Thank you for correcting the text in this article. Your corrections improve Papers Past searches for everyone. See the latest corrections.

This article contains searchable text which was automatically generated and may contain errors. Join the community and correct any errors you spot to help us improve Papers Past.

Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image

FINANCIAL STATEMENT

DELIVERED BY MINISTER OF FINANCE NEW ZEALAND’S POSITION OUTLINED INCREASES IN TAXATION G LAND AND INCOME TAX ADJUSTMENT * / TOTE DUTY INCREASED —□ —— i AMUSEMENT TAX FROM Is REVERTED TO

(With the compliments of the lion, the Minister of Fin-,nice,) WELLINGTON, July 24. In Committee of Supply, the Hoii. G. W. Forbes, Minister of* Finance, 'delivered the Financial Statement, ,ivom which the .fallowing leicerpts are made:— Mr Chairman, —In submitting this Financial Statement to hbnournbld members, I am not unmindful of the ' ’circumstances which have resulted in the honour devolving upon myself. :As you are aware, the portfolio of Minister of Finance was until recently held by the late Right Hon. Sir ■ Joseph Ward, who on account of ih , health had unfortunately been cpm- , ' polled to resign an office which lie ' held with intervals over a long period I of years with credit to himself and ! vety majterial benefit to the whole | Dominion. By his death, the British | Empire and this Dominion in pari ticular have suffered a great loss. Sir \ Joseph Ward’s* long and distinguishj led, public record wdl serve as a lastj i ing ’monument to an outstanding f ■■■'■>.. ■ ■ ■ statesman. (

adjust our expenditure accordingly. From the point of view of the public iicCiimits. the Government is faced witii reduced t'eVOitue irO.ni both 'Gus=tomM and land aild lucofiie tax, atm, tit 'fact, from all heads of revenue, during tint ensuing year, while, on the other hand, debt’ charges,, pensions, and other statutory payments of a rigid nature will result in additional expenditure. Moreover, the laihvays have now beebme a liability on the Consolidated Fund, and will letjuire financial assistance to enable them to carry oil. H will be remembered that last year it was found necessary to reduce expenditure and increase taxation in order to ensure a- balanced lludget. A country dependent on overseas investors for the greater part- of the capital required for developmental purposes oaijnot afford to impair its credit by deficits. The steps taken by the Government to meet the financial position were successful, and, as has already been publicly announced, the year’s transactions closed ' with ‘a surplus of approxilmitely £150,000.

| OVERSEAS TRADE. P The financial year which has just | closed lias been a difficult one from | many points of view. Returns of I overseas trade showed a decline in | the value of exports, compared with I that of the previous financial year, f ; of over £8,000,000, while' imports in1, creased by over £4,000,000'. The vis- | ible balance of trade for 1929-30 was, P therefore, over £12,000,000 less fqv- (| ou ruble to tlie Dominion than for l. 1928-29.., Tills reduction in the value ( of our exports is due almost entirely i! -to the lower prices received, The | declared value of butter, for instance, ■ the principal export for the year, de« I dined 8.5 per cent,, whereas the re- |' duction in quantity was only 0.4 per I cent.; and wool, the second in order of exports, declined to nearly £5,000,- | 000. a fail of 32 per cent, in value, I although a reduction in quantity of * only 5 per ceut. In considering | these figures, however, account must I be taken of the heavy stocks of proT duce held in New Zealand at the end | of the year. These . were substan-- ■ tinlly • higher than those on hand at f the end ol the previous financial | year, and the proceeds of the produce : carried over will improve the export figures for the current year to tne 3 extent of the amount eventually realised.

banking position. Turning now to the banking position, it will be remembered that at the end of March, 1929, coincident with a favourable balance of trade, deposits exceeded advances by £B,986,000, whereas by the same date the following year tihe excess deposits had declined to £326 000. During this period deposits declined by £l,343,000 and advances increased by £7,317,000, reflecting the decreased exports and increased imports for the year. This contraction of the national income means reduced spend-ing-power both privately and nationally. EXCHANGE RATES. Due partly to the adverse balance of trade, but more especially to the economic conditions obtaining in Australia, the exchange. rates rose sharply against the New Zealand importer, and at the close of the financial year stood at £6 per cent. While the result has been to increase the cost of .all imported goods, at the same time a .considerable incentive lias been given to local production. Moreover, the favourable exchange rates for exporters have to some extent reimbursed the primary producers lor lower prices realised, so that the position is not without its compensations. .ECONOMIC POSITION. ' Reviewing the whole position for the year, it will be seen that the present financial stringency is due principally to the decline in the value of our primary products. As these art; responsible for approximately 99 per cent, of our exports, it is evident that anv reduction in value affects the prosperity of the whole Dominion. | This decline of export values is not j peculiar to New Zealand, but is evidence of the fact that world prices are tending progressively downwards, j We are therefore faced at present : with a substantial reduction in our national income, to which wo must 1

