PROBLEMS THAT FACE THE INVESTOR.

Shannon News, 30 July 1929, Page 3

PROBLEMS THAT FACE THE INVESTOR.

TAXATION, STATE ENTERPRISES AND OTHER HANDICAPS.

EVER-GROWING GOVERNMENT

EXPENDITURE,

The whereabouts of the money that is constantly being made in such a highly productive country as New Zealand was an enigma which received some attention in the. course of an address entitled "The National Outlook—Where ■ Are We Going?" delivered by Mr M. A. Carr, of Wellington, at the Lev mi Chamber of Commerce Lunch Club, at the monthly gathering in the Oxford tea-rooms, on Friday. The lack of finance for investment was chiefly under consideration, and the speaker put forward various reasons to account for the position.

The attendance was goo'd, and was presided over by Mr K. Aitken, who offered apologies for absence from Crs Parker and Harvey, Messrs J. A. Smith; J. T. M. Brewster, F. H. Hudson, and D. Smart. The Chairman then introduced Mr Carr, stating that he was a Wellington citizen of some standing, a member of the Chamber of Commerce of the capital city, and a member of the commerce and inports'committee of that body. Mr Carr'a visit was appropriate at this juncture, because he happened to be president of the "Charley's Aunt" Club, a Wellington organisation which had a membeiship oi about six hundred and which was decidedly of a humorous nature.

Mr Carr said he appreciated very much the honour of having been invited to say a few words at this function. Some years ago he was asked to attend the annual meeting of the Levin Chamber of Commerce and say something about the activities of kindred institutions. He judged from the present invitation that he could not have wearied his hearers to any ex tent on the first occasion.

Coming to the subject of his aldress, Mr Carr said he had been at a loss to know what might interest the club, but after consideration he had concluded that he might be allowed for a few minutes to take a serious view of things pertaining to the national outlook. He was agreeably surprised to find that Professor Murphy had taken the same subject for a talk before the executive of the Farmers' Union. There was no collusion about this, but perhaps it was a case of great minds thinking alike. (Laughter and applause). However, he made no pretence of being able to deal with the subject in the academic way that Professor Murphy could. That gentleman had given rather a startling report; the figures were very arresting. In 1890 the national debt was £38,000,000, in 1912 £84,000,000, in 1919 £176,000,000, and in 1929 £231,396,000. The national expenditure in the same years was as follows:—1890, £4,000,000; 1912, £10,000,000; 1919, £18,000,000; 1929, £35,000,000. The local bodies' indebtedness increased from £6,000,000 in 1890 to £66,000,000 in 1928. and the local bodies rates increased from £460,000 in 1890 to £5,620,000 in 1928. If a- more modern period, 191428, were taken and the revenue and. expenditure noted as per head of population, he thought his hearers would agree that the figures were sufficieently alarming to give them considerable food for thought, and they might well ask themselves, "Where are we going? Where will it end?" He was indebted to the N.Z. Taxpayers' Federation for the figures to chow the increase in the nett Government expenditure. The figures which he would quote would not agree with figures issued by the Government, because in 1925 the railway revenue and expenditure were, by Act of Parliament, ex eluded from the Consolidated Fund nc count, and in 1928 the Post and Tele graph figures were treated in the same manner. Therefore, in discussing the revenue and expenditure and for pur poses of comparison, it was necessary to adjust by either deducting from the years undc-r review the credits and debits of these two departments, or by including both in the latest year't transactions. In his opinion the fair est method was to include the credit;and debits in their respective accounts and his figures were based upon thai principle. The summary was as under:

It was estimated that the net revenue for 1929 would be approximately £33,500,000, or estimated revenue of £23 10s per head of population. Now there arose the question of capital for investment. Considering the amount of capital that was in the country and the wonderful natural productivity, people must ask themselves why money was so scarce for industrial and commercial enterprise. A few days ago he read of a suggestion by the chairman of the Auckland Harbour poard that it would be wise to set up committees from Chambers of Commerce and other experts in business to advise investors as to the kind of investments that they should undertake; but it occurred to him (Mr Carr) that the suggestion —if there wero anything in it at all—was merely a palliative. What they should endeavour to do in every caso was to find the cause of [ the disease and then attempt to find a j cure. Any other,course seemed to be I like fighting the* air. He considered that the first of the most important reasons for the unwillingness of investors to'" invest in industrial and eem'

