THE COMPULSORY LOAN

Otago Daily Times, Issue 24420, 4 October 1940, Page 4

THE COMPULSORY LOAN

TO THE EDITOH Sir, —1 feel you may have misled your readers by the tone of ycjur three recent editorials on the War Loan and by the half dozen interviews and reports you have published by heads of the Stock Exchange, Chamber of Commerce and a former Finance Minister. The tencr of all these is that the loan will involve considerable hardship and is an inequitable burden on those with over £6OO a year (about 22,000 taxpayers). The regulations require everyone to take up an amount equal to the nearest £lO of income tax paid in February. 1940, less an exemption of £SO. The following examples take the case of a married man with two children and show approximately how much income tax he would have paid on different amounts of earned income and how much loan he is required to take:

If the above incomes were unearned the tax was a third higher and the amount of War Loan correspondingly increased. . Your paper suggests that the hardship arises because for three years the loan carries no interest, instead of 2 2 per cent, all through. Thus the man with £llOO income loses £1 10s a year in interest on his £6O of loan, the man with £2350 income loses £9 10s a year in interest, while the unfortunate man with £4IOO a year income actually loses £27 8s a year in interest ter a whole three years. You practically admit that it is only the lack of interest that causes the hardship, not the amount of the loan itself, for you and the above-men-tioned contributors all agree that if it had been issued at per cent, throughout, it would have been •* readily subscribed ” and would have met with “a splendid response.” Now surely the people who would have given it this splendid response are the very individuals and companies with large incomes and considerable fortunes who are Required by the regulations to subscribe. It is obvious that it is not the working man or the widows and orphans who could have taken large blocks of an ordinary Government loan. Therefore, the alleged hardship is net the fact that the wealthier section of 22,000 taxpayers have to take the loan, but merely that they have to forego during three years of war the above-mentioned paltry amounts of interest. You then proceed to state that as there is no interest for three years, it is not really a loan at all but a tax or a capital levy. Anyone would think that the Government was taking the money for good instead of undertaking to repay it in full in 13 years. If a wealthy man advances £IOOO to his son to help him in a critical time, and says, "Don’t pay me back.” that is a gift. But if he requires It to be repaid in full in 13 years with 2i per cent, interest for the last 10 years, no one would suggest that it was anything but a loan:—a generous one, no doubt, but not too generous in the critical circumstances. Finally, consider the position of the man who had, say, £2OOO income in

1939 arising from investments. He paid at the unearned rate approximately £440 for income tax. and will have to take £390 of war loan. If his investments showed an average of 4 per cent., this means he has £50.000 capital invested and earning interest for his benefit. Such a man will usually have a fair sum in ready cash besides his investments, and surely it is no hardship that out of such a fortune he should be asked to lend the Government £390 for war loan. What about the suggested hardship on companies? But perhaps I have taken enough space. Considering the generous contributions already made to interest-free war funds, and the comments that I have heard by many taxpayers who feel that the present loan is a very fair and reasonable call on their resources, I feel that you are doing the country a grave dis-service by discrediting the loan and spreading the misleading suggestion that it causes unfair and widespread hardship.—l am, etc., Lexecon.

Income, Tax. War Loan. £450 £12 Nil. £750 £54 Nil. £1100 £112 £60 £2350 £430 £380 £4100 £1129 £1080