New Zealand Times. MONDAY, APRIL 12, 1875.

New Zealand Times, Volume XXX, Issue 4387, 12 April 1875, Page 4

New Zealand Times. MONDAY, APRIL 12, 1875.

The following remarks appear in a recent article in our Wairarapa contemporary : It has always been our opinion that a tax on all the rateable property of the colony, to be paid by the owner and not by the tenant, ought to have constituted an integral portion of the Immigration and Public Works Policy. The liabilities the colony is incurring in carrying out this policy ought at least in part to be borne by that description of property which that policy is being the means of so enorously enhancing in value. But we are convinced that no such tax will be imposed either on this ground, or for the purpose of rendering a free trade policy possible, so long as the cost of government, and the maintenance of the public credit, can be sustained by indirect taxation. We prefer direct to indirect taxes, not because we believe in the dogmas of the free traders ; but because we are persuaded that until such taxation becomes the rule instead of the exception, one of the strongest safeguards against ollicial extravagance, jobbery, and corruption—one of the safest antidotes against popular ignorance and political apathy—will remain unsupplied. But irrespective even of these considerations—without any reference to the axioms of the economists—leaving out of sight the principles of protection on the one side and those of free trade on the other—it would, we think, be no difficult matter to show that at no distant date a property tax will be as necessary for the maintenance of the public credit, ns it would now prove alike wise and equitable. Our credit is not so good as it has been, and there is every reason to suppose that it will, instead of becoming better, grow worse, if we continue to pay interest out of loan instead of revenue. There is no reason why this course should be continued. Tire rate at which the Government can borrow is indicated not by the nominal rate of interest it may offer, but by the price obtained for its stocks. The enhanced value given to property by the public works policy ought to enhance the value of the stcurity we have to offer to the public creditor ; for though the rate of interest depends partly on the demand and supply of loanable capital, it depends chiefly on the nature of the security offered. Consequently there will be no difficulty In obtaining loans for the prosecution of public works so long as there is no hesitation shown by the owners of property to pay the interest on the money that maybe thus borrowed. The best way they can indicate their willingness in this respect will be by their gracefully submitting to the imposition of a property and income tax. These remarks had reference to allusions in our own paper to the injurious effect of the Protectionist policy upon Victoria, in contrast with the progress New Sooth Wales has made since it adopted a more liberal fiscal policy. The Standard takes exception to our Freo Trade doctrines, but is willing to forego its cherished convictions, on the following condition : “If our contemporary [the New Zealand Times] will aid us “ in getting an income and property tax “ imposed, we [ Wairarapa Standard] “ will, notwithstanding our Protectionist “ proclivities, assist him in getting those “ restrictions removed from trade—mean- “ ing, of course, the import trade, —about “ which he appears so terribly anxious.’' This offer is one for which, wo suppose, we should thank our contemporary. It has an appearance of fairness about it, but it is scarcely fair. On economic grounds, we say at once that wo are in favor of direct taxation. It is at once the fairest and most satisfactory way of raising revenue, and as our contemporary remarks, it “ is one of tho strongest safe- “ guards against official extravagance, “jobbery, and corruption;—one of the “ safest antidotes against popular ignorance and political apathy.” But then

we are met at the outset with this difficulty. The public creditor holds, as part of his security, the Consolidated Revenue, which is principally raised through the Custom House. The Customs Duties levied in New Zealand amount to one million sterling (speaking in round numbers) annually; and in a general way, we may say that the interest on the public debt amounts to a like sum. Of course it does not nearly amount to that sum now, but it will do so when the works authorised by the General Assembly have been completed. For the sake of argument, however, we shall assume that the Customs Revenue of the colony is absorbed by interest on the public debt. This being so, it will be evident at once that any such sweeping change in the incidence of taxation as that proposed by our contemporary is practically impossible. It may be led up to slowly, and with prudent forecast, but it cannot be accomplished by legislative enactment in the summary way our contemporary deems possible. The public creditor would take alarm if such a thing were attempted ; and private creditors —English capitalists who have made large advances to New Zealand colonists —would be thoroughly scared for their investments, and in their haste to realise might bring about a ruinous financial crisis. Indeed, we think this would be inevitable were the attempt made to substitute direct for indirect taxation.

