The Daily News. THURSDAY, OCTOBER 7, 1920. TAXING MUNICIPAL DEBENTURES.

Taranaki Daily News, 7 October 1920, Page 4

The Daily News. THURSDAY, OCTOBER 7, 1920. TAXING MUNICIPAL DEBENTURES.

In moving the second reading of the Land and Income Tax Amendment Bill in the House on Tuesday, Mr. Massey said he wanted to make it dear that the proposed tax on local bodies' debentures was to be collected by those bodies because it was impossible for the Department to follow those debentures. Subsequently he said it was only intended to tax trading concerns of local bodies. The view expressed by Mr. J. P. Luke (Wellington) that! the proposal would detrimentally affect the raising of loans by local bodies, will meet with general endorsement, for, as he rightly argued, lenders would naturally prefer Government loans to those of local bodies which were subject to a tax of 2s 6d in the £. Considering that local bodies are doing certain work for the people which otherwise would have to be undertaken by the Government, there should certainly be no handicap placed on those bodies. The proposed tax is an innovation of a retrograde character; it is neither justified on principle nor on equity, but is apparently intended to catch small investors whose income does not come within the incidence of taxation, otherwise the amount received bywwaty t of interest would be taxed in the ordinary way. The Government has encouraged local bodies to take part in providing hydroelectric power for the people, to fit in with the national scheme, and now proposes to levy a tax on the debentures issued to carry out this national work. The effect will be that np debentures will be taken up except at a rate of interest that will more than cover the tax, and as public bodies already find it almost impossible to obtain loan money at the statutory limit of rate, the proposed tax will make municipal borrovciing out of the question. Apparently the proposal has not received proper consideration. It probably came to a departmental officer as a brilliant idea for raising revenue without any trouble to the department, and its effect was not taken into account. If the tax is to be levied on existing loans it will certainly cause much hardship,, and it will certainly retard progress. Moreover, it is dangerous in principle, and the Government would be well advised to find some other source of revenue, even though it may entail a little trouble in collection.