LAND AND INCOME TAX

Hokitika Guardian, 25 August 1930, Page 7

LAND AND INCOME TAX

BILL BEFORE HOUSE, fj LONG: DERATE OX SECOND ■' reading. ■■ • ' r ’ WELLINGTON, August 21. ■ Urgency was accorded the - passage' of \ the’’(Land.- and •. Income Tax Apt' Amendriiierit Bill and Land and Income Till .((AniiiM) Bill 1 in the 'House df Representatives torday. . in* moving the second reading of the Land and Income Tax Act Aniend- > ment Bill: the Prime Minister, exV,. plaining the measure, said that one of\ the' principal provisions wa« the abolition of super-tax on land. It had .to 'be recognised that owners of land had been hardest hit by the fall in the value of primary products, and it:- was necessary that this relief ph'ould be given , them. The next clause made clear the extent to which land ' was subject to income tax, ah estates of an unimproved value cxJceiidirig £7300 being assessable. Another clause brought South African war veterans in line with Great War pensioners in granting -. them exemptioh; froin taxation of pensions. Re-

ferring 3 to the olause -reducing the exemption allowed in respect of inpome "derived from the use of land, • the Ririme Minister said that formerly this hed stood at 5 per cent on the improved i. value. It was considered that in the coee of city buildings the alldwahCfe pf 5 percent was too great, because. , the actual depreciation in the. case f of, buildings constructed in eteel 'ah'd': concrete would not amount to. more' then If •P e *’ cent annually. By v fixing the basis on unimproved instead of; improved value the- exemption .became more / workable. Special provisions 1 with re*pebt to the assessment v f# * income- tax of insurance companies ■ whose headquarters ,;were oiitaide’ lSl'ew Zealand brought.,., these Companies! ph to the same footing as New.; Zealand institutions. Formerly they Enjoyed (an advantage and ' tax was • a long way ~paid- by . New Zealand compafrieA ’There 1 - was no reason why overseas r institutions should not contribute the same-rate. ‘;. -: The • Hofe : W.-Dbwhie,Stewai't. (Dunpdih ’West) ■•said the, ;Byr afforded another instance (that 'the Governmen was le.af.hinff-by experience, ‘and, only b> experience detrimental to the taxpaveri Party.(had . protested against the super-tax when the proposal was before the House, and the views expressed then by the Opposition had been sustained by the i Royal -iPommission appointed to deal wfcth ' WwT of ‘ hardship. 'Referring to other features of the Bill, Mr Stewart said the proposal to assess income tax on returns from land- of an •d value (exceeding £7600 was in line with the: modern trend of political bpihion'iand' was an approach to the of taxation on income Opinion was not yet quite wady for Ahe total substitution of

incomeifpf land tax. The Bill would bring city- and country taxpayers on to the same, footing. Both would be liable to income; tax, both would be liable, to land tax, and both would be entitled to 5 per cent exemption on the unimproved value of the land. The new basis of granting exemption would place the rural taxpayer on a more favourable standing than the city man, because unimproved value in the country practically amounted to two-thirds of the capital value,' while in the city the proportion Was very much smaller. He- said that the change might very well have a detrimental effect on chain businesses; They (would have no means of passing -the tax on to consumers, and,' if‘‘■Nthei.r Ibusinedses suffered, there might be a consequent increase in unemployment. It seemed to be the policy of the Government to make the maximum taxation for one year the minimum for the following year. The Prime Minister might next year find himself faced with a continued fall in values of produce, and it might riot 1 be possible to repeat this year’s programme of increasing taxation. He isaid he had made all the reductions' in Departmental expenditure, but this claim had not been accepted by outside critics, an the speaker suggested that it would be wise to set up a commission to investigate expenditure.

