annual premium payment of about £7. This. .demonstrates very forcibly the fallacy of the assumption that life offices are a combination of capitalists. "