TAXATION

Nelson Evening Mail, Volume LXIII, 2 August 1929, Page 6

TAXATION

PROPOSED INCREASES TO BALANCE THE BUDGET As to this all-important question, honourable members will have gathered from my remarks earlier in this Statement that, in view of the deficit last year and the general position of the country's finances when the Government assumed office, there is no practicable option but to face the facts and obtain additional revenue from taxation if the Budget for this year is to be balanced — and that, of course, is essential. In determining how the additional revenue required" may best be obtained, I have endeiivoured to make a virtue of necessity, and, while adjusting taxation on an equitable basis, place the added burden in such a way as to assist the Government's land-settlement policy which I have already outlined. At the same time I have had regard to the desirability of creating as little disturbance as possible in business and trade,

in order that the economic progress of the Dominion may not be hindered. LAND-TAX Attention was first given Ut the largo farming incomes, which 1 consider have not borne their fair share, of taxation in recent years. Accordingly, to adjust thjs jnequity and assist jn bringing ■about the euttiij'g-up of large estates, it is proposed, in ihe case of farming-lands of aii unimproved value in excess of £12,500, that the amount of land-tax assessed on the present graduated scale shall be increased by a supertax calculated on a graduated percentage basis rising 1 per cent, for each £SO of unimproved value above £12,500 oii | which such land-tax is assessed, until for an unimproved Value of £15,000 the supertax will be 50 per cent, of tho land-tax on the present basis. Thereafter the percentage rate of supertax will continue to increase 1 per cent, for every £3OO of unimproved value on which laud-tax is based, until for an unimproved value of £30,000 tb P supertax will be 100 per cent. Above r.n unimproved value of £30,000 the supertax will be at a flat rate, of 100 per cent, of tho land-tax as assessed under the present scale. It is further proposed that the, mortgage exemption allowed in assessing iland-tax shall be reduced to £SOOO, disappearing £1 for every £1 of unimproved value in excess of £SOOO. The present exemption is £IO,OOO, disappearing £2 for every £1 of unimproved value in excess of £IO,OOO. It is a fact that at present, owing to exemptions, many farmers with an unimproved value up to £IO,OOO pay neither land nor income tax. INCOME-TAX ON LARGE FARMING INCOMES In addition it is intended to amend the law to make all farmers, including farming partnerships, : with holdings (whether owned or leased) of an Unimproved value of £12,500 and over at any time during the year ended 31st March, 1929, assessable with incometax on their farming income, but subject to a set-off of the actual amount paid in land-tax on the land used for 'farming. In effect, this means the payment of land-tax or income-tax, which ever is the greater. In such cases, however, the 5 per cent, of the capital value of land otherwise deductible from assessable income derived from such land will not be allowed, as normally this is intended to cover landtax paid. This proposal is- intended to ensure that the large farming incomes will contribute to the national revenue in the same ratio as'the incomes from other occupations, which is only just and equitable. INCREASE IN PRIMAGE DUTY

As I do not anticipate that these land- and income-tax proposals will produce enough additional revenue to ensure a balanced Budget for this financial year, it is proposed to move a resolution to-night increasing the primage duty on imports from 1 per cent, to 2 per cent. Primage is purely a revenue duty imposed upon practically all imports whether dutiable or not, and to obtain the additional revenue required in the manner indicated will not affect any particular industry or class of goods. The duty is so small and so universal in its application that the proposed increase will be the least felt of any possible increase in indirect taxation. Further, as soon as the Budget balance is stabilised, this additional duty can be taken oIT without disturbing the tariff in any way.

