WELLINGTON NOTES

Hokitika Guardian, 20 April 1923, Page 1

WELLINGTON NOTES

TAXATION OF OC.MPANJES. DOCTORS DIFFER. [Speciai, To The Guardian.] WELLINGTON’, April IS The person who invites .Mr \\ . D Hunt to a controversy over figures does so at his own peril. Mr Hunt, who was chairman of the Taxation Commission set up h.v the Government lasl year, ha- persistently and consistently urged the reduction of the company income tax in its higher gradations a> a cure, or, at any rate, as an amelioration, of the financial ills trom which the primary producers are sulfering. 11 is> contention is that the companies with 7s Id in the pound to pay on their own profits cannot allord to advance money to the lariuers who lean upon them at a lower rate of interest than Bor 0 per cent. He has iterated and reiterated statements to this effect, and last week Mr ShitTeliffe, another member of the Taxation Committee and generally understood to he the author of the minority report that emanated from the body, challenged his' < (intention in a series of articles contributed to the “Domim ion. - ’ Mr Sliirtelilfe took his stand on the fact that he knew of four mort-

gage companies that were lending money at an average rate of 6.1 polecat and yet were paying dividends varying from sto 6.J per cent. He was anxious, no doubt, to make the attitude of the Government towards this question good. THE POLITE REJOINDER. .Mr limit was absent from Wellington when Mr Shriteliff’e’s articles appeared and he returned to the city only yesterday. He has 10-i no further time, however, in making the retort courteous. "Let us examine his statement,’' lie writes, referring to Mr , Shirtilitfe's indictment." "He gives a table prepared from the balance sheets of four companies receiving , money on deposit and lending it on mortgage. The table purports to show the results ot the lasi year's working of these four companies, lie dues not give their names, hut, calls them A. B. ('. and D. 1 happen to have the balance shoots of these same four companies. They must he the same because the paid-up capital, deposits, mortgages, and dividends are all the same. A perusal of these balance sheets makes it evident to me that ilu* table published as .Mr Shirlelilfe's was not prepared by him. A gentleman of his known business ability and thoroughness when writing for. the informal ion of the public would never he guilty ol putting forward such a table as a fair .statement of the position disclosed by the balance sheets. Someone has let him down.” From this courteous summary of the position Mi Hunt proceeds to details. THE FA( TS. It would l«e inip.i-sihle here to follow Mr Hunt through two columns of print in which lie demonstrates the inaccuracy of his critic's tigurcs. hut two or three of Ids points may he mentioned, lie sets tip- companies "A" and "D" aside altogether, because, as lie points old, they are so small that the one pays only 3s 2d in the pound by way of income tax and the ot I ii* i only 2s Id in the pound. These are rates about which there is no complaint. As for I,lie other two companies, "11" and they have paid all average dividend on their j shareholders’ funds of .‘1.2-s per cent ami have between them added Cl titl'd to their reerve funds equal to another .17 per cent or 3:J per cent altogether. "Mr Sliirtelilfe and every business man will know," Mr Hunt declares, "that these results ale nut satisfactory, and that if they are continued the entnpauies will liquidate." Mr Shirlcliffe had put a hypothetical case ill which a company had borrowed a million on debentures al ’>' per cent and by lending ii out at 7 per cent had made a net pndii of L'ti.llJft, hut Mr Hunt shows that after the company had paid debenture tax it would lie involved in a 10-s of £2,250 without taking had debts into account. RATE OF INTEREST. Finally Mr limit disposes ol Mr Shirlelilfe's implication that £S 12s (id per cent would lie an unconscionable rate of interest to charge the farmers who are compelled to turn to the stock and station agents for assistame. lie allows Mr Sliirtelilfe to have his company with a million of its own capital and a million raised bv debentures at .5! per cent a total of two millions. Then la* shows that the two millions loaned at IS 12s (id per cent would return £172.500. From 11 1 iwould he deducted £55,000 interest on debentures and £IO,OOO for expenses, .Mr Shirtclill'e’s own figure, leaving a prolit ol .£ 107,7)011. From this would have to he paid income tax of £13,000 and debenture tax of £'8,250, equal to 2 per rent, on the capital without making any provision for reserve or had debts. "Mr ShirtelitFe’s company," Mr Hunt iii-Kls, -'could not lend even at £8 12s (id per cent and make a reasonable profit.” And apparently lie is correct. Ii lomains for Mr Shirtelifl'e to reply on behalf of those members of the Taxation Commission who subscribed to the minority report.