TAXATION.

Hokitika Guardian, 14 October 1924, Page 4

TAXATION.

STATE AM) MUNICIPAL TRADING SHARE OK DURDEN.

IX. (Contributed.) The question of bringing Slate- and municipal trading and utility undertakings under the operation of the income tax in order to secure an equitable distribution of the country’s burdens already has been mentioned. Jts importance, however, entitles it to a little closer examination. The Taxation Committee set up in 1022, after taking a large amount of evidence and investigating all the available data, made the following pronouncement upon this subject :

The Committee has carefully considered the question of charging income tax to public bodies and Government trading concerns. Such concerns in general have either replaced or tome into competition with privately owned undertakings which have to pay income tax at the usual rates. Certain public utilities are provided in one town by companies which have to pay income tax and in another town by municipal enterprises which escape taxation, with the result that the town served by the company has to pay increased charges lor the services rendered in order to cover the tax, and indirectly, therefore, bears part ol toe taxation which the other town escapes. It, is the opinion of the committee that, if the Government or local body trading is to continue, it should be on even terms with private enterprise and should accordingly bear the charges and taxes to which private undertakings are subject, bolder no other condition is such competition fair, or in the interests of the community. Public owned undertakings are carried on with borrowed money secured on the credit of the ratepayers, and therefore cannot be taxed on the same basis as companies. It would, therefore, bo necessary, for taxation purposes, to assume an income based upon a fixed percentage of capital employed, and this might be fixed at a lower rate when capital is borrowed within the Dominion than when borrowed from foreign lenders. The Committee unanimously embodied the following recommendation in its report:—“That income tax, equivalent approximately to the average rate paid by companies, be paid by all public bodies and Government trading and privately owned utility undertakings, and the tax arrived at bv assuming income based oil a lixed percentage of the total amount ol capital employed.” The Taxation Commission whose report was presented to Parliament during the present session, having taken further evidence on the subject, emphatically endorsed the finding of the Taxation Committee. “That State and public body trading and public utility concerns,” it recommended, “ should be charged income and land tax to the same extent as private enterprises, and that for the the purposes of taxation, their borrowed capital should be treated in the same way as borrowed capital in private enterprise is treated.” SOME EXAMPLES.

These findings by two highly qualified bodies in possession of all the facts should leave little room for two opinions on this subject, but one or two cases may be quoted by way of illus--1 ration. There is the case of the gas companies operating in Auckland, Wellington, and Christchurch and the mtiucipal gas department in Dunedin, rendering similar services to their respective communities. The gas companies in Auckland, Wellington and Christchurch pay heavy taxation which they must pass on to their customers, while the municipal gas department in Dunedin pays no taxation and it.s customers are supplied with gas at a substantially lower rale than i; possible in the other three cities. In !92.\ v hen the UMMinuni i 11 1 tj«;!•; tax w.e. Ss 9 2-sd, the difference was Is 11 hi per l,lmolt ; in l()2:i, when the tax was reduced to 7s Id, Is Hd per l,()()()ft and in 1921, when the tax was reduced to 5s 10 2-dd, Is 5d per I,oooft. 'I his does not mean simply that the gas consumers in Dunedin are obtaining an unfair advantage over the customers in the other cities, but it means more particularly that they are shifting the share of taxation they should be hearing on to the .shoulders of the rest of the community. Then there is the case of the Auckland tramways. When the Auckalml Municipality took over the lines from the Auckland Tramway Company the company was paying something like CUO,OOO a year in income tax : but directly the lines were municipalized they were freed from taxation and the State had to obtain the C.‘10,000 from some other source. That, at any rate, is how the exemption of State and municipal trading and utility undertakings works out in practice. The Minister of Kinanec must have bis revenue, and if he loses part of it by the exemption of these undertakings from taxation lie must recover iL hv imposing taxation elsewhere. The loss to the public revenue from the sale of the Auckland tramways and from the exemption of the Dunedin gas department from taxation amounts to between 910,000 and C 50,000 a year, and this large sum has to be recovered by mnintaing excessive taxation upon private enterprises and individuals that .stand sadly in need of relief. And these are only two instances out of ma 11 v more that might be quoted.

A MINOR ENTERPRISE. Another insidious form of Stale trading is threatening the country just now in connection with the Kauri gum industry. This is an old story, having originated with the assistance the Government gave to the gum diggers at the beginning of the war; but it has been revived with a wider and more significant purpose. 'Hie Government is now being urged to save the industry and its workers from the machinations of “manfactnrers, agents, brokers and others.” “The - difficulty can be over-come,” says the gum-diggers’ representative in Parliament, “only hy setting up a control board. This could be done hy reorganising the existing Government Gum Purchase Department. The duties of the hoard would he to assume control of the gum industry, to effect sales in Auckland, or to ship overseas if deemed necessary, and while not monoplizing the export of gum, exercise full control of grading, marketing

and prices. M The Government has doferred to the appeal of tho gum-dig-gers’ representative to the length of instructing the Lands Department in Auckland to institute an inquiry into the position and to supply a report. Whether or not the Department is the best equipped authority for a task of this kind need not be discussed, but had the Minister in Charge been able to look into the matter himself bo doubtless would have discovered easily what is the matter with the gum industry. He probably would have found that the market is being depressed by the large quantity of inferior in store, by the development in America of new and cheaper processes for the manufacture of varnish and by the largely increased importation of material from other countries. Ho certainly would not have found that buyers were paying only £3O a ton for gum they were selling readily at £9O. On this point a broker propounds in one of the Auckland papers a very pertinent question. “ As the Government is far and away the largest holder of Kauri gum and

can sell in America and Europe presumably at such profits,” ho asks,. “ why does it not clear its stock and give us a lead in increasing further prices to the diggers r” But there senrcelv is need to dwell on this subject further. It is mentioned mainly to indicate to what lengths the agitation for State trading may be carried. Happily its promoters have .not control of the affairs of the Dominion at the present time.