SHOULD BE TREATED ALIKE. Mr Savage, Auckland West) said that Parliament would soon be- a tiling of the past if they were going to set up an outside inquiry into the running of the Civil Service, Sorely, the Government could undertake i . Tt was the Government's responsibility He submitted that in the matter of taxation both farm and city People should be treated alike. Th e 5 per cent allowance on unimproved value instead of on capital va-lue was a step in the right direction. Statistics,; .showed that there .were still many incomes capable of bearing greater degree of taxation. The grea bulk of assessable incomes were above the £IOOO mark, and lie contended there was a greater for taxing) thosq. sources than for raising additional revenue from Customs ' tax seepied to be the weakest flaw » the Government’s proposals. H© tygarded the removal of the special land tax as a retrograde step, and suggested that, the super-tax should have,, been retained on estates above £20,000 unimproved value. That would do no-injustice to small men o n the land. The principle of land tax should he to make it easy to use the land for its full production, and in the case, of big estates the land was not being used to that extent. Mr Wilkinson (Egmont) said there was a limit to which taxation could be imposed, and that was being approached now. The proposal for the special - exemption in respect of in-come-derived- from the use of land to be based on the unimproved value woud result in hardship and would dwoourage building. ,He asked the Government to amend the clause to providea ■ reasonable allowance for depreciation.

THE SUPER-TAX. Mr Wright (Wellington Suburbs) referred to the differences between the taxation policies of the three main parties in the House, and said he believed the Reform Party’s policy had been correct. Tiie super-tax on land had been introduced with a great flourish of trumpets, but the Government bad now found it advisable to abolish it. He congratulated the Prime Minister on having made the change Mr Wright supported the remarks of Mr Stewart with regard to hardship that might be created by the; changed basis for granting, the 5 per? cent exemption with respect o land taxation.

Mr Jones (Mid-Canterbury) said the Government was apparently hail - ing;, down its flag in connection with the! super-tax on land/ and he was satisfied that the Reform Party attitude throughout had been a correct one: There were a number of reasons why Mr Savage’s 'suggestion that estates of an unimproved value of over £20,000 should ibe subject- to super-tax was unfair. For instance, the land might already have been subdivided and offered for sale without result, It might have been subdivided and sold, only to fall back again on the taxpayer’s hands. In Other oases it might be subject to-a long term lease, rendering su ivis ion impossible. He believed the time would eventually come when farmers would have to pay only income tax. It should -be recognised that local rates constituted a ' sufficiently heavy burden on the land. ~ . Mr Fletcher (Grey Lynn) said he did not think there should be any differentiation -between the treatment of a man in the country and of a man in the city as far ns taxation was concerned, ffe. favoured income tax atone ■as the basis of taxation. He did not think that the unimproved value of land should enter into consideration, [f a man owned an estate valued at over £7500, but did not make a profit he should not be taxed, but, if a man owned land of an unimproved value of only £IOO, but earned from it an income of over £3OO, he should be taxed on th© (same basis as a man In the 'city.,. . f , • ',- BURDEN ON THE LAND.

Mr Lysnar . (Gisborne) declared that the amoiint paid in land tax by the farmer should be deducted from his income tax. Mr J. A. Nash (Palmerston): Would you do that to the city man too? Mr Lysnar: Certainly not. The city man can pass his land tax on, but the farmer cannot. He urged the Prime Minister to make such a concession to the man on the land. There would be no real prosperity in this Domonion until the burden on the land was relieved.

Mr Batehener (Waitaki) also asked the Government to ease the burden on the farmer. He asserted that it was diffiult for many men to carry on but the Government appeared to bA showing consideration only 'for those on Crown lands. Even then it was find-

ing difficulty in getting Crown lands' taxon up. ’' ''

Mr. Hall (Hauraki) objeced to double tax on farmers, and read quotations to slioiv that Liberal members hac; objected to it in the past.

Mr Young (Hamilton) said that the effect of the super-tax bad been to destroy industry and create unemployment.

RELIEF NEEDED. Mr Coates, leader of the Opposition, reminded the Government that it hacl been in office two years and it Had produced two Land and Income Tax Amendment Bills. He wondered what it would produce next year. The consequence of last year’s Bill was well known and it was unfortunate that the present Bill demanded an increase of taxation at a time of depression. A return to confidence was important and this could be induced by granting some relief from taxation. He favoured income tax as the basis of farmers’ taxation. An unfortunate feature connected with land tax was the almostimpossibility for farmers to get full allowance for improvements, with the result that the unimproved values on which they were taxed were too high. 'Mr Field (Otaki) also urged that farmers’ taxation should not be too heavy. He snid he considered that a tax on income was the fairest method but at a time of stress like the present he had no objection to land tax, so long as it was not allowed to be oppressive,