• REVENUE. Of a iota.' revenue'tor the year of .£25,349,861, the sum of £19,'471115 represents proceeds of taxation, the balance of £5,875,746 being' interest earnings fee's, and miscellaneous departmental receipts. Of the proceeds of taxation, £8,827,335 is direct taxation, and the remaining £10,636,780 is indirect. . ' Included ill the total revenue is tlie sum of £1,510,790, beiilg petrol-tax, duties, licenses, etc,', ‘ki ‘respect of motor-vehicles, which revenue Is specially earmarked for main highways, leaving £23,809,071 available for the general purposes of the State, ’this represents an increase of £1,482,972 over the receipts of the previous year. The principal decreases of revenue were in respect of stamp,?and death duties (£170,428)-the latter, being obviously difficult to- forecast---and interest on railway oapatail liability (£199,011). The decrease in interestrecoveries from the railways is due to the writing-off of £8,100.000 of railway capital. This reduction, however. was offset by : a decrease., in expenditure resulting from the cancellation of tlie subsidies previously paid on branch lines and isolated sections of railway, and an increase in the rate of interest payable from 41 per cent, to 4i per cent., the reason for which I will explain later. EXPENDITURE. Tlie net expenditure of the Ordinary Revenue Account for the- year totalled £25.200,882, compared with £21,176,928 for the previous financial year. The net increase of £1,023,954 is made up of £983.008 in permanent appropriations, and the balance of £40,946 in annual appropriations. The modest increase in the later is evidence of the veiy successful efforts made by the Government to keep departmental expenditure down to a minimum. Expenditure under permanent appropriations consists of interest, debt-repayment charges, and payments under special Acts of the Legislature, whereas the annual appropriations cover the various departmental votes. Notwithstanding the fact that the estimates for those votes were most carefully overhauled last year, the c-iose control maintained over expenditure resulted in the votes being underspent, by approximately £218.000. AN NU AL ARPEOPUT ATIONS. The net. expenditure under this heading amounted to £7,973,277, compared with £7,932,331 for 1928-29. Almost half of the total under annual appropriations is in respect of vote “'Education,’' the expenditure for the year being £3,218,828, which is £126,532 in excess of that for the previous year. TREASURY BILLS. Revenue Treasury hills amounting in the aggregate to £4,595,000 were issued during the year, but .£1,200.000 of these bills represented only internal transactions between Treasury accounts to facilitate the financing ot the year’s operations. Of the bills issued to the public, £2,695.000 vas tbe maximum amount current at any one lime. This last amount included £145,000 issued in Now Zealand at in.teiost-ra.tes of 5 and 51 per cent., and £2,550,000 issued m 'London at

a discount varying from j 9-10 per cent, down to 4 9-1 (i per cent., the market rate falling to this extent during the period Ist November to 31st December. 1929, when the bills were issued. All of these bills were issued in anticipation of revenue, and were duly paid off during February and March last, when the income-tax itvenue came to hand. PUBLIC WORKS. I wish now to deal with another important section of the State’s activities, and that is in respect of public works. During the year suostantia.l process was made towards the completion of the large undertakings in hand, and as a result the expenditure was somewhat higher Limit for the previous year. Iho ae*ual expenditure under the several headings was as follows. £ ' Railway construction, additionl;, and improvements 3,315,612 Main highways and roads 2.28 h ,‘21 1 Hydro eiectrb supply ... 581,9.0 Telegraphs and telephones Co/,291 Public buildings (including schools) 817,979 Irngation. land and river improvements ... 139,881 Other public works ... . • 136,881

TVria i £8,031,818 Work? In hand lmve keen proceeded with as rapidly ns possible in order, f’r-tlv. to make them productive ut the earliest posa'bCe moment, and, secondly, to assist in relieving the unemployment position. As regards the sections of construe*

of further benefit to the primary in r dustries of the Dominion. First of all, the Government realizes, that all idle Crown lands suitable for farming should be made productive as soon as possible, and to this end large areas of land have been offered for selection. During the 17 months ended the 30th. April last no less than 545,100 acres of all classes of rural and suburban Crown lands were selected | under various tenures, the number of j subdivisions being 2.519. It is anticipated that some IGI additional farming sections will bo offered for selection by the 31st. July. Secondly, while pudiing ahead with the breaking-in of idle Crown lands, the policy is being pursued of purchasino- private estates that can be acquired at nrices which will allow of profitable farming operations after subdivision has been effected- A particularly close watch is being kept on the economic aspect of the matter in order to prevent anything in the nature of a land boom. , Special attention has been paid to the dairy industry, which, at the present time, is responsible for a large proportion of our national income, the necessity fo-r this being emphasised by the fact that no time previously have the Dominion’s dairy exports encountered such serious competition in the wtorld’s markets. Aho the possibilities of placing the pig. industry on a more remunerative basis, the problems connected with the cold storage ,of meat, butter, cheese, and fruit, and the difficulties at present experienced with regard to the flax industry, are all matters which are being investigated by the Government’s direction.

tion work in the South 'lsland—namely, 'the Westport-Inangluw and Xe’snn-Lhangalma lines—the vork on which was seriously interrupted hy the, earthquake in June 1929, a large amount of the expenditure has been 'n-vwred in connection with restoration work. The expenditure during Mie rear amounted to £88,113 in connection with the former line and £72.215 in respect of the latter. Ihe work was further dislocated by the slips which continued to fall after the earthquake, so that it was only recently that work has been resumed.

