No Reduction in Taxation

Sun (Auckland), Volume 1, Issue 113, 3 August 1927, Page 8

No Reduction in Taxation

Finance Minister Gives Reasons

THE State collects £16,904,687 in direct and indirect taxation. This ransom from the people has been going on since the war; but the Minister of Finance, the Hon. W. Downie Stewart, declares in his Budget, which was presented to Parliament last evening, that it is impossible to effect any reductions this year. War debt charges and war pensions still absorb approximately 30 per cent, of the total receipts from taxation. This means that more than the whole of the revenue from both land tax and income tax goes to the payment of interest on war debt and cost of war pensions. It will be clear, observes the Minister grimly, that any further substantial reductions in taxation are out of the question until good progress has been made in reducing the deadweight portion of the debt. Moreover, 23 per cent, of the State’s expenditure goes to the payment of inte rest charges on the Dominion*;? ordinary debt.

(THE SUN'S Parliamentary Reporter.) WELLINGTON, Tuesday. TF I hesitated last year to conA sider reductions in taxation.” says the Minister of Finance, “it will be admitted that the present conditions

are less favourable and do not permit of reductions in the current year. “LIBERAL INCOME TAX” “Our income tax is one of the most liberal in the world in regard to the rate of tax and the exemptions granted for children, life insurance and other deductions. But the effect of our increases during the war and various subsequent decreases since 1921 has been to upset seriously the fairness of of the graduation. Some incomes are actually paying less now than they did before the war, while other classes pay considerably more than pre-war. This anomaly was pointed out by the Tax Commission of 1924 and they recommended that it should be remedied. It is obvious that before any start can be made toward reducing taxation the scale of income tax should be restored to a proper graduation, otherwise the schedule will be come still more full of anomalies. I hope this year to effect some improvement in the graduation with a

view to remedying the anomalies mentioned, so that when a reduction is feasible it can be made on an equitable and scientific basis. A LITTLE BIT OF RELIEF

“In view of the discussion in the Press from time to time, l would like to review the recommendations concerning land and income tax, which were considered by a committee in 1922, and again by a Royal Commission in 1924. Although it is often stated that the reports of these commissions have not been considered or dealt with by the Government, an examination of the statute books will show that most of their recommendations have been adopted. For instance, the 1922 committee recommended that the maximum rate of income tax should not exceed 5s in the pound. In 1922 the maximum income tax was 7s 4d in the pound. It has since been reduced to 4s 6d in the pound. They recommended that provision be made for the carrying forward of losses and the setting off of loss in one business against profit in another; that interest from debentures be taxed on the same basis as other income; and that super tax on land be abolished. Effect has been given to all these recommendations. “The committee further recommended that all Government and public body undertakings be taxed. The purely commercial Departments of State are now required to pay income tax, but the principle has not yet been extended to local body undertakings. SALES TAX NOT FAVOURED

A suggestion was made that the possibilities of a sales and turnover tax should be considered in place of some of our present taxation, but 1 am satisfied that such a tax would not be as equitable as the present tax on income. In any case, in my opinion, such a tax being both on luxuries and necessities must hit the poor (who have a smaller margin beyond necessary expenditure) more heavily than the rich. “Another recommendation was to the effect that land tax should be levied at a fiat rate; but it is considered desirable to retain the graduated rate as being more equitable and discouraging aggregation of land. “The 1924 commission recommended that data be obtained relative to an important change in the basis o! company taxation. This information has now been obtained and examined, unit appears that a complete change would involve a loss of revenue of about £1,000,000 per annum. For fiscal reasons, therefore, apart from other considerations, the proposal cannot be entertained at present..