OVERHAUL NEEDED

Nelson Evening Mail, Volume LXIII, 27 July 1929, Page 5

OVERHAUL NEEDED

OF THE COUNTRY’S FINANCES

i) It Asm l-CONOMY. NOT MORI; TAXATION

STATEMENT UVT A Oil AM HER 0.1:

COM MERC!

The following memorandum lias been prepared by tin* Council o! the Cauteiliurv Chamber of Commerce, as business people feel that (lie lime lias come when llie l iovernnu'iiL should decrease ils overhead as every well organised business linn has had to do, and instead ol increasing taxation should decrease iL to a figure which the community can reasonably bear: A recent statement, made. )>y the Prime .Minister suggests that, owing to a deficit in, the national accounts for the lasL (inn Uriel year, the Government will find itself ‘ forced to increase taxation still further. It, appears necessary, therefore, to point out that the burden of taxation in New Zealand is already excessive, and that there are other and much more desirable methods by which revenue and expenditure may be made to balance. Though there is no reason for believing that the pre-war burden of taxation was as light, or public finance as economical as was desirable, the prewar years afford r. convenient basis lor comparison. Conclusions drawn hum such comparisons are, however, strengthened bv the admission of weaknesses in the fiscal system in the year 1914, which is used as a standard for comparison. Recent taxation in the Dominion compares as follows with pre-war taxation : STATK TAXATION, 1913-14 AND 1927-28 1913-14 1927-28 £ £ Tolai taxation ... 5,918,034 17,145,145 Taxation per head 510 0 11 17 7 The figures show that total State taxation. (omitting local body rates) has almost trebled, while taxation per head Inis more than doubled since pre-war years, liven if full allowance )>e made; for tlu- rise in prices, the burden ol State taxation per bead lias increased 45 per cent, since 1914. This great expansion, has been achieved by greater exactions front old and exhaustive exploitation of new sources of taxation. The amounts cnlicctcd under different heads compare, as follows: — CHIEF SOURCES OF TAXATION

It is commonly stated that higher taxation is occasioned by increased population, higher prices, and by unavoidable, war expenditure. But even if interest paid on war debt and the amounts of war pensions be subtracted from total taxation, the amount remaining per head still shows an increase over 1914 greater than can he accounted for by the rise in prices. And it does not logically follow that increases in population caprices should necessitate increases in taxation.

The fact is, that the great increases in taxation and in the, real burden of taxation are due to an enormous expansion in State expenditure. It. is b\ analysis of expenditure that the causes are revealed, and only in the control of expenditure that an effective solution of the taxation problem can be found. The State’s current expenditure annually follows its revenue fairly closely, and such expenditure has risen with, and is indeed the cause of, the rise in taxation. But, capital expenditure has expanded 100, and .the first cause of higher annual expenditure is found in the enormous growth of expenditure from loan moneys revealed in the figures below. NATIONAL DEBT IuAt March 31st 1914 1928. crease £ £ pc. Net debt ... 91,689,833 248.740.736 172 Debt per bead 80 9 1 171 2 7 113 Inter, on debt 3,813,000 The National Debt, increased by 157 millions between 1914 and 1928. Of this increase, nearly 72 millions is due to war debt, and the remainder, 85

millions, is other debt. Further, 78 millions was borrowed in the nine years 1919-28. If the net, borrowings of 1928 29 are added, we are seen to have borrowed, in the last, ten years alone, a sum approximately equal to the total National Debt, before the war. 'lbis increase in debt has involved the practical trebling of the interest l,»i 11Of the U millions paid in interest, £3,489,000' was. paid op war debt, leaving more than 71 millions, almost double Hie pre-war interest, bill, to be paid on oilier debt. Roth our debt and (Mir interest bill per head are now almost, certainly higher than that ol any other country in the world. A further cause of the enormous increase in expenditure is revealed ill the next table,, showing increases in Stale- departments, and their stalls (figures for these totals as published by the X.Z. Taxpayers' Federation).