BACKBLOCK ROADS. ; ; ' ■ Last year's provision for ordinary metalling and improvement of baekl/.ock sett!meat roads, for the most ,|i>ar r ’ in ».o-c<pura.ti'onl with L'ousvty Councils, "as £400,000, of wljich £300,'337 was expended. »It is proposed to set aside an additional amount this financial year for the om> rose of providing access to the uiitlying districts of the Dominion, inis icpresenus a turther contrijout.ion by the Government towards encouraging primary production. PUBLIC DEBT. The public debt as at 31st. March, 1930, amounted to £267,383,343, the Pet increase for the last financial year being £3,191,300. Including the portion of the £7,000,000 added to the debt during the previous financial year, the aggregate of additions to the debt on account of the year was £11,099,325. This amount was raised for the following purposes: Public works £7,988,250 State advances 2,144,075 Land-settlement 615,000 State forests 352,000 £11,099,325 CLASSIFICATION OF DEBT. Ordinary £154,297,847 War 69,783,525 Discharged soldiers ... 7,861,886 State advances -35,440,085 £67,383,343 DOMICILE: OF DEBT. London 146,580,502 Australia ... 4,276,750 New Zealand 116,526,081 £267,383,343 STATE ADVANCES. From the 10th. December, 1928 (when the Government assumed office)' until the 31st. March, 1930, the sum of £5,563,885, which includes £1,565,950 obtained by the issue of bonds on the assets of the Rural Advances Branch, was added to the capital of the Department. With this additional capital the Department has been able to meet all the demands made upon it. During this period loans totalling £4,219,895 were granted to 3,495 settlers, £3,851,452 to 4,413 workers, and £5,580 to eight local authorities, making a grand total of £8,076,927 granted to 7,916 applicants: a record of financial assistance given on the easiest terms possible, which has undoubtedly done, much, both directly and indirectly, to promote the welfare of the people of the Dominion. RURAL INTERMEDIATE CREDIT. Bv the passing of the Rural Intermediate Credit Amendment Act of last session, the maximum lean which may ' be granted to any one farmer was raised from £IOOO to £2OOO, and this extension has greatly assisted in developing the system, particularly in sheep-farming and grain growing districts, where the increased facilities I have been fully availed of. | At the 30th. June, 1929, the Board’s ' total advances outstanding amounted to £165,480, and it is gratifying to record that up to the present, repayments have come to hand in a very satisfactorv ma nnet’. Generally, it can bo stated with confidence that .the Rural Intermediate Credit scheme is proving a decided success, and contains great possibilities

education; As indicated in Inst year’s Budget, die Government is of opinion that the jduca+eiomil system of the Dominion ■should he developed on more practical lines than have obtained in the past, r mentioned in the earlier part of this statement that practically 99 per cent, i of our exports, and consequently the | greater part of our national income, is . derived from the sale of primary products, so that it is evident that adequate provision should.be made in our educational system for tuition ill subjects relating to such industries.. UNEMPLOYMENT RELIEF. The Government is much concerned that many-of our people are still suffering the mental and physical hardships resulting from unemployment. The cure lies in far-reaching measures which will enable the additional labour to be employed with profit in private enterprise. So far as New Zealand is concerned, land settlement must be the chief field of operations, but to get new settlers satisfactorily settled on the land is a matter that, given the best will in the world—and Government lias that—is going to take some time. In the meantime the Government, with the assistance of local authorities, is doing its utmost to provide as much relief work as possible. The problem of unemployment is not by any means peculiar to New Zealand, but has affected all parts of the civilised world tq a more or less extent, gnd basically seems to be due to the economic upheaval caused by the recent war, followed by a falling world price-level. The expenditure by the Government on unemployment relief last financial year amounted to £1,415,592, an increase of £612,882 over that of the previous year. At the 31st March last there were 16,197 men emoloved on public works, as compared with 13.694 on the - 31st. March, 1929, and the highest weekly number during last year was 16,354, as against 14,544 during the previous year. In order to co-ordinate the various relief schemes i throughout the Dominion, the Government recently reappointed the Cabinet Unemployment Committee (consisting of the Ministers of Lands, Public Works, and Labour). It is the duty of the 'Committee to expedite the prosecution of the relief works that have been approved, and, as far as finance will permit, to put in hand additional schemes as they are required. GOVERNMENT TRADING DEPARTMENTS. With the exception of the railways, all the Government trading departments dosed the year with profits. The savings-bank business conducted by. the Department continues to be popular with the general public of the Dominion. The deposits for the year amounted to £28,561,854 and the withdrawals to £29,575,994. The withdrawals exceeded the deposits by £l,014,140, compared with £859,559 for the previous year. The interest credited to depositors amounted to £1,806,414, as against £1,745,050 for the previous year, so that notwithstanding the heavy witlulrawls the accumulated funds show an increase of £792.274, the balance at the orediet of depositors on 31st. March last amounting to £49,436,491. The Post Office Investment Certificates sold by the Department are becoming increasingly popular for the investment of the savings of people with small means, and the sales for the year under this heading amounted to £639,000. The rapid progress of the Public Trust Office was more than maintained during, the year. The value of estates and funds under administration on tlie 31st. March was £53.049,437 — a further record for the Office—new business amounting to £5,473,916 having been accepted throughout the year. The net profits for the year totalled £13,256, and in considering this amount account must be taken of the substantial reductions made during the year in respect of administration charges and Office fees generally., In

