THE BUDGET

Taranaki Daily News, 17 June 1916, Page 6

THE BUDGET

TWO MILLION SURPLUS WAR PROFITS HEAVILY TAXED FAR-REACHING PROPOSALS

Wellington, Last Night.

Til the House of Representatives tonight the Minister for Finance (Sir •Joseph Ward) delivered the Budget. The salient features are as follows:

I am pleased to be able to inform the House that, owing to the freedom of the seas having been maintained between N'ew Zealand and the Motherland and other causes, there has been a very considerable revival of trade. The export from this country of meat and other farming produce lias been continued at remunerative prices, and the producers of tlie Dominion have experienced ft very favorable /ear. These circumstances have made it possible for the community to meet the extra taxation of last year without inconvenience, and I have thus been able not only to provide for the additional charges 011 the Consolidated Fund, but to show, in addition, a good surplus for the year, amounting to £'2,108,077. Deducting from this surplus the sum of £ 149,047 carried forward from the previous year, there is left a net surplus of revenue actually received during the year, of £2,017,030.

111 announcing this large surplus I wish to remind the House and the country that the longer the war continues the greater will become our annual burdens, and that consequently the expenditure of the year just concluded must not be taken as the maximum of the expenditure of the current and succeeding rears.

POST AMD TELEGRAPH DEPARTMENT.

The payment for interest and sinking fund in respect of War loans will show a very considerable increase for this find succeeding years over the amount paid for last year. Two items alone will entail an additional expenditure this year of over one million sterling. REVENUE AND EXPENDITURE. The following figures show the revenue ,ind expenditure for the year 1915-16 as compared with the figures for the previous year:— ' Revenue.

It will be noticed that the revenue for 1915-16 exceeded that for 1914-15 by £2,058,192. This increase was partly due, of course, to the increased taxation and revenue charges imposed by last year's legislation, and partly to increased activities in the trade'and commerce of the Dominion.

In reference to the expenditure, I desire especially to call attention to the reduction of £74,675 in the expenditure under the annual appropriations for the year 1915-16, when compared with that of the previous year, and in this connection I would like to say that this economy is largely, in my opinion, due to th.> care with which the Administrative Heads of Departments, controlled their expenditure. ! • BEER DUTY. Calculated according to the old system of collection of the beer duty by means iuvci. stamps, the usual estimate 'or the v.- a , about £184,000. The increase ior four month* due to the nevj^

system is £33,000, thus making the total revenue for ' the financial year £1y7,592.

LAND-TAX AND INCOME-TAX. The effect on the revenue of the increased taxation upon land and income is very marked. The net receipts in this Department for the past year amounted to £2,440,475 (made up of land-tax £1,048,350, income-tax £l,392,119, and, compared with the collection for the previous year, show an increase of £1,100,518. INCOME-TAX. The income-tax receipts for the financial year l!Ho-10 also considerably exceeded the estimate, and, compared with those of 1914-15, are as follow:—Receipts. 1915-16, £1,392,119. Receipts, 1914-15, £540,318. An increase of £851,801, Members will be interested to know that the income-tax chargeable for the past year to farmers in respect of the profits derived from land amounted to £369,000, of which sum £240.000 had been paid by the 31st March last.

The revenue Collected for the year amounted to £1,089,917. Thi?"exceeds that of the previous year by no less than £330 474.

The Savings-bank deposits reached a total of £13,700.057, while the withdrawals amounted to .611,294,974. At the end of the year the total amount standing to the credit of depositors was no less than £22,100.365, an increase of £3,118,330. The money-order and post-al-note business has steadily increased, the total issues for the year amounting to £4,252.843. The revenue from postages amounted to £801,935; from and from telephone exchanges, £287,547. STAMP AND OTHER DUTIES. This year the revenue collected was £1.470,307. as against £ 1 ->4 J 17."207 last year, an increase of £53,100. LAND REVENUE. The gross revenue received from Crown and endowment lands of the Dominion shows an increase for the past year. The total receipts amounted to £1,286,524, as against £1,163,127 received during the previous twelve months. SETTLEMENT OF CROWN LANDS. A total area of approximately 750.000 acres was offered for public application during the year under the various tenures provided by the Land Act and the Land for Settlement Act., etc., and the bulk of this land was readily taken up. The regulations governing the granting'of financial assistance to soldier settlers have been issued, and money up to an amount of £SOOOO lias been authorised under the Act to provide advances to assist in developing the holdings. AGRICULTURE. The agricultural and pastoral pursuits of the Dominion have been most successful during the past year. Prices obtainable overseas for all kinds- of farm-pro-duce remained at a very high level, with the result that the value of our agricultural exports was much higher than in any previous year.

