The Daily News. TUESDAY, AUGUST 26, 1919. INCOME TAX REFORM.

Taranaki Daily News, 26 August 1919, Page 4

The Daily News. TUESDAY, AUGUST 26, 1919. INCOME TAX REFORM.

There are many anomalies in the system' of taxation that have long called for removal, their inequity having been unpleasantly emphasised during the war period. In his recent manifesto Sir Joseph i Ward practically admits the errors of his ways in this connection and proposes a recasting of the whole system in six mouths' time, when the full annual provisions necessary to meet the war expenditure under all headings will be definitely known. He also admits that taxalion of co-operative associations requires adjustment, and that, company income tax should „ba u»ou tiie individual snare-

holder's income, the companies being taxed on the undistributed balance. Under the present system two shareholders—one with an income of £IO,OOO per annum, and the other with only £3OO a year—are each called upon to pay the maximum progressive income tax of seven shillings and. sixpence in the pound. By this method no account is taken ol! Ihe dividend earning power of any particular company, with the result that a concern with a sn.all capital which may be earning 25 per cent, but the income of which does not exceed £I6OO, only pays two shillings m the £, while a company whose income exceeds £G4OO pays seven and sixpence. Manifestly the smaller companies enjoy a great advantage over the larger and yet the latter may not be earning anything like the dividends of the former. But even if both paid the same dividend, a shareholder in the larger concern, assuming his dividend to be worth £IOO, would, after the deduction of income tax, only receive £62 10s, as against £9O in the case of a similar dividend in the smaller company, besides which the market value of the respective shares inflicts a further penalty on the holders of shares in the larger concerns. It is not surprising to find that of late years there has been a growing tendency to convert businesses into small limited liability companies, and that the ultimate effect will be to restrict the investment of capital in the large commercial and industrial enterprises. The question at once arises: If a line of demarcation is drawn at £I6OO for the two .shilling tax. and £6400 for the maximum duty, what should the man with £IO,OOO pay, and why should not the sliding scale be made to apply to all incomes over that sum "so as to bear equitably on those paying the tax"? The obvious remedy is to make the individual, and not the company, responsible for progressive taxation, and although Sir Joseph Ward fought against this' principle when in office, it looms large in his recent manifesto. It is a reform that is long overdue. Another injustice connected with the present system is that it places a tax on parenthood and education of children because it does not fully recognise the taxpayer's family responsibilities, nor does it make sufficient allowance for widows or the guardians of orphaned children. Again and again has the press of the Dominion drawn attention to these anomalies but they have only just now made a convert of our ex-Minister of Pinance, who at last has come to the conclusion that "further exemptions in our income tax system should be made in respect to wives and children of taxpayers." In all probability it will be found that professional and higher salaried men have suffered more than any other class from the pinch of taxation and increased cost of living, without the slightest hope of relief, and yet these are the men on whom the country depends largely for its welfare. Their case does not appear to have enlisted the sympathy of Sir Joseph Ward, nor does'he appear to have any desire to tackle the single men who can enjoy life on £250 a year without paying direct taxation. If there is to be a just and equitable system of raising revenue by means.of income tax, the incidence of that impost needs a thorough revision. There must be sound, businesslike principles as a basis, a lowering of the line where it cuts too deeply, and a raising of the maximum in the case of the highest grades of income much in the same way as in America, where J. D. Rockfeller has to pay seven millions a year in taxation out of a revenue of twelve millions. There is certainly ample scope for revising Operations in our taxation, and now that the war has ended the time has arrived for a thorough overhaul of the system with a view to equitable adjustments.