accordance with the amending legislation passed last session, half .the net profits of the Office «'re now paid ml»4 ; the Consolidated Fund. - J*\r~ The investments during the year \ total led £4,210.590, consisting chiefly of loans to local authorities for public utility works, to farmers for the acquisition and development -of their holtl-, ings ,to .business men for the erection of °buildings, and to city and’,. _ town . dwellers for the acquisition or building of homes. The Government Life Insurance ♦Department’s operations resulted in a net cash surplus of £222,540, of which the ' gum of £214,188 walTWlocated for dmsion amongst policy holders in the form of reversionary bonuses.’ The new business for the year amounted to £1.918,509 —the highest in the history, of the Department—while the cost/•. J management was reduced, the pel cent-; age of expenses to total income falling from 9.35 per cent', in 1928 to 8.8 per, cent, in 1929. • ' The operations of , the State Tnsur-| ance Office for the year also constituted.', a record, both the total income and the total profit being larger than for any year previously, being £201,104. and £78,276 respectively. The Accident Branch of the State Fire Insurance also experienced a, record year, a total profit of £lß,o6o.being shown in the annual accounts. All tlm foregoing offices pay both land and income tax, and legislation will be introduced this session provid-. ing for the charging in addition of; license fees and stamp duty on' : . Y cheques. Tlius, in future, all these' trading departments will be subject to similar taxation as obtains im the

case of trading companies. y > ; The State coal-mines earned a net,' profit'of £15,856 for the year, in spite - of the difficult trading conditions ; which obtained, and the total profits;, earned since inception now amount to\ . . £179,174. • Full details of the operations of the Government trading departments will- . j given in the annual reports of the j TV'.nartmenfs concerned,, but ! liav'e dealt with the matter here for the-purr’ pose' of correcting the popular imprints- 1 I sion that Government trading activities result in a loss. ’ . l: . .V . EARTHQUAKE DISASTER, u! As a result of the serious earthquake \ that occurred on the 17tli. June, considerable expenditure- has been in-. • jeurred in restoration work in the dis’tricts affected; The Government took • : immediate steps to -restore . roads,” bridges,' railways, public buildings-, etc. | the first objective being;'the .making of i: ! tracks as temporary-' means of access ;to settlers cut off as- result-of' the i calamity. Arrangements were later - - ! made for the reopening of the main ' ! • roads, and for the restorateion of pU%. [lie buildings. This has necessarily involved the Government in considerable additional expense, and up to date .th'e , Vi ; expenditure out-of revenue has. been. £155.252, and from the -Public Works Fund out of capital £24.878. This does not represent the. total cos,t to . the' Y Crown, as expenditure is still being, j incurred, particularly -in connection j with the reconstruction of roads, etc., y

STATE SUPERANNUATION FUNDS,* ■ In accordance with the Government’s . promise, a Committee has been .set up consisting of the Public Service Gom- r . missioner, the Financial Adviser to the Government, and a representative of each of the superannuation funds..'Tho Committee has been directed to investigate the whole position and report to the Government on the state of the funds', and generally what action': is considered necessary to place the matter of I superannuation for /the public services on a sound and satisfactory basis. •' i The Government is accordingly withholding further action until the Committee’s report is received. RAILWAYS. As has already been announced, the Budget difficulties for the current- financial year have been greatly increased by the fact that the railways have now reached a position when, on the present basis of operations, they can no longer meet the interest payable on the capital invested therein. As the total of the contribution to railway capital from revenue, amounting to £8,100,000 has already been written /- Y, off the capital is now represented al- - most entirely of loan-money. 1 The . interest on the whole of the public deht, i including that on the £51,000,000-in- | vested in railways, is paid out of the Consolidated Fund. The approximate I amount of the interest on the Railway portion of the.debt has, in the -last few years, been recovered from the. separate Working Railways Account, notwithstanding the heavy losses which have been incurred by the Railways. ' 1930-31. As I have indicated in my opening remarks, the Dominion is once again called upon to face a substantial drop in export prices, which inevitably means a contraction in the national income. Still, we have had to meet similar fluctuations in prices previously, and there is certainly no occasion for alarm. cv - * Partly on account of the falling-off in the trade position, but mostly duo to the reaction from Australian conditions, the exchange rates are at present verv much against the importers. While there is some consolation in the fact that the exporters are benefiting from the position, and tlius obtaining some set-off for the low price’s they have received, the com-* . hi hat ion of the two factors—a contraction in the national ipcome and an exchange irate of at- least £5 cent—must result in a considerable fall-'. ing-off’in imports, and,this, of course means a corresponding decline in Customs revenue, ' 1 ' (Continued on page throe.)

