TAXATION.

Hokitika Guardian, 18 October 1924, Page 1

TAXATION.

FINDINGS OF ROYAL COMMISSION. NEED FOR VIGILANCE. (Contributed). X. The purpose of the series of articles of which this is the last has been to place before the public in as concise a form as possible the substance of the evidence on which the report of the recent Taxation Commission was based, and to provide a few simple illustrations of the manner in which the present income tax operates to the disadvantage of flu' whole community. No attempt has been made to saddle the responsibility for Ihe existence of an inequitable system upon any individual or any party of politicians. In considering a question of such vast national importance more personal interests and party predilections should be set aside altogether. The facts have been presented as clearly as they could be within reasonable space and it now remains only lo summarise tho findings of the Commission and to make some passing allusion to their scope and significance. Before proceeding to do this, however, it may he permissable to say that the constitution of the Commission entitles its conclusions and recommendations to very special consideration. The presence of a judge of the Supreme Court in the chair at mice iTotlied the Commission in a very special degree with the status and dignity of an independent tribunal and removed il beyond all suspicion of partiality. Its lay members were chosen for their special knowledge and wide experience, and they brought to their task individual qualifications of a very high and quite exceptional order. Til K (lit Dl-llt OF BKFFKKNCK.

The great value of the Commission’s report has been admitted oil all hands; hut regret lias been expressed to some quarters that it does not cover the whole field of taxation. If this is a fault, the blame must lie with the order of reference which confined the Commission's invesligations strictly to i lie present system of land and inc ome taxation. That no misunderstanding may remain on tlijs point il will be well to quote the full lexl ol the lirst paragraph in the Clovernur-Genora! s command : “Whereas it is expedient.” it runs, “that inquiry should he made into the present system of Land and Income Taxation in New Zealand in all its respects, including the scope, vales and incidence of thr- several taxes. allowances and reliefs; assessment, appeal and collection, and prevention of evasion; and that a Commission of Inquiry should report what alterations of the law are necessary or desirable, and what effect any such alterations would have on vales of tax it il weie neie-sary to maintain the total yield

of land lax and of income tax rcspccti\olv." Il will’ In- seen from this do-i-l-irat ion that the scope of the inquiry was definitely restricted and that, consequently the Commission could not i any its investigation info the areas some of its critics would have had il explore. ibe concluding sentence of ill" quoted paragraph also explains why i; was incumbent upon the Commission, when il recommended changes in the incidence if taxation, to make suggestions loi the maintenance ot the present “yield of land tax and income tax respectively'' in the event of its pro-po-als fill- changes in the incidence reducing the revenue, ft INCLUSIONS OF COAIM ISSUIN'. T ie- conclusions ot ihe ( nmmi.-sinn w .mupre-eed into so small a space in tla- report returned to the (lovcruor(tenoral and subsequently |.iesonted to Baiiiane-nt that any casual readers mar have over-looked then* number awoll their importance. Still further compression il will be necessary here to indicate to the public and the politi- : i.iii. oi hat loPi.iin.- to lie done. Ihe InlhiuiMg may bo imluded ill snob a li-l : ” (1) Land and Income taxes must lie considered together, as they uo\etail into one another. (•J) —The graduated system of income tax is sound in principle and necessary in praeiee. (T) In order to pot the graduated principle properly into practice it is necessary that every individual’s' income from all .-onfees, (income from tax-free war loans excepted) should he brought together in one amount, so that the graduated rate of lax that applies to the whole income may he fixed. (I) The presenl system of graduating Ihe income of each company as a separate income, and i barging tax accordingly. is not in accordance with the true principle ol a graduated income tax. (ol II is wrong; ill principle to vary (he rate of taxation acioi'diim; to the Miurce from which iI c derived. ll'.i Income tax on the smaller individual iu> nines in New Zealand i- oil a low stale as compar'd with Ihe rates in (.Teat Britain and Australia. I( is only ahniil T.'i per icut. ol Ihe British rale and about .V. pel cent, of the Australian rale.

(7) There is a point bevolnl which income lax upon individual incomes i annul he poshed without reducing K ■ product iveue-s through capital leaving the count I V.

(S) Till' •rrndnnl cd system of in. nine | MN - mokes "it necessary to aiii'i'cmite in, .nil.' derived from l:iml other income for taxation purposes. Fxemplions consequent upon land tax stand in the way of this. For this and other reasons land lav. ineliidin" pradualod land tax. should as soon as possible 1)t» abolished.

(0) Tin* graduated land-tax v.*ns onoinallv designed to hivak up largo estalj.s. There is no evidence to show that it is required any loaner for this purpose, and there is much evidence show inn that, it is now prevention the development of large areas of land requiring a coitsiderahle amount of capital expenditure to break in. I lie graduated land-tax applied io business premises is a serious handicap to trade and industrial enterprise, and serves no good purpose. "(lit) Ikistoial tenants should pay income tax. They paid in pre-war days. They pay little or no land tax. flit The chances in land and income lax will take some time to bring about. It. may not he possible to make the whole of the elm lines ill one step or in the immediate future. fl*2V-The changes indicated in land and income inx would moan that land held in an idle and unproductive state would pay neither land nor income tax. This would have to he provided for. I KV)--The base on which income tax revenue is raised should ho made a> broad as possible m order to Hidden the weight of the tax. Fvorv decision to free from tax. or tax liidiUy. some source of income carries with it a decision to tax some other source at n higher rate than otherwise would he necessary. Cl 4) AVe see no adequate reason why State and puhlie-ownod trading and public utility concerns should not he taxed as well as private enterprises. This would broaden the base of the tax. Special provisions for taxing this source of revenue would ho necessary. THE AA'KTGTIT OF TAXATION'.

The Committee after sotting out its conclusions at greater length than they me indicated here leaves no room for the politicians to assume that mere changes in the incidence of taxation is going to free the country from its troubles. “AA'e wish to record our view ” the members say unanimously and emphatically, “that the weight of taxation is most important and that it is essential in the interests of _ the further prosperity of the Dominion that the weight of taxation should lie reduced as rapidly ns possible.” It is due to the Government to say that it has not been iiulitforont to representations that have been made to it in this respect. The income tax reached its highest level in 1921 with a mast-

until, of 8s n.Gil. In 1022 the maximum was brought down to ,s ' lJ?"' Af Os 10. Ul and this year to Is lO.bbd. HI course all the graduations between tho lirst pound of taxable income and the maximum have been relieved in proportion. The rate on a taxable income o £4OO, for instance, has been reduced from Is 2. Id to Bd, on t’looo from Is tl.Gd to Is, on £2.000 from 2s D.Od tol s G.GOd, on .to,ooo from -Is O.Gil to As 2,GGd and so on. These concessions ail have been acceptable and all have assisted in bringing about improved conditions in the Dominion. But the reforms suggested by the taxation Commission are made none the less necessary oil that account. They are 111-, tended to facilitate and stabilise the return to prosperity throughout the country and towards this end the polltioians and the public should ho appl>ing their very best efforts ot the present juncture. The Commission Ims shown that there is much work to he done hy the politicians before the ultimate goal for a just system of taxation can he attained, and it is the duty of every citizen to see that the politicians apply themselves lo the task with the single purpose of promoting tho inlorcsts of tho whole of the community.