DEPARTMENTAL STAFFS AND SALARIES

In--1913-14 1928-29 crease (estimate) p.c. Staffs 11,587 21,272 84 Salaried 131,914,016 £5.237,731 174 Population 1,125,000 1,460,000 30 Sslarv bill per head £1 14 0 £3 10 7 108 Those are departmental employees only, probably about o-ne-fourth of the total public employees in New Zealand. Vet, while population has increased 30 per cent., their numbers have increased 84 per cent., their salaries 174 per cent, (the increase of average salary thus being 49 per cent.), and their salary bill per head of population has more than doubled. It, is difficult to find reason for those increases, and more difficult, to believe that the growth in value of services rendered has been commensurate with the growth of expenditure. Such departmental expenditure is included in the Annual Appropriations from the Consolidated Fund. It is customary to divide Government expenditure in'to Permanent Appropriations and Annual Appropriations. A comparison of these with their totals and percentage increases is as follows (figures from Taxpayers’ Federations). STATE EXPENDITURE

Total 11.825,863 31,630,027 168 Railway expenditure is included for both years, in order that the returns may he comparable. For a population of less than 1A millions, the figures of expenditure are staggering. Vet it is suggested that, to meet a deficit, taxation should bn increased.

In some other countries, other methods have been adopted, and taxation* has been considerably reduced in recent years. The British Treasury, in a recent publication, stated that unemployment and depression in Britain are due mainly to the fact that costs of production are higher than can he justified by 1 tiling prices. It is now becoming generally recognised that the same conclusion holds good for New Zealand, and that the only really effective means to prosperity lies in the reduction of production costs. Taxation constitutes an important part of those costs. Any economy in public expenditure, and consequent reduction of taxation, would tend to lower costs and promote prosperity. Almost any increase of expenditure and of taxation would have the opposite effect. The. heavy burden of taxation has retarded recovery ever since the postwar slump, and it is still so hftivy as to threaten to dry up the sources from which it is drawn. The experiences of the last few years of high primary production and good prices, accompanied by widespread unemployment, suggest that real recovery, progress and prosperity are unlikely to he secured uptil the burden of taxation is lightened. In the face of Ibis situation it is proposed to* increase taxation and to make revenue meet the swollen State expenditure. Business men throughout the Dominion have realised thoroughly that expenditure got out of hand during the years of the post-war boom. Recognising, when the slump came, that their expenditure had to be reduced, they have been forced to ask themselves how l'ar the results secured in. each department were commensurate with expenditure there, and they have undoubtedly reduced both overhead and working costs and have increased efficiency. Throughout the process they have been retarded, rather than aided, by State exactions and by State interference. The continuance of unemployment and a low level of business coiilideiice at a time when all external conditions am highly favourable and money is abundant, points to the conclusion that the economy of the. people cannot secure the Dominion’s prosperity unless the State, too, makes a real effort towards economy. Those who have made the effort themselves, and achieved success, have the strongest right to demand that their strivings should not- he nullified by the extravagant demands of the State. In particular, they claim that the enormous expenditure of government should he reduced, and every effort made to ensure that real value is returned for State expenditure. They are convinced that such value is not n't present being secured in many Government departments, particularly in the railways, and that money which taxpayers can ill afford is being spent to the positive detriment, of the taxpayers. In support of this contention, they point to the large and increasing army of state inspectors, some of whom are necessary, but most of whom are mere irritants, whose effect it is to restrict production, prevent the introduction of better methods and'increase production costs. The cost of instituting and maintaining this parasitic growth is not only heavy directly; it is infinitely heavier in its indirect effects on production* and development. In the light, not only of the deficit in last year’s accounts, but of the economic situation generally, there is urgent need lor a thorough overhaul of the country’s finances. Reform is undoubtedly required. But the reform for which the situation calls is in the direction of drastic public economies, with a view to .securing real value for all expenditure, and appreciable reduction of taxation. I lie suggestion that the present whip of heavy taxation should he exchanged for I lie scorpion of more taxation is a concession of bankruptcy i.n administrative rapacity.

Customs and In-1913-14 1924-28 crease £ Thousands p.c. Excise 3.554 8,872 149 Land Tax 767 1,154 50 Income Tax 554 3.274 491 Death Duties 614 1,899 209 Ollier Taxes 421) 1.946 354 5.918 17,145 190

Appro-1913-14 1927-28 Increase print ion £ ' £ p.e. Permanent 4,236,087 14,879,378 251 Ann mil 7,589,776 16,750,649 121