WAR TAXATION.

Lyttelton Times, Volume CXVII, Issue 17279, 21 September 1916, Page 4

WAR TAXATION.

THE NEW LEGISLATION. ITS OPERATION FURTHER EXPLAINED. V-v . ; (‘'Evening Post,” August 16.) Yesterday was published the first section of nil explanatory exposition of the operation of the Finance Act (War Taxation Act), passed Last session. Following is tho second article, dealing with other phases of tho new taxation: — In any case where the Commissioner is satisfied that the computation of the standard income by any of the methods (A), (B), (C), (D), outlined, ' yesterday would entail serious hardship on any taxpayer by reason of the recent commencement of tho business of such taxpayer, or by reason of the fact that the amount of capital actually employed by the taxpayer in his business is, owing to the nature of that business, small compared with the capital necessarily at stake for that business, tho Commissioner may compute tho standard income in such a manner as, having regard to all tho circumstances of the caso he deems just and reasonable. The Commissioner may also allow timo for. payment of tho excess profits duty if he considers that serious hardship would be entailed by payment on tho date fixed. Provision is made for tho hearing of objections to assessments of excess profits duty, at the election of tho taxpayer either by a Magistrate’s Court, undor the Land and Income Tax Act, 1916, or a special board of appeal constituted by tho Finance Act, 1916. Returns and statements required for tho purpose of assessing tho excess profits duty,:— A taxpayer who elects under (A), # (B] or (C) is required to furnish (unless he has already done so) a return or returns of. income for tho year or years which he elects to take, and also a statement of assets and liailities as at April 1, 1915, and as at tho commencing date of the year or years to which his election relates. That is, if he elects to take the year ending March 31, 1914, as the standard, a return will be required for that year (if he has not already forwarded on p), a.nrl also a statement of assets and liabilities as- at April 1, 1915 (the commencement of the income year), and as at April 1, 1913 (the commencement of the standard year). A taxpayer who elects under <D), or whose first year in business terminates during the year ending March 31, 1916, is required to furnish (unless ho has already done so) a return for tho year ended March 31, 1916, or date of completion of first year’s business, as the'case may be, and also a statement of assets and liabilities as at April J, 1915, qr the date of commencement of business, as tlio case may be. For instance: If a taxpayer commenced business on January 1, 1915, he should furnish a return for the year ending December 31, 1915 (if he has not already done so), and a statement of assets and liabilities as at January 1, 1915. Where annual balance-sheets and profit and loss accounts have been prepared, a copy of the same will be accepted in lieu of the aforementioned returns and statements. In cases whei;e the taxpayer has furnished all tho returns and _ statements required he need only notify the Commissioner of his election. < Every taxpayer .who has derived excess profits is required to notify the Commissioner of his election as to standard income. Forms of return, notification of election, and statement of assets and liabilities will shortly be obtainable at. all postal money order offices in the Dominion. In addition to the ordinary income tax, tho Finance Act, 1916, ' provides for a special' tax on all assessable income over £3OO. . Up to £9OO the rate is 2J per cent (6d in the £). Over £9OO the rate is 5 per cent (Is in the*£) —e.g., (1) If a taxpayer has an assessable income of £SOO, be will pay on £2OO at 6d in the £, equals £5; (2)-if a taxpayer has an assessable income of £l2Ol, ho will pay on £9Ol at Is in the £, equals £45 Is. Where excess profits duty is payable, the duty is allowed as a deduction in arriving at the taxable balance for ordinary income tax, and also for special income tax. The following is a typical assessment: A taxpayer’s assessable income for the income year is £I2OO and his standard income is £9OO. He pays £4O per annum in life insurance premiums, and owns his business premises, of which the Government valuation is £2OOO. £ s. d. Excels Profits Duty— Assessable income, £1200; standard incomo, £300; excess profits, £lo3—duty at 45 per cent . 135 0 0 Special Income Tax — Assersable income, £1200; lass £3OO and excess profits duty £135, £133; taxable balance, £T6S—£765 at Cd in the £1 . 10 2 G Ordinary Income Tax— Assessable, income, £1200; less exco33 profits duty £135, special exemptions £3OO, life insurance j premiums £4O, 5 per cent on ! , . Government valuation business • premises (£2000), £100; £575 ,! taxablo b.i’nnce, £025 at 7 11-lOd in £1 ... . ; . 20 0 4 Super tax, 83J p.c. . . . » 613 5 Total tax £ISO 10 3 By reason of tho special exemptions being deductible in arriving at the ordinary income tax and not in arriving at the other duties a taxpayer may be liable for tho latter and not for the former. This is: A taxpayer has an income of £4OO and a standard incomo of £350. He pays £4O per annum in life insurance premiums and has two children under sixteen years of age dependent on him. Ilis assessment would be as follows: £ s. d. Excess Profits Duty Afforssb’e income £IOO, standard income £l5O. excess rrofits £SO, ditto duty 43 per cent . . 22 10 0 Special Incomo Tax— Assessable income £IOO. less special exemption £3GO, less ex- «£» profits dvtv £22 10s, £322 10s, taxable balance £77 10s; £77 IDs at Gd in the £1 . 1 18 9 Ordinary Graduated Incomo lax— Assessable incomb'£)o3.".lesS excess profits duty £22 10s special exemptions £?CO, life, insurance premium £4O, 2 chi’dren at. £25. £SO; £412 30s, taxablo balance nil. Total tax •»< « 9 j, I n a v similar way after the excess profits duty is deducted, the balance may be ‘under £300; consequently neither of the, income taxes would bo payable. '