As there is at present every prospect of another good year for our farmers, and as the bulk of our exports are not in the nature of luxuries but rather of necessaries to the peoples of Europe, the outlook for the future is hopeful, although obviously it is not to be expected that the present very high level of prices will continue after peace is established. LAND FOR SETTLEMENT. The purchase of lands for settlement during the year lias been for various reasons considerably restricted. 10,495 acres, valued at £136,220, were, however, purchased. There, has been a good demand for the whole. STATE ADVANCES OFFICE.

i There lias been no change in the policy of this Office during the year. The limit 1 of advances to local authorities remains at £SOOO, while advances not exceeding £IOOO (including loans for the repayment of mortgages and the erection of homes in urban districts up to £450) continue to ho made to settlers. In the Workers' Branch the full amount Allowed by the law is being advanced. Amounts of Advances paid over during year ended MARCH 31, 1910. £ Advances to settlers 814,555 Advances to workers 275.650 Advances to local authorities 285,410 £1.375,6-15 Loans authorised but not paid over as at March 31, 1910. £ Advances to settlers 147,279 Advances to workers 85,185 Advances to local authorities 300,490 £532,954 The rates to settlers and workers remain at 5 per cent., reducible to 4>/o per cent, for prompt payment. The rate chargeable to local authorities remains at 4% per cent. STATE FIRE INSURANCE. The. year 1915 has proved the most prosperous in the history of the State Fire Insurance Office. The income amounted to £76,299, as compared with £67,693 for 1914. The net profits, after placing an additional £IOOO to Investment Fluctuation Reserve, and an additional £BOOB to UiTearned Premium Reserve, amounted to £25,032, as against £18,300 for 1914.

I will ask the House to make provision for exempting from assessment of income-tax in New Zealand any income earned elsewhere and which has already been taxed in the United Kingdom or any British dominion, with a view of avoiding as far as we can the duplicate taxation of income within the Empire.]

The total of accumulated funds at the close of 1915 amounted to '£116,084, as compared with £87,423 at the close of 1914

'ESTIMATED LOAN EXPENDITURE FOR 11>1i6-17. I estimate that it will be neeessary to provide from sources within the Dominion a sum not exceeding £2,500,000 during the current year to provide, for the carrying-on of works and other services which are deemed to be necessary. Of the above-mentioned sum, £500,000 represents money for the purchase of land for soldiers, and as this may be paid for by means of debentures, I estimate that the net amount which it will be necessary to obtain for works will amount to, approximately, £2,000000. . ESTIMATES OF' REVENUE ANT) EXPENDITURE FOR 1910-17.

RESERVE. Since the war began' the deposits at call iyth tlio Post Office Savings Bank nave increased very rapidly, and a consideraMe portion of these moneys has been invested in war debentures and other Government securities. In view of the possibility of heavy claims Being made by the depositors when matters assume a more normal aspect in Europe, I established a reserve in London by investing in Imperial Treasury bills funds which are not wanted for immediate requirements. New Zealand has by this means assisted the Imperial Government, and has at the same time established a strong liquid reserve against possible sudden claims in the future.

WAR LOANS. During the session of 1914, authority was granted by this House to enable £2,000 000 to be raised for war purposes, and during last session additional authority wis granted for raising a sum not exceeding £19,000,000 for the same purposes, making a total of £12,000,000 in all. Of this total we had borrowed, up to the beginning of May, 1916, £9,850000, leaving an unexhausted authority of £2,150,000. The Imperial Government lias advanced £8,51X1,000 of the £9,850,000 raised and the balance, £1,350,000 has been found in New Zealand /from Post Office investments.