This,' our largest .item of revenue, is'fi.iviiys difficult to gauge in advance, and at a time like the present, when are so many uncertain factors to . be considered, it presents a very complex problem indeed. Having regard to the experience of the past, . and mating allowances for the economic probabilities of the near fu%rg, it is estimated that the Customs ,(revenue for this year,, apart from any changes made in the' tariff, will be £1,150,000 less than was received last financial k year.^cThe' Custonis revenue for the W months of the financial year f ajmounted to £2,006,243, as compared with £1,917,667 for the same period of last year; but an examination of the receipts for this year clearly indicate that the total has been considerably inflated ;by excessive clearances, from bond due to fear of tariff increases. This is’clearly: shown by the fact that, while the Customs revenue is higher, imports Have declined, Further, un-, less a' marked change not yet discernible occurs in..the economic outlook, it is .very probable that . the falling-off in Customs revenue will he more marked during the, balance of the financial year, for most of : the goods now coming to hand were probably ordered before the present restrictive measures effective. ; Imports last year showed a comparative increases sof £4,000,000 over those of the previous year. This year a comparative decrease of'at least £5,000,000 is likely. Furthermore, the falling-off will assuredly, be greatest in the luxury items, on which the duties are highest. ' : :. The, fall in export prices and the difficult times that have resulted therefrom will also affect the yield from land and income tax, although not to anything like the same extent. So faras income-tax is concerned, the full effect will probably not .be felt in the revenue until next financial year. Landtax, under the present legislation, would be, affected by the provision for remissions in the case of hardship, while land-tax outstanding usually increases iri times like.ithe present. For the cur-. v reiit financial year it. is estimated that land and income tax, apart frpm any changes in the- law, will be adversely affected to the-,extent),of about £300,OCO. • '■ WW • A, Ips,s of.. £l ,300,000 in the. Railway accounts, coupled i with the , exhaustion of the liquid, reserves, would mean that only about £900,000 . could have been paid to the:Consolidated Fund on account. of interest, a decrease of £1,230,000 compared with the amount received last year. ' In addition, it is expected that the v revenue item,; “Interest on public would' in the ordinary.course have' shown this year' a comparative decrease of about £6o'jooo' due to there being less money available for investment arid to the low rates of interest offering on the London market for; short-term investments. ' Tlien the ' item 'for .'miscellaneous revenue was lhsf year increased by . £60,000, derived from the sale of New Zealand’s interests 'in the Pacific Cable, a- certain accumulation of unclaimed moneys from the 'Public Trust Office received co'xiseqweht ; upon legislation passed last session, and other amounts of a■' non-recurring nature." ’’ '7 Conso-; a ' reduction of '' xibout £90,000 was likely this year; On the expenditure side, under permanent appropriations there will he unavoidable increases in debt charges, amounting, 'it is estimated, to £315,000? compfisiiig' £220,0b0 additional interest "arising out of the increases in the ""public debt and. approximately £9o',ooo"‘'for debt-repayment charges. As I have already explained the latter' item will increase steadily each yeajy hut such increases are offset by savings in interest on debt redeemed. A. further rigid item is found in pensions,. where automatic increases are to be expected. The estimated ■ increase for this year compared with last^'year’s"expenditure' amounts to £62,0C0. Which increase is chiefly under the headings, of old-age and war i pensions. Iri addition, increases are I normally to be expected in hospital iL subsicfies and 'various other items bason’ tfixed'. ’rates.' In reviewing the., prospective budgetary" position' ho 'allowance ’ was made for any’ incrt&sft; in’tdbpartmental votes whibH'ndrrtialfy increase.a little each year ns a result of expanding services.. For instance; the .Education vote has increased 'by an average of £90,000 per annum during the last five years.

Smaller increases qnd some decreases probably ;largely offsetting one. another, were to he expected under otlier items, out, to. .sum up the position tlie Government was called upon to deal with, the anticipated principal variations from lash, ( year’s revenue and expenditure, , if. .operations had been carried ' out iip.the ordinary way on the same basis,...are as follows: Decreases in revenue: Customs £1,150,000 Interest on; railway capital 1,230,000 Land and income tax 300,000 Items othey than taxation . 150,000 ;. ' m ; £2,830,000 ! ' Increases in expenditure: Debt, charges £315,000 Pensions and other fixed items 100,000 ' V ’ £415,000 ■'?: ; £3,245,000 Less amount ,of last year’s surplus 150,000 Prospective Budget shortage for 1,930-31 £3,095,000

I may mention that the amount of last year’s surplus has been reducted not because it can be brought into this year’s Budget, but because comparisons have been made with the revenue and expenditure for last year which resulted, in a surplus of approximately £150,000.. : An.estimated Budget, shortage of over £3,000,000,! quite apart from any increase i; under departmental votes—that is what the Government, this House and the country generally have to face. Still, given the 00-operation and support of honourable members and the people, the Government is satisfied that fhe position can be met arid the Budget balanced, as, of couirse, it must be,, without imposing undue hardship op tiny section of the community, for there is no doubt that the genera 1 financial position of the Dominion as a whole is quite sound. ALTERATION IN BUDGETARY PROCEDURE, • ' This year a departure was made from the usual procedure in dealing with the estimates, and, after a careful examirifttioii of the various votes, only su -h amount as was considered would be just .sufficient to enable them to carry out their .proper normal functions effi--ciently, While exercising continuous rigid .economy in detail, was allocated to each Department. In this connection I. may say that it is proposed to make,this, system of allocating amounts to the : several votes a permanent feature of the budgetary system. The reductions made mean., of course, that having-, regard to the degree of hardship likely to result to outside organisations' concerned, various subsidies and other less essential- and extraneous items . have had to be eliminated or considerably reduced. The change has been made with a view to the adoption of the more businesslike principle of cutting the national coat according to the cloth available. REDUCTIONS IN EXPENDITURE. The. position being as I have stated, reductions in expenditure are the only alternative to heavy increases in taxation. .Needless to say, the Government's anxious to avoid increasing taxation,,as much as possible, and, on becoming apprised of the position, immed ately. proceeded to review carefully the expenditure. The four items—debt charges, pensions, highway moneys, and subsidies to local authorities —accounts for £15,176,000 of the £17,228,000 of expenditure 'under the permanent appropriations,. Of the remaining £2,052,000, approximately £690,000 went in subsidies to Hospital Boards on rates, £600,000 be mg oty account of maintenance and £90,000. on capital leyies. So far a ' s maintenance is concerned curtailment of the subsidy, except in so far as it arises from the exercise of economy by the Hospital Boards, is not possible without, upsetting the whole basis of hospital finance, and it is not proposed to do that. "With capital expenditure, however, there is more elasticity, and fob this year capital expenditure by the Boards will have to be restricted to urgent essential works. In this way itis estimated’ that a reduction of £30,000 will result in the subsidies payable out of.the Consolidated Fund. Subsidies on voluntary contributions arid Requests to hospitals and various educational institutions amounted last year to- approximately £BO,OOO. Generally .speaking, bequests, together with the subsidy normally payable thereon, are. in the nature of “windfalls,” usually additional to the normal finance of the organisation concerned; and trie same remarks apply to some of trie voluntary contributions that are received. Obviously, little hardship will be' entailed in restricting the payment of subsidy to cases where voluntary con. tribution and bequests are aplied to essential (irks. Subsidies on voluntary contributions for useful and necessary work .in connection with the primary schools will be paid as heretofore, but, in general,, each'(request for a subsidy will have to be considered on the merits of the case. It is hoped in this way to save £40,000 this year without inflicting any great hardship on anybody. Then there are the subsidies to State Superannuation Funds and the National Provident Fund, which last year amoynted to £382,000 including £43,000 maternity allowances paid through the National Provident Fund and the frieridly societies. As already stated, te Superannuation Funds are in a very unsatisfactory financial state, but, pending the report of the Committee which is investigating the position, the susidies usually paid are being budgeted ifrir at present. This means i: saving of £175,000, though probably only a temporary one; in -comparison wiih the expenditure last year.

