SPRING FOOTWEAR. TAXATION.

Hokitika Guardian, 30 September 1924, Page 4

SPRING FOOTWEAR.

TAXATION.

IXKt.H i'i'Alil.l-; DISTIMIMTIOX JIAAIIMCIMNG K.NTKIi I’J! ISK.

(Contributed.) The iulvocal.‘s of the system of levying the imome tax, wliieli imposes a higher rate 0)1011 companies 1 hoo it. does 0)1011 individuals, attempt, to justify its inequitable Operation by live stock arguments. They contend that companies should hear a larger -hare of the nation hardens than imli- • idmil* hcca use I) shareholders’ liability is limited; I'J) the transfer of shareholder's interests is much more easily effectod than the transfer of individuals' iiiicrestx ; (..) companies can lioaoce by giving security over limiting assets in a way that private traders 1 annul; ■ I) companies do not have to make provision for death and succession duties, and 10) their aggregation of (apitiil enormously increases the power of companies to trade in a Inroe way. It is not disputed that these advantages tire enjoyed hy the companies, hitt they cost the State—which is the uimmuuity—nothing, and the Slate, directly ami indirectly, prolits materially from the existence of the companies. 'llic lutmnlion of companies st imnh’.tes prodnetion, industry and trade; it ensures many services being rendered to the State tit a lower tost than otherwise would he the ease; it makes possible other sendees that could not lie rendered at all hv individual elforl, aud it enables people of small and moderate means hy amalgamating their resource* to enter trade and industry in competition with wealthy individuals, a thine; they could not do were it not for the facilities provided lor company ma'am sat ion. The activities of the companies must bring revenue lo the States, in greater or smaller measure, and though this tail would nit justify the companies in demanding exclusive privileges it certainly provides 110 excuse for subjecting lhem to penal taxation and excluding them from concession.* which individuals enjoy. t’SKS AM) Alil’SKS OK CliADi*ATION

Then iliere is another point. The '.•.radiuitmu of the income tax. sound as it is in principle and operation in the ease ol individuals, cannot he applied with tile same certainty and propriety in the ease of companies. Tlu* basic idea of the graduation lax is that the individual should lirst have the necessaries of life lor him sc-11 and his dependents and that his surplus nluive this should he taxed at a rate iitcreasinj; in proportion to the amount of the sin plus. Companies do not rei|Hire the necessaries of life in the same way us imlividittlls do. A statement of the neeesarics of life in their eane must tilke the form of a proportion of their cariboos to the capital employed. It cannot lake the form of the total amount of the prol'it regardless of the capital employed. Kor instauee, a prolit of {.TillMl a year might show a large surplus over the necessaries of life of :t small company, while it prolil of ( J 10,(111.') a year. if long eoiitinued. might mean slarvtltien and ultimate Inpiidai ion 10 a large eompany. I.ooked at from the shareholders’ point of view, there is no logical just ideation for the iiidoserimiiiato application of gradual ion between companies, since there is no evidence to show that small companies arc owned hy people 1 icg sinall'M* average incomes than those received by people owning larger 1-0111-paiiic*. A very large proportion ol the small coinoaiiies are owned, in the shape of private companies, by two or three people of very considerable means. Many ol t!io*e small compan ies, reallv are "cue-man 1 nmpanie*". with an extra shareholder or two. boldine; inorelv a nominal interest, brought in ill *t In enable the company 111 he forme I. The whole pliiicinle of the me: lit syu -m ef cemnanv laxa- | ion is wren;*, tint innic ol il r ilcl-ai-i* lemc olari’e; than tin- liapli.s-.ai-! ajiplicat inn ol gi ndualimi. C()?dPAMKS AM) (OAIPANIKS. It has I .ecu urged in some ipiarters ilial the coiilintted lloatinli of inrnpall-

ies ill this country is priiiif that the present system of taxation does mb place unwarranted burdens upnii enterprises of thi* deserol ion. year or so ago tin* Prime Minister him-.-It made a .statement to thi* cl feci in the I Intis-! ol l!ej.n *eiili!livcs, l.ui it is reasiiiiahle tu assume that the closer in' estigal ii,:i lie promi- .-d to the siihi--. I has I. ,1 him to m.i.i.-w hat modify the I i-nlat ive opinion he expressed on that neeasiuii. In any case, il is only the comparatively large i i.nipii uies ilial

;si" heavily laxid. W lii-n taxation wn at its highest level .in IflJI, n <i.liv; 1:1 u• uiiii :i taxable iiicoiiio of f.'J,."IM) |>:ii< i!.; :M in i'll- i.imml. oinil i iii” liiu tioii of ju-iki*. n rmnpahy with mi income o .'is 11, and a i-itin|i:i n y with in illcoln" of C l.!!ll(l, Is i'll. I Inter ill. ralrs pinp.i.cd In. Mr .Massey Hc-e in i'ollll‘S V.olllil |iav Is |i: I. I.’s |i| ami J: ■’“'il I'l'SH.'i'tivi'l.v. Tin l ralo mi an in i-i ini' of (.'Sljllii in Ili'Jl. was f.s !iil ii l!ii' |-i ill in I. oil an iIU-011l • of L'll.lllMl Ss .‘MI. anil mi an iiicninn of 010,0111 >'s '.'.l, I'm? ■ r tin 1 rail's now propose! 11 11 ■ si■ iiii oiaos woiilil iiav Is 01. Is 7 ami Is lllil respectively. Companies, of I'inirsi', gel no untitxcd exemptions wliilo individuals get a iininlii'r of ex.ii'.pl inns. 'I lio truth is that tin' great hull; of Ilia nail' companies now being registered ara small jirivata conci'ins, many of tlu'iil organised by on" m iiiori' private individuals lor the purpose of lightening tlii'ir nun taxation. Tha iiiimhai' nf rnmpanics with a large pai.l np I'ajiital—ami so subject to Ilia niiixiinuni ttix—organised during Hit' last low yoars has hooii 'wry small inilooil. Tito contention Unit excessive taxiitioii has not retarded the formation of (ompanios roally useful to the country, thcivl'nre falls In the ground. K-iCAI’iXt; TAXATION. It lines not follow that large com panics will not 1.0 Untiled. There am many services that (an he rendered In the public only by large cninptinies, and even H the high taxation (oiitinnes siloh companies still will hi' organised. They will he organised, however, only u lien their pitnnoters are lolly satislied that they will he aide to pass oil their taxation to the .general pnldie. Not only managers anil organisers of large eompanies, lull also shiireholders and prospective shareholders, are now well aware of the fact that mi enterprise of this kind (till succeed unless it starts out with the certainty of being aide to recover from the public the taxation it is called upon to pay. This means, among other things, that individuals with large capital at their disposal will invest in these passing on companies and so, by the exemption of their dividends from assessment and taxation, escape the lair share of the country’s burdens they should he