The Guardian And Evening Star, with which is in corporated the West Coast Times.) THURSDAY, MAY 1st, 1924. THE INCIDENCE OF TAXATION.

Hokitika Guardian, 1 May 1924, Page 2

The Guardian And Evening Star, with which is in corporated the West Coast Times.) THURSDAY, MAY Ist, 1924. THE INCIDENCE OF TAXATION.

No hot tor definition of a just system of taxation could !><_» found than tiio olio which tho Prime Mini.ster offered in Ins recent, statement at In Voronihin. His policy, Mr Massey, declared, was that every man in tin* community should fay taxation in |irof.ortion to his ability to fay. This is a frank viiunei tion of a sound and ef|nitnl>!c principle which few people will gainsay. But while it is easy to state such a principle in hroad terms, its successful application to the financial affairs of any country require* a great deal of careful thought and deliberate consideration. Two highly important points are involved in .Mi - Massey's system. The first is that the taxation shall vest upon the individual on whom it is levied and shall not he passed on, and the other is that a. plain interpretation of the phrase '‘in proportion to his ability to pay" shall he provided. If every man is to pay “in proportion to his i bi'itv to pay’’ then the taxation must he levied in such a way that he will actually nay it out of his own resources. ami will have no opportunity to pass it- on for other people to hear. If the tax were levied in such a way that he could pass it on. then lie would not be paying taxation at all. hut j would lie merely acting as a oollector for i.ic State, n.s many individuals and companies are doing under the present system. In order to carry out Mr Massey’s policy effectively, therefore it is essential that the taxation should he levied in such a way as to ensure its remaining where it was. intended to bo placed. This is the very essence of the Prime Minister’s policy. Next it is necessary to decide what is meant by the words “in proportion to bis ability to pay”. Until comparatively recent years a man was deemed to pay income tax “in proportion to his ability to pay”, if be paid a fixed percentage of his income, no matter how large it might be. It was not until the special circumstances created bv the Great War arose that the system of graduated taxation, which is now adopted by most countries in one form or another, was brought into general operation. The idea behind the graduated income tax is that the man with a large income can spare for State purposes a larger proportion of each pound sterling he receives than can the man with a small income. If this principle is accepted, ns it has been almost universally, then it is important to ensure'that taxation shall be so levied that every man pays in proportion to his total jncomo from all

sources. Under the present system a man in the enjoyment of a large in. come may escape with a low rate of graduation because his income is derived from several sources, some of which are not taxable, while another man receiving a smaller income mny he graduated at a high rate I icon use the whole of his income is derived from one source which is taxable. A man, for instance, may lie receiving £I,OOO a year as a salary, twice as much for tho successful working of a farm, and twice as much again from shares in a company, £3,C00 in all, and yet his in. come tax would ho only £SO, while the income tax of a man receiving £2,000 as a salary and having no other income at all would bo £lB7 13s 4d. nearly four times as much ns would lie paid by the man with an income £3,000 larger. This is the kind of inequality the adoption of Mr Massey’s system would remove if the system were enforced equitably, but so far the complaint is that it is not.