The Guradian (And Evening Star, with which is incorporated the West Coast Times.) TUESDAY, MAY 22nd, 1923.

Hokitika Guardian, 22 May 1923, Page 2

The Guradian (And Evening Star, with which is incorporated the West Coast Times.) TUESDAY, MAY 22nd, 1923.

THE INCIDENCE OF TAXATION. Matters affecting taxation are sure to loom large in the coming session. The Prime Minister has promised to reduce taxation, which will ho a most acceptable cut. There is also the promise practically to announce penny postage in the Budget. In regard to racing taxation some relief has been promised after July. Under all these heads there will Ire much curiosity till Mr Ma ssey makes the important definite announcements. Meantime, per medium of tire Taxpayers’ Association, and by individual comment, the Government is under constant firo in regard to compnny taxation, which it has been shown is a serious impost, and is retarding expansion. Mr Hunt of 'Woffington is one of the most severe critics, and lias roused Mr Massey to a reply through the press, and Mr Hunt lias had rather the better of the argument. In a late letter replying to the Prime Minister, Mr Hunt went on to say :—“The fact is that Mr Massey’s system of taxation results in the taxation of the poor and the relief of the rich. This is why his system is being strongly supported by many rich people who know that they are escaping their fair share of the burden, while the poor and those of moderate means (especially the farmers) are carrying the great bulk of the load. This is entirely opposed to the basic idea of the graduated system, which is that the individual with a largo income can spare for public purposes a greater proportion of each pound than can the individual with a small income. This is how it works out wherever the individual system of taxation is adopted. But in New Zealand the taxation of companies as if their profits were the income of individuals, added to the other avenues that are supplied in this country for the escape of taxation by the wealthy, means that almost tho whole income tax is passed on to the public, and the bulk of it ultimately borne by the farmers, who cannot pass anything on. Under the individual system of taxation, passing on is impossible. Page 7 of the report of the New Zealand Taxation Committee shows clearly the manner in which the wealthy can escape income tax. The evidence given before the New Zealand Taxation Committee by the New Zealand Commissioner of liidland Revenue, and also the evidence given liefore the 'Australian Royal Commission by the Commonwealth Commissioner of Inland Revenue, show that both in New Zealand and Australia companies are chiefly financed by the savings of those of moderate means and the comparatively poor. The wealthy are largely in business on their own account, or have other investments. For example, take a company earning a profit of £IO.OOO ft year. It pays a tax of 7s 4d in the pound. In many cases there will be very few shareholders in the company with more than £3OO a yoar. This company will have to widen its margin of profits in order to be able to pay its shareholders a reasonable dividend and give the Government 7s 4d in the pound. It 3 competitor in business may he a private trader earning £3OOO a year. It is the private trader, and not the shareholder in the compnny, who is the wealthy individual but on liis income of £3OOO a year he pays at most 3s in the pound. Owing to'the company having to widen its margin of profit to pay 7s 4d in the pound, its private competitor can do tho same. He therefore collects the 7s 4d in tho pound from the public, pays 3s to the Governemnt, and puts tho mnitjninp; 4$ 44 in life ovrtt packet,

He is not paying tax at all. Obviously, lie is having the time of his life. As a matter of fact, the individual trader earning £3OOO a year probably will not pay more than 2s Gd in. the pound, because ho gets allowances for personal earnings, life insurance, maintenance of children and so forth, which a company does not receive. Under tho individual system of taxation, the companies do not have to widen their margin of profit in order to pass taxation on to the public. Tho taxes are paid by individuals, and the general public get their services at a rate which is not loaded by company taxation. Under this system tho wealthy individual, no matter whether a private trader or a shareholder in a company, has to pay graduated tax according to his means, and cannot pass anything on, while the small shareholder pays little, and in many cases noThing. Under Mr Massey’s system the heavy end of tho burden of taxation is borne by the poor and these of small means, while the rich largely escape. This is an absolute travesty of the principle of equality of sacrifice.