TAXATION ANOMALIES.

Hokitika Guardian, 6 April 1922, Page 4

TAXATION ANOMALIES.

(To the Editor.)

Sir.—Having occupied so much of your space with my two previous letters dealing with the anomalous opdra- t tioii of the income tax in its. applica- 1 |fc>n to companies, I will be as brief as I possible in mentioning the remaining incongruities which have been strongly emphasised by the enormous increase in 'the rate of the tax. Perhaps these can be best presented by quoting state meats made quite recently by business men of high standing and wide experience, who speak, not merely for themselves but with equal authority for a large number of producers and investors.

Here is a running list of them prepared by a commercial man doing business all over the Dominion, chiefly with farmers, tradesmen and manufacturers:—“(l) Losses incurred in running a business or a farm a/re not allowed as deductions from a salaried taxpayer. (2) Loss incurred in one year or in any succeeding year. (3) Interest paid on. a bank overdraft is not permitted to be set off against the interest earned on money borrowed and placed on deposit elsewhere. (4) The cost of litigation in defending patents, etc., whether successful or unsuccessful is not allowed as a deduction. (5) Rates of depreciation of various assets and items of plant are ridiculously low. (6) The price paid for sinking a bore in an unsuccessful attempt to obtain water on a farm is disallowed ns a deduction. Profit on

company’s earnings even in ■ cases where all the members are employed as workers is not deemed to he earned income. (8) Tax is assessed on th c not income of a limited liability company, while in an unregistered partnership the individual partners are taxed on their respective shares in the profits.” This, again, is the view of a lead-

ing business man controlling a great farmers’ co-operative concern: “The effect of the present company taxation lias been the means of not allowing companies to strengthen their positions lit building un substantial reserves, which every prudently managed company endeavours to do. Had they been allowed to build up reserves, most companies would have been able to pay dividends is usual and the present slump could have been faced with a, certain amount of equanimity. What is still more important

than paying out dividends, a large

number of farmers could have been assisted over the present crisis, whereas now, numbers will go right out. abso-

lutely ruined, whom it would have paid the companies to nurse and help along until times improved. Thus by assisting the men on the land, tho companies would have rfnnsidcraihly

mitigated the difficulties of thc slum]) and so relieved the Government of a lot of the embarrassment it is now experiencing.” Another manager of a big trading company, also chiefly concerned for the welfare of the men on the land writes: “Under Section 86, sub-sec-tion 1, individual holding an executive position, whose emolument comes by way of salary, in the event of investing in a farming proposition, is not allotted to Ueuucl lrom the assessment on his s'aiary any losses sustained in the farming venture although m the event of a profit being derived, such is added to tile salary and the tax levied at the graduated rate. So far neither Mr Massey nor

tho taxing officials have been able to explain by what process the differentiation is arrived at, but there is talk of a test case being taken in the Supreme Court to determine the proper interpretation of the law.” The head of a. firm of stock and station agents that has done inval-

nahle work in opening up a wide rural district presents other aspects of the question“A concern like ours which constantly has to be opening up in new district has to reply on the local market! for additional capital to enable it to supply the requirements of its clients. The present tax is a. constant bar to the investment of capital. In the stock industry, which is the main portion ol our business, expenses, such as taxation, cannot he passed on. We are trading with our clients on fixed rates of commission which, under present circumstances cannot he increased. The fact that ten shillings in the pound has to go in taxation is simply paralysing to the individual efforts of any man.”

An extract from the protest of a large manufacturing company compelled by the nature of its business to hold land in diii'erent parts of the country must conclude these extracts from a large number of bitter com-plaints:—-“The gross injustice of lump ing together foj- land tax all free-bold and leases owned by business concerns in the various towns of the Dominion is little short of a crime. It is well known that the graduated tax was established in order to penalise or ift least burst up the large pastoral es- 1 tates which were not benefiting in any shape the general public. As it now stands, enterprising concerns employing largo numbers of hands and paying big wage lists, thereby benefiting the towns and the Dominion alike, are treated in exactly the same manner as the men against whom the legislation was directed.” These statements were not prepared with the intention of their being published, but were supplied in answer to inquiries and show the facts of the position as they are known to every business man acquainted with the producing and manufacturing industries in the Dominion. I am etc., EQUITY.