1 propose to ask the House for authority to borrow further amounts for war purposes to the extent of £12,000,000 for this year. With the unexhausted authority' of £2,150,000, this will provide a total of £14,150,000 It is expected (hat the war costs will shortly run into over £1,000,000 per month. PUBLIC WORKS LOAN. During last session of Parliament authority was granted to the Government to raise a loan of £2,000,000 for public works, and this amount was duly raised' without having recourse to the London market. ' As Kgards the future, our chief efforts must be exerted in the direction of rendering as much financial aid as it is possible to the prosecution of the war, and until the termination of the war, therefore, the utmost economy will be exercised in the prosecution of public .vorks, and oi'ly those works which are essential will be continued. I estimate that there is sufficient money now available .for public works to en:ille us to carry on at a reduced late of expenditure for some time, but to guard against unforeseen contingencies, the House will be asked to grant authority for raising during the year, half a million pounds from the Post Office funds.

REDEMPTION AND RENEWALS. In l.ist year's Budget it was shown that loans amounting to £6,274,953 would requiiv to be met in London before the 31st March, 1916, and I am glad fo say that this has been successfully and satisfactorily completed. CONVERSIONS. Treasury bills, which at one period of the war reached the record amount of £1,950,000, were all paid off before the 31st March. CUSTOMS. The revenue was estimated on a conservative basis at £2,800,000. In addition to this, it was expected that primage for seven months, and increased duties on spirits, ino.tor-ears, gas and oil engines would bring in £145,000, making a total of £2,945,000. The amount actually realised was £3,365,5fi5. This remarkable surplus is accounted for mainly by the great, increase in the value of goods the world over. . Tt is gratifying to .note that Great Britain and British dominions still maintain their full share gf the goods ordered for Ntw Zealand. Out of the total imports of £21,728,834, Britain and British dominions sent £17,727,137, the balance being distributed between the United States and other countries. TI11? new duties for the seven months during which they were in operation amounted to £149.000, and of this amount primage duty of 1 per cent, on all imports was responsible for £98,000. TAXATION PROPOSALS. I propose to effect some change in taxation. The ordinary land-tax 011 mortgages will be repealed, and an in-come-tax substituted on the income derived from the mortgages. This while giving relief to the owners of. small sums invested 011 mortgage, will impose a heavier tax 011 the income of those having large investments.

I wish to point out that no additional taxation is being suggested, except to provide for war expenditure, and though the extra tax mav he ■severely felt by some of those who will '.be called upon to respond to the needs of the country during the wai, they will uheerfully accept any additional burdens which are .essential to achieve the .final victory in this great conflict. It mav be necessary as soon as I lenow definitely what amount is required for authorisation on the supplementary estimates to afek she House to provide for an increase of taxation to further

MONEY. During' the year the financial condition of the country has been a singularly peculiar one. Money lias been plentiful, but the uncertainty of the future has made those who were the fortunate owners of sums in excess of their own requirements exceedingly cautious; the result lias been a marked indisposition to invest in existing industries or new undertakings. The fact that no one can, with any degree of accuracy, gauge what conditions will prevail after the war makes the position anything but easy to forecast. It, however, appears certain that after the war tlie whole world will find a new and, indeed, nn unprecedented situation, and that the change in the economic, industrial, social, and financial condition must necessarily bring about changed methods of finance. AH industries, whether trade or primary, to a large extent are dependent on. the stability of the country's finance. I am convinced that it is a wise course to keep the year's surplus in a liquid form, and I decided some months ago not to use the surplus for ordinary governmental requirements, but to invest it in liquid securities, and part of this £2,000,(100 has since the close of the financial year been invested in Imperial Treasury bills, and tlie remainder will be similarly invested at an early date. I have from the first recognised'that it is our duty to aid the Motherland during this great war to our utmost capacity, I had previously invested a sura of £1,32"),000 in Imperial Treasury bills, and with this further £-2,000,000 a total of £3,320,000 will be provided as a reserve. T think this investment in Imperial Treasury bills may ho regarded as a partial setoff by New Zealand against the war funds so generously advanced by the Motherland. I hope during the current year to further increase this reserve.