To remedy a cause of hardship under the present income-tax provisions relating to children's exemption, it is proposed that the present age-limit of eighteen years shall not apply in cases where the Commissioner of Taxes is satisfied that a child, owing to mental or physical incapacity of a permanent nature, is unable to earn his or her own living. Further, it is proposed to provide that the exemption on account of children under eighteen years of age shall be apportionable over the twelve months in cases where a child is born or attains the age-limit for exemption during the income-tax year. At present, if a child is born on the 31st March, th e full exemption is allowed, and if a .child dies or attains the age of eighteen on 30tn March the exemption for that year is lost. The available data in connection with farming incomes is meagre, as incometax returns have not been made by farmers since 1923. ' Moreover, the effect of the .steeper land-tax as a set-off against income-tax cannot be readily arrived at. For these reasons it is difficult to estimate' how much additional revenue will be derived from the proposals. The matter is further complicated by some uncertainty as to the extent of the increase in imports that ,will result from the present large favourable balance of trade. The direct cause of th e deficit last year was the failure of the revenue from taxation to come up to expectations, and I want to ensure that the same thing does not happen this year. However, after careful consideration ,of all the circumstances, I am of opinion that the new proposals should produce the additional revenue required. ESTIMATES FOR 1929-30 Before having recourse to additional taxation, I can assure honourable members that the estimates of expenditure for the current year have been most carefully overhauled with a view to reducing them to a minimum consistent with the maintenance of the existing services. Increased debt-charges and other rigid items call for an increase under permanent appropriations of approximately £700,000, but under annual votes the reductions I haxe effected have kept the increase over last year's expenditure down to £30,000. At the same time the items of revenue, apart from taxation, were also scrutinised with a view to seeing that all legitimate recoveries and departmental receipts will be brought to account. In i this connection I may say that in order to place the State trading department "on a basis more comparable with outside organisations, 1 have decided that m future the State Fire Insurance Office and the Public Trust Office shall be called upon to pay land-tax. In addition, as the Post and Telegraph accounts have been separated from the Consolidated Fund and placed upon a commercial basis, it is proposed that this Department shall, in future, be charged with Customs duty on its imports. In reviewing the interest recoveries fronr the various separate accounts I find

that the Main Highways Account is paying no interest on a portion of the capital borrowed for construction purposes. This 1 propose to adjust. Then there, is due to Ihe Consolidated Fund some accumulated interest mi enemy-property moneys, which can be paid in this year, and also certain unclaimed moneys in', the liailds of the Public Trustee. It was the practice to pay such Unclaimed moneys into the Consolidated iTund, but latterly the receipts nave been held up owing to a technical defect in the Public. Revenues Act, which will be remedied. The net result is that 1 estimate the revenue for the year as follows: £ Customs 8,400,000 Beer duty 600^000 Motor-vehicles—Duties, licenses, etc 1,442.000 Stamp and death duties 3.614.000 liawUtax 1,493,000 Income-tax ~> 3,400.000 Interest on public moneys 820,000 Interest on capital liability— Railways ■ 2,450,000 I'ostal and Telegraph 480,000 Interest on Public Debt Redemption Fund 995,000 Other receipts 1,478,000 £25,172,000 The above total includes £1,442,000 to be received on account of "Motorvehicles—Duties, licenses, etc.," but this is earmarked for specific purposes, and is not available to meet general expenditure. ESTIMATED RESULTS To sum up, I estimate the position for the. financial year to be—- £ Revenue 25,172,000 Expenditure—- • Permanent appropriations 10,946,000 Annual appropriations 7.964.000 —■ ■ 24,910,000 Leaving the amount of ... 262,000 to provide for supplementary estimates and contingencies. In conclusion, 1 have to thank honourable members for the attentive and patient hearing they have given to my Statement, which covers most important policy questions. The measures proposed to ensure a stable finance for the annual Budget and the more far-reaching measures dealing with railways, landsettlement, and public works will, I consider, give effect to th e mandate the people of the Dominion gave to this Government. To sum it al] up, the- cardinal points of the Government's policy are:— (a) To take immediate steps to obtain a balanced Budget, as this is a matter which cannot wait for the fulfilment of the more far-reaching proposals. (b) To provide a, permanent cure for the .unemployment difficulty and pave the way for decreases in the rates of taxation,'by increasing the prosperity of the Dominion on a solid basis through vigorously fostering land-settlement. . (c) To provide all the capital necessary to enable' the State Advances O/lice to cope with the demand for loans for development of farms and the building of houses for workers. (d) To accelerate the completion of the trunk railway-lines, in order that these unfinished works may be brought into operation and made 'interest-earn-ing and at the same tim e provide more work. (e) To deal with the present unsatisfactory financial position of the railways and institute a comprehensive system of co-ordination <in transport, in order to check the present dangerous drift into economic waste, which otherwise will undoubtedly impose greatly increased burdens on the taxpayers. It will, I think, be generally recognised that there has been little delav in formulating and initiating these reforms in view of the short period I have had to investigate th e 'country's aflairs since taking office in December but the same industry and application will now be applied to the vigorous administration of the policy measures I have outlined, in order that the beneficial results I confidently expect will be realised at an early date. As regards the financial and economic position generally, I am glad to say that the outlook for our primary industries i» good, and ample capital 1 S available o finance trade and industry. Internally our favourable overseas- trade balance has not yet reflected its full value, and tins phase, unfortunately is concomitant with the unemployment difliculty, a difficulty that I venture to predict will be cured only bv a vigorous administration of the fundamental re lorms the Government has in hand. with vn?i ti(A !° f "? "ktemenfc dealing with rail and road transport and the finances of several Government depart! mens has unavoidably been held over until to-morrow.)