The Civil: 17 it and siil.-.r'es : u l honoraria, mostly Log.slativc arid Judicial, layable under statute, accounted for a further £138,009 of the expenditure under permanent appropriations; while grants to University colleges, seholar,shops,, and other education purposes ibsoVbed £101,000; compensation ■ for condemned stock ,£30,000; Singapore .Naval Base, under agreement with the i itish Government, £125,000; main-fc-nance of war graves, 31,003; and ex changes and management charges ,ol New Zealand stock in ondon, £72,000. Reduction cannot be made in these iteriis. I fnay add, however, that the Singapore Naval Base will be a subject for discussion at the forthcoming Imperial Economic Conference. The remaining expenditure under permanent appropriations last year, amounting to £403,000, included £IBO,000 on account of railway losses, which this year will be wholly reflected in decreased interest receipts. An amount of £50,000 transfer to Discharged Soldiers Depreciation Fund, need not he repeated this year, although the amount of the fund is not yet laige enough to offset the discharged-soldiei-settlement losses written off against loan capital. The balance of the expenditure consists of payment unclei numerous Acts of Parliament, full .'<• tails of which are set out in the esti mates placed before honourable members. The expenditure under annual appropriations, which comprise the .lepurtmontal costs, numerous; small grin s niK 1 subsidies, and various nits*!,«v.m90U' i items, amounted last year to £7,973,000 nearly half the amours—or £3,219,000 —being spent on education. In the case of the Defence, the imount allowed, £275,000, will mean a general suspension of the compulsory military training.and some reduction in the staff personnel. The dispensing with the services of members of the staff is much regretted, especially in view of the unemployment difficulties, but if there is to be a suspension of operations the work will not be there for them to do. The estimates under annual approoriations prepared on the basis that 1 have indicated total £7,585,00, being a decrease of £388,000 as compared with last year’s expenditure. In addition, as previously mentioned, a reduction in the Rail wav estimates, aided by certain increases in revenue, will aid to thei extent of £450,000. In addition to these savings in ex< peiuliture, it is proposed to. augment the revenue to the extent of £90,000 by bringing in the following amounts: — (a) £60,000 fromm the Land Assurance Fund. T 30,000 balance of interest on re-naration-moneys at present held in a special reserve by the Public Trustee. Interest to the amount of £50,000 -'aimed on such balances since the Treaty has previously been received, but owing to technical legal difficulties, legislation will be necessary before interest accruing prior to the Treaty can ■be made available. All interest on exenemy moneys, however, should be applied in relief of taxation, which is carrying the burden.of the war pensions and war debts, etc. I may add that the capital moneys, with the exception of about £60.030 held by the Public Trustee against contingent liabilities, have already been applied in repayment of war debt. The necessary legislation embodying these two proposals will be submitted in due course. To sum up. it is proposed that the Budget shortage of £3,095,000 shall bo partly met by reductions in expenditure, and adjustments ris follows : £ Subsidies to local authorities on rates transferred to Higjhways Account 220,000 Interest on loan capital transferred to Highways | Account 61,000 Additional superannuation, subsidies not being budgeted for . 175,000 Decrease in hospital dies ... 30,000 Decrease in subsidies on, voluntary contributions 40,000 Subsidies to Railways .nonrecurring ... 180,000 Elimination of transfer to Discharged Soldiers Settlement Account Depreciation Fund 50,000 Reduction in annual votes 388,000 Railways—reduction in expenditure and increase in revenue ... 450,000 Transfer from Land Assurance Fund 60,000 Balance of interest on re-paration-moneys 30,000 Total estimated savings on last year’s expenditure 1 £1,684,000 Allowing,' say? £250,000 for supplementary estimates and contingencies, there remains approximately £1.660,000 to be provided out of additional taxation. TAXATION. . Needless to say, the Government regret very much having to bring forw'ard proposals for fresh taxation, especially at a time like this, when . business generally is not as prosper- ! oils as it might be. The small surplus for last year was only atttained by close control over the expenditure and there was very little margin to come and go on. Thus, when we find ourselves faced this year with a shrinkage of £2,830.000 in revenue and added liabilities on rigid items of over £400,000, there is no possibility of bridging the .gap without isome additional taxation. Having carefully combed out the expenditure, the most the Government can do is to endeavour to place the additional burdens as equitably as possible and