PRIME MINISTER IN REPLY. Replying to the debate, the Prime Minister said that it was claimed that the great fight of the Opposition save'd the fanners o'f the country, bnt 1500 farmers only were affected and it looked well for the Opposition to say that the whole of the 80,000 farmers of New Zealand were hit. The super-tax would have been satisfactory if it had not been for the price of wool and other produce. There was a difference o'f opinion as to what exemption should be allowed on ferroconcrete buildings. He had .before Him a, prospectus for a ferroconcrete arid steel building, and depreciation of one quarter per (cent was allowed. .-•••. : Mr Hamilton: That is a life of 400 years. The Prime Minister: The .(amount can be fixed. Mi- Fletcher: Who is going to fix it if the Prime Minister and the Government are not ? The Prime Minister: It will be fixed by experts. -1 . IN COMMITTEE. The Bill having been read a second time was considered in comiriittee. Mr Harris (Waitemata) asked if foreign insurance companies would be taxed on the same basis as 1 the Government Life Insurance Office. Mr Forbes replied that that was so. Mr Wilkinson (Egmont) gave notice that he would move nn amendment to fix depreciation on brick or concrete buildings at three per cent, and on wooden buildings at 4} per cent.

Mr Barnard (Napier) asked if then had been a departure from the Budget regarding taxation of life insurance companies.

M(r Forbes said that the rate of cle predation on buildings would be fixed. The rates mentioned in Mr Wilkinson’s amendment were fairly handsome ant: they could; not be adopted (because rates could only be fixed after tinmatter bad been carefully gone into. Mr Coates referred to insurance companies and said that the proposals did not place foreign companies on the same footing as the Government department, because the Government deI partment did not pay dues which hat, to be borne by private companies. | After objections had been raised by other members to the clause relating to life insurance companies the Prime Minister stated that he would have nc object; on to discussing the position before the Bill went before the Legislative Council. The short title was passed at 11.45 p.m. When the clause relating to payment of income tax by occupiers of land, the unimproved value of which exceeds £7,500, was reached Mr Hamilton (Wallace) asked the Prime Minister whether it would be possible to increase the minimum to £1.0,000. Mr Forbes said he could not do so. Mr Wilkinson asked whether notice would be taken of the wages paid by a father to his children. Mr Forbes said this would be done if it could be shown that wages actually were paid. The clause was passed. When the exemption clause was before the committee Mr Wilkinson moved an amendment that the rate of depreciation of premises be fixed at not less than 4 per cent per annum in the case of wooden buildings and 2J- per cent in the case of brick or concrete. This was defeated by 53 to 14. Mr lluslnvorth (Bay of Islands), then moved an amendment providing that the question of assessment of deductions for improvements should be in the hands of the Minister of Finance instead of the Commissioner of Taxes. He said that until some principle hau been evolved a great deal of taxing authority would be required. No public servant should be; entrusted with such powers. The Prime Minister stated that experience had shown that Commissioners of Taxes had always been very reasonable men. Mr Rushworth remarked that it was not a question of reasonableness or competence. There would be many problems arising and a great deal of authority would have to be delegated. Furthermore, when disputes arose, it would he possible to ask the Minister •of' Finance questions on the subject, but it would not be possible to deal in the same way with the Commissioner.

Mr Samuel (Thames) pointed out that placing the necessity to decide In the hands of the Minister of Finance would leave him open to charges of party bias and similar embarrassments. He added that appeals against the Commissioner’s rulings could always be brought before Parliament. ' The amendment was lost on the voices and the origial clause was passed. Mr Langston (Waimarino), moved that an additional clause be added to the Bill providing that in computing the annual taxable income of any registered company under the Act of 1908 no exemptions should be allowed on directors fees in excess of £2OO in that company. He said that by payment, of very large directors’ fees companies avoided paying a fair share of income tax.

The motion was ruled out off 'order,

Mr Kyle (Riccarton) moved to add a clause providing that mortgage exemption should be restored from £7500 to £IO,OOO. He contended that under the Bill before the committee farmers would find their taxation burdens heavy, and the additional exemption on mortgaged estates would provide some protection. The motion was rejected by 38 to 29.

Both the Land and Income Tax Act Amendment Bill and Land and Income Tax (Annual) Bill were then reported to the House without amendment. BILL PASSED.

Speaking on the third reading of the Amenndment Bill Mr Samuel (Thames) expressed appreciation that the Prime Minister had agreed to meet members of the House and representatives of insurance companies to discuss the new clause relating to insurance company taxation. The Land and Income Tax Bill was read a third timo and passed.