TAXATION.

Hokitika Guardian, 20 September 1924, Page 1

TAXATION.

CRAIMATIOX. TiiKORV AND i'RACTICK. V Contributed.) Tlie principle embodied in the yrntlliiited income tax, that tlie person with a la roe income can spare for Slate purposes a larger proportion of each pound he re< eivcs than can the person with a small income, is now almost universally accepted a.s a sound basis of taxation. The Royal Commission appointed in Knyland in I!)_’U to consider the whole question of taxation set out this point emphatically, "We do not tool called upon,” it said, "to defend with aryumonts the principle o! graduation of income tax. Direct yraduatiuti of tax lax was bitterly opposed for malty tears, lon it is now almost universally admitted to lie as sound in principle as it is imperatively necessary in practice. We are therefore. concerned more with the practical than with the theoretical aspect ol the subject, u d -o much with the principal as with the means h.v which thut principle can he translated into practice.” 'this conclusion applies as appropriately to the conditions existing in Xew Zealand as it dees to the conditions existiuy in Britain. The problem here is to translate the principle fairly into practice, so that both the la rye income and the small income, with all the graduations that li<- between them, shall contribute their fair share to the needs of the State. As already shown in these pae.es, i he Dominion has been seehitc; this yoal by a different route from the one pursued by the Mother Country and it is time lor the politicians and the public to consider whether or not if litis been the riylit one. A few out standing taels and liyures mav be olfered us yuidalice. I-'ACTS AN D I'It: IT, ICS. The eS.ll-V>,!;;i7 of company incomes left last year, after deductiny the taxed exemptions, paid l"-’, 11)11,7*2''' in income tax, or an average el almost fain the pound, while the L'li >,;!()•),o.ll ol personal incomes leit alter deductiny I he taxed exemptions, paid Cl,l-Id.-S 7-7 in income ttix, or an averaye ol 7,bl in the pound. The company incomes were owned in just the same measure by individuals as were the personal incomes, and probably by individuals of about the same averaye wealth. Xow does a system that yivos these results harmonise with tin* conclusion cl the British Royal Commission on income tax, previously quoted, that “the amount of the income and uni the manner in which it is earned is I Incorrect measure of the taxable capacity!'” Of course it is antagonistic In this conclusion in every particular. It is obvious that if the sound principles of taxation we sum up in this country in the phrase "I'.quality of Sacrifice" are to he maintained there must be some system by which each individual taxpayer's imome from all sources can ho ascertained, in the absence of sin h a syst.-m it is impossible to lix equitably the rate ol taxation each individual should pay. If. instead of lixiny the rate ol I lie lax ill proportion to the individual's income, it is lixed acoordiny to the sources from which it is derived, reyard less ol the amount the individual is receiving from each, then the whole idea cmbiiiiied ill the principle ol the yradtlaled tax i- defeated. A DKU'SIOX \XI) A SXMii:. To show hou the primiple o| yrnd mil ion has been distorted m Xeii Zea - land it i- necessary only to enumerate some of the provisions made fur the treatment of dili'eretil incomes:— < I) Incomes I'ri in large eoiiipiinies. nil charged at one rale, reyarless ol the Slim received hv etmli shareholder. rj) Incomes front small companies, clmryi-d at another rate, regardless of the stun received liv each shareholder. Cl) Incomes from pastoral runs, free «r r<lli*ss «»I' si/.t*. (I) Ineoines from war bonds, free nf tax, rcyardlcss ol size. (7i) Income from company debentures taxed at a maximum yrndilated rate of a little more than half Lhc iiiitxinium yradilation rate charyed in other directions, and incomes 1 1*0111 public bodies debentures, taxed at less than half the maxim rate paid ill other directions. There is the lurther am ily that incomes received from these sources ot income are not added toyclhcr lor the purpose ol lixiny a yraduated rate. The ineoines from each source are (axed separately. The only incomes that are taxed til a yraduated rate in the hands of individuals are those Irons personal exertion .other than farmj no) and interest on investments other than company dividends). I liese incomes, ayain. are not aggregated Tor (be purpose of luxation with the income just enumerated. RASKIXC OX. Another matter of importance in ennneetion with the yraduated income lax is that it should he paid directly out of the resotiru-s of the person responsible for its payment and should not be passed mi to sotno oilier person. In Britain, where the individual system is followed, as already explained, il i- held by authorities that tlm tax ivullv does fall upon the persons lor ii is intended and is not passed ,m in other shoulders. The l-ondon "Krnliomist" last year, after discitssiny this question closely presented its conclusions in the lollowiny words. "The ineidenee of a general ineome tax on all classes of income is reyardcd in i-eonomie theory as beiny capable of only a very sliylit shil'tiny or diffusion.' That is to say. it actually tall* where it appears to lull, and iilieie il is inlendod to tail.” There is abundant, evidence that the ■ Xow Zealand system ol levying the income tax. with its discrimination between companies and individuals, it-tax-free and liyhtlv-taxed sources ol ineoines, and its other anomalies, do*not operate with the same pieeisioti. There is not space to elaborate the point lu-re, and a tew lines must sul lice. The chairman of the Hank of Xow Zealand, Sir Ceorye I'.lliot, addressing the shareholders at their annual mooting last year made plain what was happening in the sphere of finance. "In estimating costs," li" said "it must not he foryotte'i that income tax is a< much taken into n«crunt as are wayes and rent-, and that in the end it is the public that pars the tax.” and aoaix. The same sort of thiny is happening in the soheres of industry anil commerce. A verv apt illustration of this was provided a little while ago m an anvlsis of the operations of the four laroe -as works in the Dominion, those . in Auckland, Wellington. Christchurch. and Dunedin. The works 111 Auckland, 1 Wellington and Christchurch are pro- " prietary concerns and pay the maxt- ) mum rate of income tax. The works in Dunedin are owned by the ntumet-

palitv and so are exempt from taxation. In 1021, when the income tax for the proprietary concerns stood at Is Id in the pound, the net average price of gas was 5s per 1,000 feet in the four centres, in llllti tho tax was raised 2s Sd in the pound and the pro prietary concerns advanced Their price to an average of os Id while the municipal works, exempt from taxation con tinned to supply at os. In 1018 the tax rose to 7s (id in the pound and the Dunedin price still stood at ds while the average price in Auckland. Wellington and Christchurch rose to ds (> l-.'ld. The..lax reached its maximum of 8s 2-dd in 1022 when the average price oi gas in Auckland, Christchurch and Wellington advanced to 8s (id while the Dunedin price reached tis Bd. With the reduction of taxation in j 1)2:1, the average price ol gas supplied hy the three proprietary works was brought down to 7s lid and with the further reduction of taxation in 1021 to 7s Bd. Here, it will lie seen, that the companies ol necessity passed on their taxation to the consumers, giving the latter relief directly their own payments to the State were lightened. Company taxation as it is known in New Zealand obviously does not fall “where it appears to tall and where it is intended tn fall,” and to this extent defeats the whole purpose and intention of graduation.