THE COMPULSORY LOAN

Otago Daily Times, Issue 24424, 9 October 1940, Page 11

THE COMPULSORY LOAN

TO THE EDITOR

Sir,—Your correspondent “Countryman ” in this morning’s issue complains that the loan will cripple industry, and suggests instead that resort should be had to inflation, thus throwing the burden on the wage earners. Another suggestion of those who are opposing the interest-free loan is that it should have Been drawn from the £30,000.000 of current deposits lying in the banks instead of from individuals and .companies using their money in production. I wonder who owns this £30,000,000. It is certainly not the man in the-moon, but largely the very individuals and companies who will have to take up the loan. I have looked up the published balance sheets of 10 representative companies and find that most of them have : a very considerable holding of cash in bank, either at call or on short notice. There is, of course, a minority in a less happy position, with, perhaps, a heavy overdraft. but if the loan obligations press too heavily on them the regulations provide for an appeal in cases of hardship. It is curious that this war loan should be accused of paralysing industry. The balance sheets of the companies mentioned above almost without exception show that they hold large amounts of previous Government loans. If it suited the companies of their own accord to invest part of their moneys in these earlier loans, why raise such an outcry about a further investment in the present loan? Is it merely the loss of the three years’ interest they are complaining about? I notice also that you devoted part of a recent editorial to an accusation that the Government was using “ political blackmail ’’ by threatening to publish names (and amount of loan contribution) of those who did not take up their share. From these figures, you said, one could calculate their incomes, and thus an inviolable secret would be laid bare. Why should there be so much secrecy about a rich man's income? Everyone knows what income a tram conductor or a carpenter or shop assistant gets. By making a few inquiries one could easily find out what salary is paid to our municipal officers, postal and railway officials and other Government servants. But to reveal the incomes of the captains o» finance and commerce and journalism —oh horrors! Is it because they are ashamed that they receive so much and give the community so little in return?

However, there is a serious fallacy in your argument that; given a man’s tax. one can calculate what his income is. As was explained in a paragraph in your paper a few days ago. a man may, hold several thousands of taxfree Government loans of the last war. or may have an income of several thousands from company dividends, and, if so, will pay no tax at all on that part of his income.. Thus for 1940, a single man may have to pay, say. £IOOO in income tax at the new war rate, but his income may be any one of the following:—(a) £3IOO if all earned income: (b) £2600 if all unearned income from rents and mortgage interest; (c) £6OOO a year if twothirds of it was from dividends and tex-free stock; (d) £16,000 a year if nine-tenths of it was from dividends and tax-free stock. In the last case the tax represents about Is 3d in the £ bn the total income. It'” seems ..that the ;■ very wealthy men who hold big parcels of company shares and,,tax-free stocks are able to get away with remarkably little tax—l am. etc., Lexecon. Dunedin. Oct. 8.