The Southland Times. PUBLISHED EVERY MORNING. Luceo Non Uro. WEDNESDAY, JANUARY 19, 1927. THE EVASIVE ANSWER

Southland Times, Issue 20081, 19 January 1927, Page 4

The Southland Times. PUBLISHED EVERY MORNING. Luceo Non Uro. WEDNESDAY, JANUARY 19, 1927. THE EVASIVE ANSWER

Evidently “Suum Cuique’s” answer to a question like: “What is the sum of two and two ?” would be “Three twos are six.” By the simple process of stating new problems and introducing some new figures he has sought to evade the issue, but at the risk of wearying him and our readers we make one more attempt to reveal to him the consequences of his reasoning and the results which show the fallacy of his theories. In the first place he must admit that there is a point past which efficiency cannot go and no matter how long the process goes on the reduction of the operating costs by one competing firm can be repeated by the other. This means that if A reduces his cost from £137 10/- to £126 10/- (C’s price) he must do it by cutting down operating charges standing at £l5, because rhe buyer will buy in the cheapest market. If he can reduce his operating charges by £ll, it stands to reason that C can do likewise and his selling price falls at once by that £4 only which compels A to think of cutting his operating costs out entirely—• frankly an impossibility. There remain profits. A, to effect further reductions, reduces his profit to 5 per cent, and lowers his price by £6 5/-, and can sell at £l2O, but C by lowering his operating costs to £4— the point attained by A, can still undersell A without reducing his profit. Does not this show that the operating costs, put at any figure, must be regarded as a constant ? Then, says the elusive “Suum Cuique,” A, by losing his business, will lose his income tax charge and will be able to sell on the same basis as C—and farmers dealing with these two stores will not pay income tax on the goods they buy. What happened to the business lost ? If 0 secured it he became liable for the income tax and so took A’s place! But granting that both avoided the income tax, the Government has lost £lO in revenue it requires and it can recover it only by taxing the firms on some new basis or by taxing the farmer direct. To recapitulate in order that our correspondent may not be placed in confusion : The operating costs are constant because the efficiency of one firm is available to the other, and there remain profits and the taxation items. If profits go the business is closed up and the Government loses the taxation revenue, if both firms evade taxation, the Government loses the revenue. Now, if the Government’s demand for revenue remains constant, how is it going to recover this £lO ? If the farmer bought these goods for £lO less than he did previously he will pay that £lO back to the Government in some form or other during the year, and at most the saving will be £l, less the cost of collecting the taxation from the farmer, and with, so many people seeking to evade their obligation this might be a heavy item. “Suum Cuique” has often said that those who pay income tax pay out of profits. Let him take the man on a salary of £5OO a year who has to meet a compensation claim of £2os—an unexpected loss. He still pays income tax on £5OO, although actually his nett income is £295. But to return to his farmer who will deal only with those who pay no income tax and will buy only in the cheapest market. C firm, always able to undersell A until the former ceases to pay income tax, obtains his business until the income tax charge disappears entirely. Then the farmer, according to “Suum Cuique” will pay no tax unless he shows a profit. If he shows a profit he must reduce it by £lO which, in effect, increases his production cost by that sum; if he shows a loss the Government loses its revenue, but it requires that money and must have it. If the farmer, by losing on the year’s working evades the tax, the Government must still get the £lO, and other and more assured methods must be devised, bringing it back finally to the land and to a charge on production. Again we come to this point: the cost of the national administration of New Zealand is a charge on New Zealand and is paid by the products of New Zealand. If the farmer pays all the taxation, it matters not what the taxation is called or how it is applied; it must come back on the farmer because the Government must obtain its share of the return from the country’s products. If a trader does not sell an article he cannot pay any tax on it, therefore the customers must pay whatever tax has to be paid, and therefore the passing on of that tax is not evidence of an excessive profit. One word more: “Suum Cinque” -should interview successful business men and discover the intricacies and importance of costing; he should also examine again his contention that where Customs taxation is paid there is no competition and no inducement to efficiency in business. Let him go to the country where business efficiency is admittedly at its highest and note that a Customs tariff there has not eliminated competition.