In the region of practical politics, therefore, we cannot always be guided by abstract principles. We must take things as we find them, and endeavor to bring about reforms without creating panic, or disturbing the ordinary operations of finance. To substitute a property and income tax for import duties would now be ruinous to the trade and industries of New Zealand. Not but the country would ultimately right itself; but it would undergo a long period of depression, compared with which any stagnation yet experienced would be a trifle. But we go the length of saying that a tax should be levied, in aid of revenue, on all owners of property within a certain distance of railway lines and highways constructed by the Government out of loan. That would be equitable. It would not alarm the public creditor, because it would increase his security ; it would not scare the private creditor, for the value of his security would be largely enhanced by the colonial expenditure on permanent works; it would be approved of by the general body of taxpayers, who would be relieved of a burden which should properly be borne of others; and it should not be objected to by those landed proprietors who would enjoy the direct profit of tho Government expenditure. To this extent, the imposition of a property tax is at once defensible and necessary. New South Wales proposes to make the expenditure on public works a charge on the territorial revenue ; Victoria, for many years past, allocated a fixed sum yearly of its land fund for the same purpose. This is a prudent and commendable policy; and it was suggested to the Government, during the debate on the financial statement in 1870, when the scheme of public works and immigration was first propounded. But the provincial system stood in the way. That unnatural offspring of the Constitution had gorged itself for fourteen years upon the public patrimony, and it would not relinquish its prey. Superintendentalism was the cause—the sole cause, we may add —of that great fiscal mistake in the initiation of the colonising scheme, to which the Standard refers above. It rose up before Ministers, a huge gaunt spectre, terrifying them from the straight path of public duty into narrow bye-ways of political expediency, thereby entailing serious and unnecessary liabilities on the country. If Mr. Vogel had, in 1870, put his foot down firmly and said : “ The Government “ proposes to borrow ten millions to con- “ struct roads and railways and to intro- “ duce population. The provinces, i. c. , “ Provincial Governments having failed “ to discharge those colonising functions, ‘ ‘ in pretence of which the land fund was “ made provincial revenue, it is proposed to “ resume the administration of the Crown “ lands ; and the more effectually to carry “ out a colonial policy of public works ‘ ‘ and immigration, it is also intended to “ make the interest and sinking fund of “ the loan to be raised for these purposes “ a first charge upon the territorial re- “ venue of the province for whose per- “ manent advantage it may be spent;” —if, we say, Mr. Vogel had made this the financial basis of his great policy in 1870, the country would have carried him through triumphantly, and he would have laid the ghost of Superiniendentalism which, goblin-like, has affrighted timid politicians from that day until this, and which has but yesternight fitted on a new spectre costume in Auckland, and struck an attitude as grotesquely absurd as it is possible to conceive. Had Mr. Vogel done so, there would be no question now of the abolition of the provinces ; they would have been , quietly absorbed long ago. They would have expired without a groan;—passed out of political being without regret, and without an enemy. Neither would there have been any question of colonial solvency, because the land fund is not only sufficient to pay interest and sinking fund, it is sufficient to liquidate the public debt, and leave a very considerable balance to credit of the colony. Nor would there have been any imputation of paying interest out of loan, because the special fund chargeable with interest would have been more than sufficient, which was not tho case when the Consolidated Revenue had to bear all the charges for interest and Government. And lastly, there would have been no outcry against the Government on account of increased taxation, because the taxpayer would not have had to provide for interest and sinking fund on the public works and immigration loan, while the increased prosperity, resulting from the colonising policy, would have so considerably added to the Customs receipts, that it would have been possible to take a forward step towards Free Trade by this time, and relieve shipping of all light, port, and harbor dues. But Mr. Vogel failed to take this decided and. politic step in 1870. He feared Superintendentalism, and lost an opportunity which will never again return, because whether the provinces bo abolished or not, very great mischief and loss have been entailed on the country by the makeshift expedients resorted to for the sake of conciliating the provincial magnates. Our space does not admit of going much further into this question to-day. It will be seen, however, that we differ entirely from our contemporary as to the fund out of which interest on tho public works and immigration loan should have been paid. The Standard would leave tho land fund with the Provincial Governments, relieving them of the duties inseparable from its administration, and tax all rateable property in tho colony to pay interest on a loan raised to do those identical things for tho doing of which the provinces were endowed with

the land fund. ' This system would be like burning the candle at both ends. It would permit the dissipation of the public estate and at the same time depreciate the value of rateable property, much of which could not possibly be improved by the public works expenditure. Our plan would conserve the public estate, satisfy the public creditor, enhance the value of property, and reduce taxation while stimulating trade. One word in conclusion. Our contemporary appears to think that the only obstacle to Free Trade in New Zealand is the Custom-house. This is a groat mistake. The export duty on gold, stamp duties, and a variety of other imposts, are in their way obstacles to free interchange and freedom of trade. Of course, Free Trade, in its true sense, is not possible in New Zealand, but a very considerable approach may be made towards it, to the great benefit of the country at large, at the same time also relieving the pressure of indirect taxation.