A Financial Letter.

Manawatu Standard, Volume XI, Issue 1683, 13 April 1886, Page 3

A Financial Letter.

(Special Correspondent N.Z. Tirh&s.) London, Feb. 25. As regards the; total amount o^yoiir; indebtedness^ I take the debi of 'the Colony, at the end of. the present year, at £32,000,000 (leaving out the one mil. lion guaranteed loan, which it would not be prudent to operate upon), and, m xzund^nutnbprs, estimate the debts of. cocporated bodies, harbor boards, and private railway companies at £5,500,000; we hare a total of £37,500,000 of untaxed capital on which the ( olony pays interest at rates varying irom 4 to 6 per cent.* and on some small loans a higher rate. The whole, or nearly the whole, of the interest of this great turn leaves the Colony ,to be expended elsewhere, without contributing one farthing toward the cost of Government m New Zealand. Yet I am unaware of any clause m the various Land Acts that for bids its taxation, if the tax on the above amount was but f d m the noimd it would yield: an. annual revenue. of i' 8125 on every million ao taxed, or, on the total sum, there would be an annual gain of £117.187 10s. Thus, at }d, m the pound you reduce your taxation and at the same time increase your income. It may be reasonably asked, What precedents are there for taxing the cou-. pons of a public dejbt ? To this I acswer — Firstly, that during the last year the British Government enforced a reduction of 5 per cent.'on the interest coupons of the Egyptian debt; secondly, the coupons of part of the Austrian foreign public debt are taxed ; thirdly, a number of years ago Italy levied a tax on its foreign debt coupons, and that to the extent r of nearly 14 .per, pent,, yet about two years ago raised a loan on the London, market through the great house of Barings, of fourteen millions sterling, the coupons thereof being subject to the tax; fourthly, the British Parliament taxes iacQine Irom New Zealand bonds, bank snares, mortgages; &c.,, held by New Zealand colonists resident m this country, to the extent of eighteenpence m the 'pound. Fifthly, m 1841, there was no income tax m England ; m 1842 Sir Robert Feel imposed his income tax, which, of course, applied to all home and, foreign investors m the National Debt, on the bonds of , which the Imperial Parliament previously., had contracted to give a fixed rate of interest,. . Now 1 as I think I have stated all that can /be fairly said m favor of taxing coupons* let me, m as few words as possible, say what I believe would be the resuhV, pf your Parliament doinp- the same, thing. Recently I had a long conversation with two City bankers of good standing, I asked them their opinion on the subject. The first replied that taxing' your qoupons, though it might not'be direct repudiation, it was almost certain that it would be stigmatised' as such, and the consequence would be a great fafl m the price of New, Zealand Government securities, , followed by a stoppage of your borrowing m the London money market for some' time to come. The second remarked that the apt' of- • taxing New Zealand coupons wpald" bo discounted m due course, and thati you might be able, to, borrow soonerthan.might be expected from pursuing sucban unusual course. What lie meant hy. being li discounted m due course" was 1 that' your 4 per cent, bonds now ■worth, say £100, would fall probably to £90, : and you nrisrht have to pay for yoqr future loans 4^ per cent, instead of 4. .Such is the information I gleaned ; but, to my mind, .the effect... m. the Colony /Would be still mors serious, for the'sudden stoppage of borrowing would result m a sudden stoppage of public works and wide-spread distress among the laboring population of New Zealand. • -■■■'■ „ In. conclusion, and with all due reference to those colonists who may hold different opinions to mine, I may be permitted to say : To my mind it ap pears that the safest and. most desirable and satisfactory course to pursue would be * medium one. Would it not be better to limit the raising of new loans as follows : — Resolve not to borrow more than, three . millions 'during the next three years. Borrow the- first million m 1886, the second m 1887, and the third m 1888 ; the expenditure of the last millioti to be extended over two years, £500,000 being spent' m 1888 and £500,000 m 1889., During this period it would be found widdom lo discontinue all „free or assisted immigration, and effect a great reduction m the lavish expenditure of your. Government. I feel certain that these measures would restore confidence' and prosperity to New Zealand: The laboring population employed on public works would have time to pro- .■ cure legitimate; employment on farms and other industrial occupations, and New Zealand would have time to recuperate and again promise to become the Great Britain of the Pacific Ocean.