FARM TAXATION CASE

Southland Times, Issue 24871, 10 October 1942, Page 5

FARM TAXATION CASE

IMPORTANT ISSUE RAISED (Special) AUCKLAND, October 9. A taxation appeal of wide interest to farmers was heard by Mr Justice Fair. The appeal was a test case in which the Farmers’ Union, represented by Mr Sexton, challenged the method by which the Commissioner of Taxes has been imposing taxation, on farm stock. The system he adopted purported to be validated by an amending clause passed in August 1941. The case selected for the test was that of Alfred Whitmore Babbage, farmer, of Khwhia, who is a breeder of sheep and cattle. The case stated set out that for the year ended March 31, 1940, Babbage in his returns had adopted the standard value of 10/- a head for sheep and £3 for cattle. In September 1940 the Commissioner of Taxes required him to file an amended return for income tax adopting market values for livestock and a separate amended return for social security, showing standard value for the stock at the beginning of the year and market value or an approximate standard value for it at the end of the year. The commissioner had deducted the value at the beginning of the year from the value at the end and charged the difference as income. QUESTIONS FOR COURT The Court was asked to detenmne whether the commissioner had rightly included for income tax the difference in value of the appellant’s stock at the beginning and end of the year; whether having made an assessment for income tax he was stopped from making, a further different assessment for social and national security; and whether in any event livestock used solely for breeding should be taken into account in arriving at assessable income. Mr Sexton said the action was to determine the law on standard values of stock for farmers, and whether “trading stock” included stock used for breeding purposes. The question was whether the commissioner could require the farmer to use standard values at the beginning of the year and market values at the end. As a result of the commissioner’s system, Babbadge had returned a net income for social security of £1326, and a farming income for income tax of £636 for .the same period. It was this difference of nearly £7OO that was in dispute. Counsel maintained that the commissioner was not entitled to make one assessment for income tax and another for social security, but was bound by the assessment for income tax. Mr V. R. 'Meredith, for the Commissioner of Taxes, argued that the ordinary stock of the farmer was stock in trade” for taxation purposes. The appellant’s livestock were used for the purpose of making money and would ultimately be sold. The commissioner was bound by statute to act as he had done. The assessments for income tax and for social security were two totally different things. The hearing was adjourned.