TAXATION.

Hokitika Guardian, 27 September 1924, Page 4

TAXATION.

TIIK PASSING ON I’l’tlt 'KSS. tDM PAN IKS AND TIIK IM’ltl.lC. V. tl'oiil ri bn I <-( I. > The statement iiiaile by Sir Georg F.lliolt, the chairman of the Bank o New /.calami, at the annual meet in; of the shareholders of the bank Invent', regarding the effect of an execs

six-- tax upon the cost of money am j cummedilies, already has been quoted but it will bear l'.'jM'titi<m sis an intro dm lion to a brief review of t lie inevitable parsing nil process “in esliluat ; i:ig costs,” Sir George said, “ it must I imt be forgotten that income tax is a; milch taken into aciniint as are wage? . or rents, and that in the end it is tie. J public that pays file tax.” 'litis stalei incut rested on actual figures wliieb . doubtless were known to Sir George F.lliott at the time. The average net profit ot the two New Zealand hanks ' for live two years imnn-dial *-ly heloie the war. IHl.’i and Kill, when taxation was low. amounted to Hi,.'ls jo-r cent, upon their capital and undivided profits, while the average net | «rt.lit, id the throe Australian banks calculated on the same basis amounted to 10.1, 5 per lent. The averages lor the last two years, lii-jL I , and IH-J, when taxation on the New Zealand hanks was mui'li higher than that on the Australians hanks, were 0.55 per ect oil the cajiital and undivided profits ot the New Zealand banks and 5.07 per c. nt. on the capital and undivided profits of the Australian hanks. From these figures it is obvious that had the taxation on the New Zealand hanks during the two years Dot’ll on the same basis as the taxation on the Australian banks and their charges and exjiensese had been the same, their net jvrolit for the two years would have averaged l-din per cent, on their paid up cajiital and undivided profits, or nearly J per cent, more than they actually obtained. On the other band, if the Australian banks had jiaid taxation at the same rate as the New Zealand hanks did. and they had made no increase in their gross profit, their net profit would have been reduced from S.(>7 per cent, to per cent. These figures, eottjiled with Sir George Elliott’s frank statement, make it perfectly plain that the public pay the taxation imjiosed upon the banks. TAXING COMPANIES. Then take the case of large trading companies. The high taxation imposed upon these companies means that the cajiital it)vested in them must contribute far piore to the State than does the great bulk of the capital invested in other directions. The directors of these concerns have to show to their shareholders that they are receiving as good a return for their money as they

could expect to obtain from ether investments involving similar risks, ft folhnvs that if a much higher tax is levTecT on the profits made hy companies than on the profits derived from oilier sources, the directors of eompunies must widen their margin of profit su/liciciitl.v to eiuihle them to pay the additional tax and at the same time make a reasonable return to •their shnreholdres. If a company fails to do this its shareholders will become dissatisfied and, if the failure is lone continued, will insist upon a change in the management and policy of the company. Company capital, however employed, must in the lone run -earn sul'ieient to justify the existence of the company in which it is invested or the company must go out of business. This means, in short, that ultimately the tax. or at least that portion of it that exceeds the average tax on other investments, must be passed on to the general public. Then, id' course, the tax becomes an indirect tax, just as the ••costs" mentioned by Sir (.'gorge K 1 liotl are, and not a direct tax at all. It would be absurd to expert tile individuals owning the company, the shareholders, that is, to go indefinitely paying t*s in the uolllld by way of income tax on their investments, when hv placing their money elsewhere they could escape with an average of 7f,'d in the pound. Those companies that can shift the tax on to oilier shoulders, or enough of it to enable them to give as good a net return as the investments taxed at an average rate ol < |d in the pound, will emit nine in business, bat those that cannot do Ibis must either turn to some other trade or industry. in which they call pass on their excessive burden, or drill into liquidation. There is no other alternative. A DISI NTKI! KSTKD WITNKNS. Mr .). I!. ('omlelill'e. professor ol economics at ('aiiterbliry l niversity ( ollege, whom no one will suspect of being swayed in bis opinion by any sordid motive, made t!iis point so clear in the evidence be gave belore the taxation Commission that no excuse need be ufI'cred for quoting a paragraph or tv.o from bis evidence. " The assessment of taxation upon the income ol an individual," he saiil i- a direct tax that can only under rare circumstances be shifted. Hut the taxation of profits earned by companies can in many cases lie shifted cither backward to the supplier >or forward to the consumers. . . To sum up, the incidence ot the present company tax varies from industry to induslrv. A large part id it k borne by the farming community in tile shape of higher charges tor e.-sen-tial services. A large part of ii has |i passed on to consumers in tin shape of higher prices which have in-erca-cd lie- cost i f liviti;:, and thereby stimulated demands for higher wages, I bus starting a vicious circle. Soon part of it has been boric- by shareholders. 1 lids lias been i apilali-ed by : fall i:i ihe value ol their -i emit ies.

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