The Hokitika Guardian WEDNESDAY, MARCH 22, 1922. THE BURDEN OF TAXATION.

Hokitika Guardian, 22 March 1922, Page 2

The Hokitika Guardian WEDNESDAY, MARCH 22, 1922. THE BURDEN OF TAXATION.

Thf heavy burden of taxation being borne by trading companies together with the excessive overhead charges which they are compelled to meet, is causing some concern among the principals of several of the largest wholesale houses in Auckland (says hhe •‘New Zealand Herald”). Discussing this question on Saturday one merchant said that the present incidence of taxation must be changed and shareholders must he liable for income tax, instead of the companies, or many of the wholesale houses whoso riade is strictly confined to traders would have to retire from business. 'Under the present system, lie said, practically ouelialf of the net profits is paid to the Government in income tax, which meant that wholesale houses must necessarily endeavour to make just twice the amount of net profit which would he reasonable in normal times. This was manifestly impossible as their prices must be regulated by the cost at which the retail houses could themselves land the goods and the prices quoted by indent agents. A company aiming to. make a 0 per cent dividend for its shareholders,” he continued, ‘‘must make a net profit of 12 per cent on its capital; one-half of which goes to the Government, the other half to the shareholders, and there is nothing to go to reserve for further extension of business. To make 6 per cent for shareholders and put to reserve say 4 per cent, a company must make a( profit equal to 20 per c ent on its Capital, half of which goes to the Government six to shareholders and four to reserve. It is an impossibility. If tnero are preference shareholders with a guaranted dividend of 6 per cent or 7 pep cent, (he position of the ordi«»]

■ ary shareholders is very .precarious, as by the ,time the Government gets its 50 per cent of the net profit and the I reference shareholders their G or 7 tier cent on their capital, the company must be a wonderfully profitable one i with possibly a monopoly, if there is anything left for the ordinary share-

holder. As to banks and insurance companies, as they are practically a monopoly, they can pass it on to the public, who squirm hut have to pa\ up, hut as for the wholesale houses and companies manufacturing to supply the retailers, there must be a. change and that soon, or thero will bo few left in business. Perhaps during the war the system was justified as a war measure he added, but stocks were then low, prices were constantly rising and it was an easy matter to get more than the normal profit. The Government had practically used the companies to raise revenue in an indirect manner from the public, but now that trade was becoming more normal, the low prices at which retail importers could lay down the goods and the keen competition with indent agents and representatives of (English manufacturers who paid taxation on a lower basis made it impossible for wholesale houses to aim at getting anything more thah a reasonable profit,” Ahother wholesale maiiager said they must endeavour to trim their overhead costs to equalise their reduced income. They were doing the same volume of trade but the actual cash turnover was down quite 40 per cent. The ratio of profit was now about the same as when the turnover had a high cash value, so that they were working on a much smaller profit. In addition to taxation wagqs would have to come down, li was explained that the soft goods warehouses were working on a register s' agreement with their employees by which boys of 14 or 15 clitef their employ at a wage of 25s a week, and at tile end of their fourth .year are entitled under the agreement to receive £228 a year. The warehouses to-day cannot afford to pay these wages,” sail this manager, “with the result that we have found it necessary to dispense with .the services of many of these young men and engage others at tile lower starting rate ”