in suoli a. way as to cause as little .economic disturbance as possible, in order tliat a return to more prosperous times may not be hindered any niote than can be helped. ■The Customs tariff resolutions already passed will, it is estimated, produce about half the £1.630,000 additional revenue required. As I explained when dealing with the resolutions. while obtaining the necessary revenue the l opportunity is being taken to make some desirable amendments in the tariff from the protective and preference points of view. The primage duty, which previously was imposed on practically all goods whether otherwise dutiable or not, has been abolished, and 'a. surtax on dutiable goods substituted therefor; end it may be noted that on most goods of British origin, this surtax will produce about the same amount of revenue as the present primage duty. On foreign- goods, however, it will bring in a greater amount of revenue. The bulk of the additional revenue which is to be obtained from Customs will come from the increase in the duty on many lines of foreign goods which, at the same time, will increase the margin of preference on British goods. In addition, definite increases set out in the schedules to the resolutions have been made on otlier goods. DUTY ON ctnematograbh SOUND-FILMS. In connection with the amount of additional revenue which ,it was deemed advisable to obtain liom indirect taxation, I may say that in preference to other things it was considered that additional duty should be placed upon cinematograph soundfilms. As the value of films, varies a great deal, to be equitable any increased taxation should be upon an ad valorem and not a footage basis. The difficulty here, however, is that the value of a film is not known when it comes over the wharf. In this connection it may be explained that films are not sold, but are rented to the theatre proprietors, usually for a percentage of the j gross . theatre takings. Further, films are not dealt with singly but in groups or “blocks.” Under these ‘circumstances an ad valorem Customs duty in the ordinary way is hardly practicable, but it is proposed to impose .the equivalent of an, ad valorem duty in .the shape of a film-lrre tax. , Briefly, the proposal is that the . film-distributing firms will be required, to make returns monthly to the .Commission of Taxes of the gross rentals received from sound-films and. tlie, .administration expenses incurred in New Zealand, commencing as from the Ist <Tuly last. After deducting - these , expenses, and also the percentage ,of .gross rentals upon which income-tax, is levied, the residue will represent the value of the films,. on which will be levied an ad valorem tax’ fit the -rate of .10 per cent, in the case of British films and 25 per cent, in the case of foreign films. It is proposed to obtain part of the additional revenue'required from land and income tax, hut at the same time the opportunity is being taken to remove certain anomalies and place the taxes on a more equitable basis. 'Hie information obtained from last year’s income tax ‘.returns of faming incomes showed clearly that previously many large incomes had been escaping their fair share of taxation and that the amendments made last session were in the right direction. Experience has shown, however, that the snecial land-tax was too rigid in its incidence and was inequitable in some instances. At the same time, information received bv the Tax Department shows that the incomes le-i-ived from many farms of an unimproved value of considerably less than £14,000 (and thus not at present assessable for income-tax) are not contributing a fair share towards the expenses”of the State. Accordingly, to overcome all these difficulties and inequities it is proposed to abandon the special land-tax and make all farmers owning or occupying land of an unimproved value of £7,500 or over liable to assessment for incometax on their farming as well as other income. The provision in last year’s legislation whereby the land-tax payable was deductible from the incometax on farming incomes will also be repealed, and farmers will henceforth be assessed for income-tax on the satiie basis ns other clasess of the community. 1 It is proposed to revert practically to the position obtaining prior to 1923, and reduce the allowance to 5 per cent, on the unimproved value or the taxable balance in cases where a mortgage exemption lias been allowed in the land-tax assessment, together' with an appropriate allowance for 'depreciation of buildings, varying with the different classes of buildings at the discretion of the Commissioner of Taxes.. The proposal really ' amounts to dividing the present allowance into its two parts—an allowance of 5 per cent, oil the unimproved value as a set-off against land-tax paid, and depreciation on buildings at appropriate rates as a deduction from profits. The change will apply to all assessable income derived from the use of land, whether in the course of fanning or trading It is also proposed to make some chanjgies in regard to the taxation of life-infill ranee compankh, the taxation on which has been considerably reduced in recent years. In 1921 it was provided that the income should be assessed at half tlie ordinary rate, and the companies have been able to increase greatly the bonuses paid. It is found, however, that the Government Life Insurance Department, the assessable income of which is determined by . its actual profits, is paying 32' per cent of the total income-tax

