SPERMS OF WAR LOAN

Southland Times, Issue 24242, 27 September 1940, Page 6

SPERMS OF WAR LOAN

CRITICISM BY STOCK BROKER n CERTAIN CLASS UNDER COMPULSION EMPLOYMENT MAY BE AFFECTED (United Press Association) WELLINGTON, September 26. “There is no misnomer in the term compulsory applied to the loan announced today,” said Mr Andrew Hamilton, president of the Stock Exchange Association of New Zealand. “A particular class of taxpayer has again been singled.out and is compelled to make application. Admittedly he may apply voluntarily for more, but he is under compulsion for a certain amount if there is any practical meaning to the statements in the prospectus. “An unnecessary amount of difficult calculation has been passed on to taxpayers in that they are obliged to add to their taxable income certain other forms of tax-free income and then endeavour to calculate the amount of tax that would have been payable on this total,” said Mr Hamilton. “Many persons will have difficulty in deciding what higher rate of tax they would fall under in this increased amount. Compulsory subscription has been based on income tax for the year ended March 31, 1939, a year when many traders and business concerns would show profits they have not been able to make since the war began, and since further import restrictions iiave increasingly reduced their earning capacity it is more than likely that many will not have the available cash and may have to sacrifice some other form of asset or appeal to their bankers.

PROBABLE EFFECT “How the banks will be able to assist is difficult to guess, as the loan is almost certain to be at a heavy discount and will not be easily valued because for the first three years it will carry no interest. One obvious result of compulsory subscription with no return must be a tendency towards further private unemployment through reduced income. The amount to be saved in annual interest on the anticipated amount to be subscribed, £8,000,000, is only £200,000, a negligible sum in comparison with the hardship and other results to be produced. With an internal State expenditure of somewhere about £20,000,000 annually on public works, many of which could hav' waited till after the war, this saving is very small and could have been achieved by almost unnoticeable economy in such expenditure. “The people of this country as a whole are well imbued with the Empire spirit, and unless this form of loan is a political beau geste to certain elements in the country, it is hard to understand why a voluntary appeal was not made first. In no other part of the Empire has such a loan been brought forward at this stage of the war. The country might have been given the opportunity of responding to a well-handled financial appeal and the pressure pump withheld until the voluntary well was running low. “Another question being asked by many is what provision has been made for cases of hardship, and finally, what is the position of soldiers overseas whose incomes before they left the country were such as to bring them within the terms of the prospectus? Are they obliged to contribute to this loan as well as offer their lives?”

TERMS THOUGHT TOO DRASTIC AUCKLAND COMMENT (United Press Association) AUCKLAND, September 26. The war loan terms were condemned as too drastic by the chairman of the Auckland Stock Exchange (Mr J. W. Frater) who said that compulsion would have an adverse psychological effect and result in considerable hardship on business and industry. Compulsion had not been tried in any other part of the Empire so far and it was equally unnecessary here. The terms, he said, were a blow at patriotic incentive, which was strong in New Zealanders’ hearts. The restriction on the death duty clause would have the effect of weakening the market for scrip, thus compelling holders who had to sell to accept a loss. He considered that a straight-out loan at 2J per cent, involving £200,000 a year interest would have met with a splendid response and have obviated a great deal of hardship. “What has been done is, in effect, to levy special income tax on those who in February 1940. paid over £5O of income tax,” said Dr H. A. Cunningham, an authority on taxation. It. was not merely a loan, because the stock received in exchange, being free of interest for the first three years and afterwards carrying a low rate, was probably worth little more than half its face value. That represented a serious added burden in the case of many taxpayers, particularly business people, who had been recently assessed under the new provisions relating to the valuation of stock in trade. The speaker pointed out that in the case of previous loans taxpayers, could appeal | to a specially constituted Board of Appeal and afterwards to a Judge of the Supreme Court. It was now left to the Minister of Finance (the Hon. W. Nash) to decide whether a person had subscribed in due proportion to his means.

CUSTOMERS TAKING UP WAR BONDS (United Press Association) WELLINGTON, September 26. From inquiries locally it is learned that the banks have not at the moment considered what measure of assistance they will be prepared to offer those subscribers who will be compelled to take up war bonds, but it is understood the banking system will afford all reasonable assistance and facilities to customers to enable them to subscribe.