INCOME TAX MATTERS.

Putaruru Press, Volume IV, Issue 142, 22 July 1926, Page 4

INCOME TAX MATTERS.

ADDRESS BY MR. PARKER. Last Monday, before the Putaruru Chamber of Commerce, Mr. S. J. ] Parker, secretary to the Taupo Timber Co., Ltd., gave an interesting address on matters appertaining to the tax on incomes. There were sev- s eral members of the general public present in addition to members of the chamber, and Mr. Parker’s remarks were greatly appreciated. i In introducing the speaker, the j chairman (Mr. J. W. Barr Brown) re- ( marked that the chamber was arranging a series of addresses on popular ■ subjects to which everyone was in- 1 vited and he hoped an increased in- , terest in the chamber’s activities ‘ would result. THE ADDRESS. Mr. Parker said:— “ It is my intention this evening to address to you a few remarks on income tax, prefacing these by a short resume on taxation in general, and its purposes. “ Tax has been defined as a portion of the private wealth extracted from the individual by the State for the purpose of helping to meet that expenditure which is essential to the carrying out of , the functions of government. It is a compulsory contribution to the State, avoidance of which rightly entails punishment. “ The purpose of taxation is to provide the means necessary for the carrying on of those services which the State considers from time to time are better conducted as national rather than as individual services. The essential purpose is the development and protection of the State, and this can be secured only by, and in proportion to, the development of its people and property. Because of this interdependence it is essential that a Government in its taxation avoids an imposition which would tend to retard development of its people and their property, dt is in this particular regard that income tax has of late been so much in the minds of the Government and the people of New Zealand —a phase which will be mentioned more fully later on in this address. “ The financial resources of the State (omitting loans) may be divided into four general headings, viz., taxation, services, land and forestry revenues, and miscellaneous. Of these, far the , greatest , amount is derived from income taxation. Some of the services are revenue earning in varying degrees, some even self supporting, whilst others depend entirely upon Government funds for their upkeep. In the latter category are education and defence. To those services 1 which are not capable of earning their own support, general contribution by the people is necessary, and so all members of a community become taxpayers in some degree. “ Taxes are divided into two headings—direct and indirect. Of the indirect the best example is the customs tax, whereby goods imported into ’ New Zealand are subject to a taxa- . tion which ultimately is paid by the consumer. Direct taxation is best exemplified by death duties, where the contribution to the financial requirements of the Government is borne by the estate of a deceased person and cannot be passed on by the beneficiary or trustee. “It is claimed that income tax is a direct tax, but my considered opinion is, ,that it is much more in the | jnature' of an indirect one, he., income tax is more often than not passed on ' from the trader taxpayer to the consumer of his goods or services. The bulk of income tax in New Zealand is derived from incorporated companies, firms or individuals trading for ! profit ; and in arriving at a selling basis for their goods or services these concerns must take into consideration that proportion of the sale price which must be handed over to the Government as income tax, as well as the ultimate nett profit they hope to achieve for themselves. Thus, wherever it may be made possible, it is the consumer of these goods or services who becomes the ultimate taxpayer. “ So much misconception in this regard seems to exist, and so much capital is made by some politicians in a demand to tax wealth by an increased income tax, that I am sure you will forgive any apparent labouring of the matter. It seems amply clear that increases in income tax rates are borne chiefly not by the wealthy but by the general populace in ratio to their consumption of the products and services of the Dominion of which they take advantage. To exemplify this it need merely be mentioned that the wealthy individual often obtains the bulk of his income from investments in companies or other similar institutions, and that his income is to this extent free of tax u, CRWSO f! e tax has already been paid (Continued in Next Column.)