WAR PROFITS. Money for the conduct of the war must lie had, and there is no valid reason why those who have surplus moneys, largely due to war conditions, should not he called upon to provide a portion of the capital required. Those who have made extra profits during the war, cither from business or directly from primary products, cannot object's to provide out of such profits a share of the finance necessary. I will ask the House to give authority to take by way of taxation 45 per cent, of the. excess profits earned during the last year. These will.be ascertained by taking the average profits realised for each of the throe years previous to the' war, and comparing this average with the returns made since the war commenced. I estimate to receive ,€2,000,000 from this source. The date of payment will probably Ibe about the end of the current financial year. SPECIAL INCOME-TAX. Those taxpayers who derive their incomes from other sources. than war profits should likewise at this juncture be required to contribute something further than they are at present called upon to pay, and I propose to ask for authority to levy a special tax of 5 |(ier cent, upon incomes earned last year from all sources, exclusive of war profits, which have already been dealt with. This tax will he collected in Marhc next. I calculate that £7fi 0,000. will be realised under this heading. INCOME-TAX MINIMUM. I direct attention to the minimum upon which income-tax is charged in this Dominion. So far as I can ascertain, the amount at which we start to levy income-tax is the highest in the world—and by that I mean that we exclude from the payment of any tax all those who receive wages or salaries not exceeding £3OO per annum. Nothing is proposed in the direction of increasing the income-tax revenue by reducing the minimum upon which income-tax is leviable, but it will become a question for serious consideration if the. war continues beyond the end of next vear whether this should not be done.' it is only right that those who are well-to-do or possessors of wealth should contribute the greater proportion of the cost of this war, the successful winning of which means sneh enormous advantages to them as well as to every other section of the community. Even the humblest in the land would probable take exception to 'being altogether excluded under the law from making some slight contribution towards helping to win the war and towards assisting to maintain a pensions scheme for the benefit of the widows and dependents of those who are, on behalf of every class, great or small, throughout the Dominion, lighting for the freedom of this country. WAR-BONDS. I will also ask the House to provide for a system of war bonds to he issued in New Zealand, with a currency of 25 years, bearing interest at V/., per cent, free of income-tax. This will enable those desirous of assisting war finance to do so. The financial requirements (hiring the year will be obtained partly from the Old Country and partly from New Zealand, and 'will, of course, be limited to the Dominion's 'needs.

The course I am suggesting' will give those desirous of helping the Motherlatid the opportunity of doing so. Our war expenditure is now reaching very large figures, hut the proposals I aiii submitting will, in my opinion, supply the means of providing everything that is necessary for the pensions, equipment, transport, <aud pay. of our soldiers, and this must he '{lie- first duty of the country during the crisis through which the- Empire is now passing. I hope not only to supply the necessary means for current requirements, but eventually to provide for the full repayment of the loans received from the Imperial government for war purposes. It would, of course, be impossible at present to continue the war expenditure Without assistance from the Homeland. For the months of ijay a'rnl June it has been found possible to reduce the usual Imperial contribution ■by more thsin half, owifig to the assistance derived from local investments, and it will be my endeavor in the future to continue to relieve the Imperial Government to the fullest extent possible. How far this can be accomplished will largely depend upon the total amount we obtain from tax pn war profits and from the special income-tax, but' 1 feel justified in saying that the amount will be considerable.

strengthen the consolidated revenue. I will inform the Hou-e when I am in a position to do so.