mereial concerns was the prevalent industrial unrest. As affairs stood at present, the whole of a particular in-, dustry might be held up because of one organisation. There was still something wrong in the relations between labour and capital; possibly they did not understand their responsibilities to one another, but until this • unrest was settled there would be a feeling that it was unwise to embark in any enterprise in which labour was involved. Another deterrent factor was State interference. There had been a tendency on the part of the State to set up trading concerns and to take over the work that had been performed by companies and individuals. In addition, there was sometimes undue interference by the State, without properly appreciating the position, by alteration of the customs tariff. More ,' particularly, though, the reason for unwillingness to invest was the high rate of taxation. It was abnormally high in this country, and it appeared that only banks, insurance corporations and close monopolies could pay without any undue hardship, because they icould pass the cost on. There were a number of anomalies in taxation, both in regard to land and income tax. The graduated land tax had been introduced to burst up large estates held by individuals and to increase commer- ", cial prouction; it was never intended to apply to city and suburban properties. When the land tax remained at a very low figure, there was no very great exception taken, but now that it had reached a very high figure it became a very serious tax on large companies, because the whole of the freeholds were taxed on a graduated scale which should never have been applied, Another source of trouble was the incidence of taxation of companies. Any investor getting £lO a year from a company was paying the same rate of taxation as a man getting £IO,OOO a year from the same class of company. In 1924 the Government set up a Taxation Commission, which recommended a n alteration in the incidence of the taxation of companies, representing that taxation should be levied at the hands of the receiver of income and not at the source. A man drawing £IOO from a company paying the maximum taxation, had to pay, before receiving any dividend, 4/6 in the £, as per cent, must be deducted from the nett amount of revenue. When the Commission recommended that the taxation should be at the hands of the receiver, it was on fairly.;safe ground. It had been admitted publicly that the unfairness of the incidence of taxation had been recognised. Each successive Finance Minister said, "We know it is unfair, but we want the money." It was difficult to know why the recommendation of the Commission had ner, er been given effect. Mr Carr added that another factor in the scarcity of money for industrial and commercial concerns, was the activities of the Government in taking, money for fixed deposit, whether in the Public Trust or the Post Office. Large sums had been received by these two bodies, and that money was taken out of circulation. One corporation in Wellington alone had £200,000 invested with the Public Trust. How much of corporation moneys might be invested in the Gov&rnment financial trading departments? He contended that this was restricting the amount of money that would otherwise become available through the banks. In concluding, Mr Carr said that, As Professor Murphy had pointed out, it was not the Government of the day that was to blame, because, if the Government did not give the community what they were clamouring for, they would change the Government. It was only by the exercise of strong public, opinion that anything might be done to arrest the plunge that was being taken. A stock excuse of the Minister

of Finance in each successive Government was to compare the taxation of New Zealand with that of Australia. Great Britain, or other countries. What had that to do with conditions iff this Dominion? If in other countries the taxation reached a high point, was that

any justification for an increase of taxation in this country. He urged his hearers, as business men, to get behind the different organisations set up for curbing Government expenditure and reducing taxation. The Taxpayers' Federation had done a wonderfully good work in that direction, but need-

ed the moral support of business men such as those present, to help it. They should also get behind the united Chambers of Commerce to secure au alteration of the anomalies in the incidence of" taxation. In doing so they could take the credit of having "done

their bit" towards the common weal. Mr Aitken moved a very hearty vote of thanks to Mr Carr for having visited Levin and delivered an address which would give the members much food for thought. He hoped that on some future occasion they would have the pleasure of hearing Mr Carr again. The motion Avas carried by acclamation, and Mr Carr suitably acknowledged "it. -

Expenditure per head. Year. Expenditure. £ s. d. 1914 .., .... 11,825,863 ., 10 1 o 1921 ... ... . 28,178,729 . , 22 10 0 1928 .. .... 31,145,368 . ■ 21 11 7 Revenue Year. Revenue. per head. 1914 .. . .. . 12,131,761 . 10 14 8 1921 .. . . . . 34,192,196 . 27 6 1 1928 .. . . . . 31,417,651 . 21 15 4