INTEREST RATES

Hokitika Guardian, 1 April 1932, Page 2

INTEREST RATES

COMPULSION OPPOSED. AUCKLAND STOCK EXCHANGE VIEW. AUCKLAND, March 31. , Definite views upon a compulsory reduction in interest rates and a general super tax upon interest are expressed by the Auckland .Stock Exchenge in aletter which has been forwarded to the Minister for Finance, the Hon. W. Downie Stewart. The letter states: We are opposed to a. general reduction of interest oy legislation, as it destroys the country’s creditj" and the stain of broken contracts will remain a>s a. blot on the Dominion for many years to come. From our experience as brokers we find vie great majority of debenture-holders are quite prepared to pay whatever taxation may he necessary during the next few years until the present depression parses. We would emphasise that what the investor objects to very strongly is interference with interest for, say, the next 20 years with no provision for readjustment during vuo currency of his seourrey. While the | depression raises a suggestion for a 1 reduction of contractual interest, no I bloom period has ever heard it put 'forward that as a measure of mere fairness such interest rates should be increased.

Attention is drawn to the previous suggestion made by the Exchange as follows: "It is respectfully suggested, but only ne a last resource, and then strictly ns an emergency measure, .to impose a tax at a flat rate on all interest whether derived from bonds, mortgages, fixed deposits, savings bank deposits, etc., irrespective of the individual holders’ liability for ordinary income tax. This would produce a large and readily-collected revenue. The tax would not destroy capital or credit, as it would be recognised as a temporary measure only, and in our opinion, would make for the desired equality of sacrifice without placing the stain on the credit of the Dominion such as would a compulsory conversion of existing loans.

“We are opposed to the reduction of dividends on cumulative preference shares unless and until the profits earned are insufficient to pay ordinary share dividends. Oases may be cited of Australian companies paying lower preferential dividends and reduced interest on debenture issues while maintaining the usual rate of ordinary share dividends. We have yi mind several companies where a reduction of preference dividends would simply mean an increased distribution - to ordinary shareholders, “We are opposed to reduction of rents except in cases where no reduction has been made to meet existing conditions. The average reduction in Auckland is 40 per cent, and there are a large number of vacant shops and houses. In addition, there is. considerable difficulty in many cases in collecting even the reduced rentals. Therefore a compulsory reduction in addition to those already made would be quite unfair to property-owners who have met their tenants in difficulty. We suggest that the taxation of power board revenues should be immediately introduced, and 'this may apply to other State arad municipal trading organisations. Such taxes will spread over the whole community and are easily collected.’’