paid by life-insurance 1 companies, while its iriconie represents- less than 22 per cent, of tbo total income of life-insurance companies. 'Phis is a result of the peculiar method of arriving at the assessable income of foreign life-insurance-companies-. Such companies are assessed on income derived from investments in New Zealand and investments out of New Zealand held by or on behalf of the New Zeal! a lid branch. It is. not necessary for companies to make investments on behalf of any particular branch, consequently they may to a large extent determine their own taxation. Jt is proposed, therefore, to provide that in the case of foreign life-insurance companies the taxable income from life-insurance business shall equal 25 per cent, of the premium income and consideration received for annuities. This is approximately tlie rate shown on an actuarial basis by the Government Life Insurance Department. It is estimated tliat the yield from, land and income tax these adjustments have been made would ibe practically the same as under the existing legislation, the only difference being, that the burden would be more equitably distributed. In order to obtain part of the additional revenue required to balance the Budget, it is pioposed to withdraw the land-tax concessions granted in 1924, whereby . a deduction of 5 per cent, has been allowed on the . amount otl land-tax otherwise payable. INCREASE IN INCOME-TAX. In addition, it is proposed to increase the income-tax rates by 10 per cent. INCREASE IN STAMP DUTIES. (a) Increase the, banknote-duty I rent tlie present rate of 15s to 22s t‘d per cent, on tlie average amount of notes circulating during each quarter. This increase, which will operate as from the l3t July, means an increase from 3 per cent, to 4) per cent, in the banknote duty. (b) Increase the totalizator-duty from 2) per cent, to 5 per cent., the State to receive the whole of the increase. At present the State receives 2| per cent, and the racing clubs 7-1 per cent, of the amount deducted by racing clubs from investments on tlie totalizator. Trie proposal is to double the revenue received by the State without interfering with that received by the clubs, (c) Require insurance,companies to pay the usual 2d duty one receipts, At present they enjoy an exemption from this tax. ■ (d) Increase by 10 per cent, the stamp duty on all instruments presented for stamping. Instruments which the parties thereto are permitted or required, to affix adhesive stamps or,• write on stamped pa-pea- will not, however, be affected, (e) Companies' annual license duty: minimum to be £1 and maximum to be increased from £2OO to £3OO. if) The exemption from conveyance duty of transfers of land from the Crown to be limited to lands within the meaning, of the Land Act, 1924, or Land for .Settlement Act, 1925, or Education Reserves Act, 1928. This amendment would still leave free of duty transfers of land from the Crown for land-settlement and suchl'iko purposes, but will require purchasers of /land from Government trading Departments to pay the usual duties thereon. ig) Impose duty at the same rate as is payable on the transfer of shares in New Zealand companies upon transfers of shares in foreign companies, including foreign mining companies, executed in New Zealand. Atpresent such transfers escape duty in New Zealand. (h) Increase tlie flat rate of duty on registration of mortgages and discharges thereof from 2s 6d to ss. (i) Amend the definition of “publicauthority” so as to exclude the Public Trust Office from benefits in favour of the Crown, and otherwise narrow the definition of the Crown for purposes of stamp duty. (j) Require the Government Life Insurance and State Fire Insurance Departments to pay an annual license fee and receipt and cheque duties at the usual rates. This proposal means placing these Departments On the same footing in regard to taxation as other insurance companies. These proposed amendments to the Stamp Duties Act, apart from the increases in the totnlisator-duty and the bank-note duty, are individually relatively small from a revenue point of view, but in the aggregate they will be of some assistance in meeting the Budget shortage. Under the heading of “Death Duties” it is proposed to impose an additional 10 per cent, estate duty on the amount by which the final balance of an estate exceeds £IOO,OOO. This additional duty will bring in a considerable amount of revenue without imposing hardship on anybody. The exemption from gift duty is to be reduced from £looo'to £SOO per person per year, and a duty of 2| per cent, imposed on dutiable gifts of from £SOO to £IOOO in value. The annual license fee for a sliacebroker’s license is to be increased from £2 to £5. To further assist in providing additional revenue necessary to balance the Budget, it is proposed to reimpose the amusement-tax on payments of Is or more for admission to any entertainments. ’This was the position prior toff924, when the exemption was raised to the present amount, 2s. On Is admission price the tax will he from Is fid a tax of 2d, and on higher charges Id for every shilling or part of a shilling, plus an additional penny as at present. CONCLUSION. That completes my statement of the finances for the current year, and 1 have to thank honourable members for

a patient hearing. The Government’s proposals for meeting the serious financial position with which we are faced may appear to be a formidable list of items, but it is considered that the additional burdens will be more evenly distributed and the retarding effect upon economic recovery minimized by spreading the increase ovei' a number of items under bodi direct and indirect taxation In order that this Dominion should maintain its credit on the World’s money-market, the Government would be failing in its duty to the country if it did not bring down proposals to balance the Budget. Tbe principal cause of most of our troubles—falling prices in the world’s markets —lies beyond our control. We have surmounted similar difficulties in the past, and it is with confidence that 1 appeal to members of this House and to all sections o f the communitv resolutely to accord the Government solid support and co-operation in the necessary solution of the problem. The Dominion’s natural resources, its

favoured climate, and the energy of its people arc such l-iiao, glVdii , th® exercise of reasonable care, it should not be long before our present difficulties are behind us and the Dominion is again able to enjoy more prosperous times.

Permanent link to this item
Hononga pūmau ki tēnei tūemi

https://paperspast.natlib.govt.nz/newspapers/HOG19300725.2.8

Bibliographic details
Ngā taipitopito pukapuka

Hokitika Guardian, 25 July 1930, Page 2

Word count
Tapeke kupu
8,016

FINANCIAL STATEMENT Hokitika Guardian, 25 July 1930, Page 2

FINANCIAL STATEMENT Hokitika Guardian, 25 July 1930, Page 2

Help

Log in or create a Papers Past website account

Use your Papers Past website account to correct newspaper text.

By creating and using this account you agree to our terms of use.

Log in with RealMe®

If you’ve used a RealMe login somewhere else, you can use it here too. If you don’t already have a username and password, just click Log in and you can choose to create one.


Log in again to continue your work

Your session has expired.

Log in again with RealMe®


Alert