TAXATION.

Hokitika Guardian, 13 September 1924, Page 2

TAXATION.

ITS INCIDENCE. Til K NKW ZEALAND INCOME TAX'. (Contributed.) The New Zealand income tax differs in several important respects from the L’ritish income tax. It was first introduced l.y the Land and Income Tax Assessment Act of 1891 r.ml took the place of ill; property tax, which practice. I Iv, Inn; been a capital levy upon all descriptions of property irrespective of their earning capacity. The new tax was imposed upon all incomes, those of companies as well as those of individuals, with an exemption of £3OO is the case of individuals only. Companies were charged a fiat rate of Is in the pound, while individuals were charged fid in the pound on tile first taxable If 1.000 and Is in the pound on taxable income above £I.OOO. Tho higher rate was charged only on such part of the taxable iiicotlio as exceeded e 1 .ODD. Incomes derived front freehold farms paying land tax were not (charged income tax, hut income derived from pastoral freeholds were charged. A All ■’. N D AIF NT .8 IN PEACE TIME. 'I hose rates remained unchanged till 1910. In that year the principle of graduation was applied for the first time. In the case of registered companies taxable incomes of £1,2(30 paid Is in the pound: of £1,2)0 to £2,000. Is Id; and of £2.000 and over Is 2d. In tho case of firms and individuals | taxable incomes of £ III!) paid fid in the I pound: of .£ll.O to £G(!0, 7d ; of £3OO to £71)1), Sd : of £70(1 to £801), Od ; of £BOO to £!)l!0. 10d; of £!>00 to £,IOOO, 11,1: of £l.OllO to £ 1.2.1(1, Is; of £1,250 to £2.000, Is 1d and of £2,000 ami over Is 2d. Debenture-holders in companies were charged at the rate of Is in the pound, the comuanies paying the amount as agents for the deben-ture-holders. These rates remained in force fur the next two years, that is for the financial year 1011-12 and 101213; hut were revised the following year, when a new and more equitable system of graduation was applied to the higher incomes. In the case of registered cnmpniiies taxable income of £1,200 paid Is in the pound; of £1.200 to £I.OOO. Is plus 1-200 of a penny upon each pound above the low--1 er amount; of £I,OOO to £2,-100, Is 2d plus 1-100 of a penny; and £2IOO, and ever Is Id. In the case of firms and , individuals taxable incomes of £-'OO • paid Od in the pound; of £IOO to i £l,lOO, (Id plus 3-100 of a penny; of ■ £l,lOO to £2,100, Is lid plus 1-400 of . a penny; and of £2,400 and over Is Id. • Tiie rate paid hv debenture-holders roi mained unchanged at l.s in the pound - and some comparatively trilling concessions were made which need not he taken into account here. Though this revision recognised the principle of

graduation, companies continued to pay income tax on what practically was a fiat rale. The maximum of Is

Id in the pound was reached with an income of £2,100 while even the smallest income paid Is in the pound. The difference was so slight that it seems to have been regarded scarcely as an essential part ol the system. Ill'll DENS OF THE AY AII. The war brought many drastic changes in the taxation system of the Dominion. New sourt es of revenue had to he found, ami the existing sources had to Ire strained to their utmost i opacity. The income tax became the chief mainstay of the ciiiutrv. The steeply graduated rate was n|' necessity introduced and notwithstanding the wholly changed circumstances comuanies continued to bo treated as individuals. The maximum <— income from debentures was taxed at a much lower rate than income from other sources and a difference was made between in,nine obtained from company debentures and public body debentures, (fin eminent loans were issued tax free. Freehold farmers, v.lii, iciil land tax only in pre-war *l■ i v rv'iui* •••1 *.*» pay innjiHo lax. i'll" i.i.'vn iuii'in i ale was reached at 8s 9 3-All in lire pound oil a taxable income of £111.0311. It was later reduced to 7s Id in the pound and last year was brought down to os--10 2-Ad in the pound on the same income. The Prime .Minister has announced that this year il is to he fur-tli.-'l- reduced by 13 1-3 per cent. . HEHATK.AI ENTS AND CONCESSIONS.

The income tax pursues its relentless way by many paths, in all eases regarding companies as individuals and treating them worse than intlivitntls by doiiying thorn non-laxahU reliatenti'iils and oilier concessions the individual taxpayer enjoys. It may seem it little like patting the cart before the horse, but fur the present wv may defer furl Iter < onsideration of the graduated income t: f x tit ordinary ini ernes and recount briefly some of its s tl.-idarv excursions. Income Irani tax free war loan stock bears no tax and is not assessed with other incolifs for Die purpose of determining tb? graduated rate on the other income.

Income Itimt farming operations pay nn income tax, ami, like Ills income derived from free stock, is not assessed in determining the graduated rate on oilier income. Imome from Crown leaseholds bears no tax, but this <xemption appears to have come about bv an oversight, and probably will le withdrawn. Inc,into from public body debentures issued prior to last year s Finance Act i- taxed at a maximt.-t graduated rate of 2s (id in the pound and is not added to the income received from other sources for the purpiso (! f fixing the graduated rate. Incone from company debentures issued pr,otto the Finance Act of last year is •axed tit the maximum graduated rate < f 3s in the pound and enjoys the :amo exemption from graduation as does income derived from public body debentures. Income derived from public 1,0,|v or company debentures issued snbsefiiient to the Finance Act of last year is taxed at a maximum graduated rate of Is fid in the pound and is not added to the income derived front other sources for the purpose of graduation. AVitere companies have agreed to pay interest on their debentures free of income tax they are charged the maximum graduated rate for debenture and the d-'belli tire holders are not allowed any rebate. Dividends .received by shareholders from a tompane, the profits having been taxed m tlm' bauds til the company, are not taxable in tit" bands of the shareholders and are not included in the incline from other sources for the purof graduation. Home State trailing departments pay a small amount ~l’ j n0,.u1" tax. but much less than would he naid bv similar concerns in private bauds. <Ultcr Htate t.ad.ng departments pay no tax. RuUm h"dy trading and nublic utility concerns pay no income lux. Ihiitieiilni's that now have been givnio t j, f . ebaraeter of ihe income tax c-t,.,„s of Britain and Now Zealand v 'Vl enable an intelligent comparison i,..m the two systems to bo made.