TAXATION-ITS INCIDENCE.

Shannon News, 19 September 1924, Page 1

TAXATION-ITS INCIDENCE.

THE NEW ZEALAND INCOME TAX H. The New Zealand, income tax differs in several important respects from the British income tax. It was first introduced: by the Land and Income Tax (Assessment Act of 1891, and took the place of the property tax, which, practically, had been a capital - levy upon all descriptions of property, irrespective of their earning capacity. The new tax was imposed upon all incomes, those of companies as well'as those of individuals, with the exception of £3OO in th e case of individuals only. Companies were-charged a flat rate of 1/ in the pound, while individuals were charged 6d in the pound on the first taxable £IOOO, and 1/ in the pound on taxable incomes above £IOOO. The higher rate was charged only on such part of the taxable income as exceeded £IOOO. Incomes derived from freehold farms paying land tax were not charged income tax, but incomes derived from pastoral leaseholds were charged. Amendments in Peace Time. These rates remained unchanged till 1910. In that year the principle of graduation was applied for the first time. In the case, of registered companies, taxable incomes of £I6OO paid 1/ in the pound; of £1260 to £2OOO, 1/1; and of £2OOO and over, 1/2. In the case of firms and individuals taxable incomes of £4OO paid i 6d in the pound; of £4OO to £6OO, 7d; of £6OO, to £7OO, 8d; of £7OO to £BOO, 9d; of £BOO to £9OO, lOd; of £9OO to £IOOO, lid; of £IOOO to £1250, 1/; of £1250 to £2OOO, 1/1; and of £2OOO and over 1/2. Debenture-holders in companies were charged at the rate of 1/ in the pound, the companies paying the amount as agents for the debentureholders. Thes e rates remained in. force for the next two years, 1911-12 and 1912-13; but were revised in the following year, when a new and more equitable system of graduation was applied to the higher incomes. In the case of registered companies taxable incomes of £I2OO paid 1/ in t(he pound; of £I2OO to £I6OO, 1/ plus l-200th of a penny upon each pound above the lower amount; of £I6OO to £2400, 1/2 plus l'-400th of a penny; and of £2400 and over 1/4. In the case of firms and individuals, taxable incomes of £4OO paid 6d in the pouttd; of £4OO to £I4OO, 6d plus 3-400ths of a penny; of £I4OO to £2400, 1/1J plus l-4.00th of a penny; and of £2400 and over 1/4. The rate paid by debenture-holders remained unchanged at 1/ in the pound, and some comparatively trifling concessions were made which need not be taken into account here. Though this revision recognised; the principle of graduation, companies continued to pay income tax on what practically was a fiat rate. The maximum of 1/4. in the pound was reached witih an income of £2400, while even the smallest income paid 1/ in the pound. The difference was so slight that it seems to have been regarded scarcely as an essential part of the system.

Burdens of the War. The war brought about many dramatic changes in the taxation system of the Dominion. New sources of revenue had to be found;, and the existing sources had to be strained to their utmost capacity. The income tax became the. chief mainstay of the country. The steeply graduated rate was of necessity introduced, and notwithstanding the wholly changed circumstances, companies continued to be treated as individuals. The maximum income from debentures was taxed at a much lower rate than income from other sources, and a difference was made between income obtained from company debentures and public body debentures. Government loans were issued tax free. Freehold farmers, who paid land-tax only m pre-war days, were required to pay income-tax. The maximum rate was reached at 8/9 3-6 in the pound on a taxable income of £IO,OOO. It was later reduced to 7/4 in the pound,,and last year was brought down to 5/10 2-5 in the pound on the same income. The Prime Minister has an - nounced that this year it is to be further reduced by 13 1-3 - per cent.

Repayments and Concessions.

The income tax pursues its relentless way by many paths, in all cases regarding companies as individuals and treating them far worse than individuals by denying them non - taxable rebatements and other concessions the individual enjoys. It may seem a little like putting, the cart before the horse, but for the present we may defer further consideration of the graduated income tax on ordinary incomes, and recount briefly some of its subsidiary excursions. .Income from tax free war loan stock bears no tax, and is not assessed with other income for the purpose of determining the graduated rate on other income. Income from farming operations pay no income tax, and, like the income derived from tax free stock, is not assessed in determining the graduated rate on other income. Income from Ci'own leaseholds bears no tax, but this exemption appears to have come about by an oversight, and probably will be withdrawn. Income from public body debentures issued prior to last year's Finance Act is taxed at a maximum graduated rate of 2/6 in the pound, and is not added to the income received fr'om other sources for the purpose of fixing the graduated rate. Income from company debentures issued prior to the

Finance Act of last year is taxed at a maximum graduated rate of 3/ in the pound, and enjoys the same exemption from graduation as does income derived from public body debentures. Income derived from public body or company debentures issued subsequent to the Finance Act of last year is taxed at a maximum/graduated rate of 4/6 in the pound, and is not added to the income obtained from other sources for the purpose of graduation. Where companies have agreed to pay interest on their debentures free of income tax, - they are -charged the maximum graduated, rate for debentures, and the debenture-holders are not allowed any rebate. Dividends received by a shareholder from a company, th e profits having been taxed in the hands of the company, are hot taxable in the hands of me shareholder and are not included in the income from other sources for the purpose of graduation. Some State trading departments pay a small amount of income tax, but much less uian would be paid by similar concerns in private hands. Other State trading departments ‘pay no tax. Public body trading and public utility concerns pay no income tax. Particulars that now have been given of the character and operation of the income tax system of Britain and New Zealand will enable an intelligible comparison* between the two systems to be made. The Conference .then terminated.