MONEY IN DOMINION.Tt is, in my opinion, the duty of those who own or control money made in thin country to utilise it. in the Dominion us mueh as possible during the currency of the war, in order to help to maintain the stability of the trade and commerce of the country. 1 propose to ask the House for authority to ensure that this will Ibe done until twelve months after peace has been declared. This will also apply to deposits in banking or other institutions in so fiir as they represent money in New Zealand, but will not a'ffect remittances for legitimate trade or other purposes. Authority will be asl;ed to have suitable provision made by regulations to enable this proposal to be carried out. BATES OF INTEREST. Last year the House gave authority to control the raising' of public loans by local bodies, and this provision has worked well. I have not given authority for any local public body throughout the country to raise loan-money at a higher rate than 5y 4 per cent. In a number of instances I was asked to do 90 but refused, and the fact that the money has been obtained within the maximum rate fixed shows that had :.'iis provision not been made the rate of interest throughout the Dominion would in all probability have been materially increased. As already mentioned, the Government rate for' the State Advances Local Bodies branch has been kept at 4% per cent. Under the allnormal conditions at present ruling an inflated interest rate is highly undesirable. I.propose, in order to prevent the possibility of a general increase in the rates of interest, to apply similar restriction to the rates to be allowed in respect of deposits, and to fix a rate applicable to all financial institutions, whether banking, companies, or private firms, so that no institution can take advantage of another of the same class by offering higher rates for deposits.

101 o 1915 £ £ Customs 3,306,171 3,167,283 Stamp and death duties ... . 1.470,307 1,417,207 Postal and telegraph 1.689.91.7 1,353,443 Land-tax 1,048,356 790.641 Income-tax 1.392,11!) '540,318 Beer duty 157,802 127,060 Railways .... 4,484,337 4.106,675 Registration and other fees 106.263 101.020 Marine 46,228 50,387 Miscellaneous .... 421.505 401.408 Territorial 219,314 239,023 National endowment revenue .. ft2.fi.-K> 78.770 Other receipts .., 12,073 8,240 Totals 14,510,137 12,451,945

Expenditure. Permanent Approp iations- £ £ Civil iist 20,280 21,954 Interest and sink-. ing fund 3,1 DO,798 3,071,488 Under special Acta 574,000 545,341 Subsidies paid to Local Authorities 133,072 124,821 Territorial revenue 52,184 51,685 Endowments . 173,692 193,946 Old-age pensions 450,842 436,785 Widovs' pensions 30,26", 31,610 Military pensions 48,278 47,607 War Pensions Act 13,744 Totals 4,693,155 4,505,177 Annual Appropriai iohs— Legislative Departments 34,480 37,552 Department of .Finance 90,004 170,134 Post and Telegraph Dept.. .. 1,294,712 1,244,569 Working Railways Department ... 2,954,000 '2,881,087 Public buildings. domains, and maintenance of roads 100,780 117,676 Native Dept 24,877 24,005 •Tusticn Dept 452,227 442,478 Mines Dept. ■ 28,552 29,170 Dept. of Internal Affairs 408,058 489,207 Defence Dept. ... 432,227 499,137 Customs, Marine, and Inspection of Machinery Departments .. Ml. 225 149,200 Dept. of Labor ., 31,076 28,142 Ttept. of Lands and Survey 235,322 239,043 Dept. of Agriculture, Tmlxistries, and Commerce 191,774 206,731 education Dept. 1,329,106 1,207,983 Servic not provided for ...... 30,866 108,512 Totals 12,493,107 12,379,803

Customs - Railways ' Stamp anil Death Duties Postal and Telegraph .. Land and Income-tax Beer Duty ... „ Registration and other Fees Marine Miseellaneous Territorial revenue .... Endowment revenue ,.. Other receipts 3,300,000 4,450,000 1.470,000 1,750,000 2,540,475 105,000 104.605 45,850 423,500 211,(100 00,071 10,000 ■z 14,501,401 the following figures will show thr> ways and means of the Consolidated for the year 101G- ( 17, estimating the revenue on the foregoing basis:— Balanoe forward from 101510, less investment (£2.000,00(1) Estimated revenue, lflWi-17 166,077 14,501,401 £14,757,478 Estimated expenditure .... £14,31)0,620 Balance '£366,852