THE BURDEN OF TAXATION

Hokitika Guardian, 6 May 1929, Page 2

THE BURDEN OF TAXATION

STATE METHODS

A ELECTING ECO NO AIIC

PROGRESS,

AUCKLAND, May 8

The effect of the present system oi taxation on financial conditions, ami indirectly on unemployment, was discussed to-day by Air Edward Antler son, ex-president of the Auckland Savings Bank, and a member of the 1928 Taxation Committee.

,“At the moment,” lie said, “joint stock banks bold very large > sums on deposit, and the view is held in some quarters that this is owing to bit k of confidence on the part of investors, i am more inclined to the view that it is partly owing to the deatli of attractive investments'. Everything Inn been pushed too high. Business and financial men from abroad who visit the Dominion are almost invariably as. tonislied at the high prices ruling in New Zealand for invesment stocks and shares and the high values of city, surburban and rural landed property, but this hardly denotes any want ol confidence here regarding the luturc of this favoured little country, of ours. “There is another reason, and. to my mind, a very cogent reason, for inactJvely on the part of imestors. As you are aware it is quite impracticable for the wealthy investor or lending companies to make mortgage advance l at the same rate of interest as our (State departments. The rea-on is not far to seek. The larger cuim.allies an called upon to pay income t.i>: of -Is 6i ill the £ .mid if they are to obtain ■

net return of o'; per -ent. (by no m am. an exorbitant rate/ they would have to charge 7 per cent. On the otbci hand the State borrowers abroad can lend cheaply, largely because the lenders pay no income tax in New Zealand. In other words the local investor whose income is subject to tax at the rate oils Gd in the £ is compelled to charge one and a half per cent more than the foreign lender, and the handicap is too great.

“I have not the exact figures before me, but I am informed that over £30,000,000 is outstanding on State advances to settlers and workers, and if the lending departments pay income tax at the same rate as the large companies the Treasury would benefit to the extent of £371,250. To arrive at that figure I am assuming income on State advances outstanding at 5J> per cent per annum, and on £30,000,000 that would amount to £1,650,000 per annum, and a tax of 4s Od per annum would produce £371,250. Contemplation of these figures certainly raises some very interesting questions among which are the following:

“(1) In view of the enormous benefits which would result from, a material reduction in taxation should the State continue to make advances to a comparatively few individuals on such generous terms at the expense ol the general community? “(2) Is it in the public interest tlml tile Dominion should continue to borrow abroad for such purposes without making adequate provision for income tax in the rate of interest charged? “(3) Would it not be a direct saving for the Government to borrow in the Dominion at 5-V per cent., considering that the, gain in income tax would more than offset the extra annual cost of the loan ?

“(4) What prospects are there cf any substantial relief from the burden of taxation if the existing system ol borrowing abroad for Stale advances is to be extended?

“These are but few of the questions which arise out of this particular system of State competition, i'dy object in drawing attention to them is to show how a measure which before the days of high taxation was looked upon as a beneficent one lias since developed a very' powerful back kick.

The plain fact is that our system oi taxation lias gradually derel .ped in a manner which is gravely affecting our economic progress. It must take its share of responsibility, also, for the amount of unemployment which exists. “There are other reasons lor this un-

-atifactory state of affairs in a connry crying out for development. Back co the land is counsel which is some--vhat weatherworn, hit it applies with triking force to New Zealand, because tactically the whole of our wealth if. ■ nmed in the country and net in the towns, but if we are to endeavour to out more men on the land they must, lie educated for it and trained for it. The hulk of our failures in land settlement have been due to the strange obsession that a man becomes a farmer just so soon as you lend him .sonic cheap money and put him on some dear land.”