SCALE OF TAXATION.

Taranaki Daily News, 19 January 1921, Page 8

SCALE OF TAXATION.

GROWTH IN SIX YEARS. GREAT INCREASE IN REVENUE. FURTHER ADDITIONS PROPOSED. Demands for the payment of income tax amounting to probably £6,500,000 will be delivered to taxpayers shortly, and this huge amount, exceeding the last public loan, will be payable by some 44'000 persons and companies within the next two months. Land tax, amounting to about £1,500,000 was due in November, and the greater part of this sum has no doubt already reached the Treasury. In the circumstances, it is of interest to review the various steps by which the burden of direct txat’on has been so greatly increased during the few years. Before the war the indirect source of Customs and excise duties was the principal contributor to the public funds, yielding in 19'13-14 no less than 60 per cent, of the revenue raised by taxation. In that year the amount collected in Customs duties was more than double the total sum of land and income taxes. With the increase in the values of imported merchandise, the Customs revenue has expanded, but in 1919-20 it was equivalent, to only 65 per cent- of the land and income taxies. In six years, the indirect taxation of the community has increased by 46 per cent.; on the other hand, land tax has doubled, while the greater direct tax, that imposed oii incomes, yielded in 1919-20 no less than 114 times the 'amount collected in 1913--14. The growth of land tax and income tax is shown in the following table: Land Tax. Income Tax. £ £

The fall in the amount of land tax in 1916-17 was due to the alteration by which income derived froln mortgages of land was made subject to income tax instead of land tax. TAXES FOR WAR PURPOSES. The increases of taxation date from 1915, when participation in the war demanded greater sacrifices by the community. Except in regard to minor details, the system in force when the war began had remained unaltered for many : years. In Sir James Allen intro- ' duced a nmfltfucation of the graduated • tax on Laud, based oa the principle of I : increasing the rate of tax for every Cl ' of increase in unimproved value; in the following year he applied the same mo- • thod to the taxation of incomes. The scale in force up to 1915 provided for an ordinary tax on land of one penny for every £1 of unimproved value, after making the statutory deductions and exemptions. To this was added the graduated tax ranging from one' thirty, second of a penny at £50.00, to five and five-sixths of a penny at £200.000. Incomes. of companies were taxed at the rate of Is up to £l2OO, increasing at the maximum of Is 4d-at £2400, while incomes of other taxpayers were taxed at from 6d to Is 4d, the latter rate being levied on all incomes above £2400. The first tncrease was made in 1915 when the graduated land tax was ibcroased by 50 per cent., and the rate of tax on incomes extended to’ 2s. reached at £5600, with an addition of 33 1-3 per octnt. to all taxes on incomps, the scale being thufe increased to from Sd to 2s 8d in the pound. Another important provision made income derived from land subject to income tax. The experiment of taking “war profits” was made in 1916, and abandoned in the following year, when a. system of progressive. taxation of both land and incomes was adopted, with additional “special war tax” on incomes. The tax on land ranges from Id to 7d, the increase being st the rate of one penny for £32,000 ■ of value, so that the maximum is reached at £192,000; these rates are subject to a super-tax of 50 per cent., which makes the actual scale of land tax from lid to 104 d. Similarly income' tax ranges from Is 3d in the case of persons and firms and 2s 3d for companies, to a maximum of 7s 6d, the latter rate being levied on all incomes above £6700.

LAST .YEAR’S LEGISLATION. A further alteration of these taxes was embodied in legislation passed by Parliament last session, which comes into force on April 1 next. The taxation of land is to be at the of,ld up to £lOOO, increasing by Id for every £20.'000 of value (instead of £32,000 as at present), with an addition to the scale rate of 33 1-3 per cent, instead of 50 per cent. The result is a reduction of the taxes on the lower values until at £lO,OOO the new scale '■will produce approximately the same amount as at present. On all estates above that value there is an increasing advance upon the present scale of taxation. The minimum rate is to be reduced from l%d to 1 l-3d, but the maximum rate of practically 10%d is to be reached at £138,000 instead of £192,000. The extent of the increase in land taxation is illustrated by tlie following examples showing the amounts due on typical valuations under the 1913 scale, that now in

HEAVIER TAXES ON INCOME. The effect of the amending legislation on income tax cannot be briefly slated, as it is complicated by the new provisions for the relief of incomes derived by personal exertion and by the proposed change from the rual system of ordinary and special taxes to a single progressive tax. The principal result of the latter change is that taxation will be increased on all unearned incomes above £650, while incomes of £7OO or over, receiving only the deduction of 10 per cent, for earned in- ‘ comes, will pay higher taxes than at present. The new scale begins at Is , 2.4 d instead of Is 3d, but it rises to 8s 9.6 d instead of ■ 7s ud. the maximum ; being roacliad at 'J67JOO instead of ! £6700. [ The following table shows the differ-

ent results obtained, by tire prfc-war scale, the present system and that proposed for next year:— Taxable . 1913 Present Proposed Balance. Scale. Scale. Scale.

Under the new scale the taxation an estate valued at £138,000 will be little more than double that imposed before the war. An income of £lO,OOO will be required to pay nearly sevenfold the taxation then levied.

1913-14 767.451 554,271 1914-15 ..... 799,644 , 540,318 1915-1B .... 1,048.356 1,392,119 1916-17 .... 7113,118 4,262,126 5,619,561 1917-18 .... 1,385.708 1918-19 .... 1,512,093 6,219.336 iM9-a$ .... 1,557,903 6.369765

force and that proposed by last year’s legislation: — Taxable 1913 Present Proposed Balance. Scale. Scale, Scale. £ £ £ £ 1,000 s • 4 6 5 2,000 * • 8 13 12 3.000 . 35 33 10,000 . . 4!) 80 SO 15,000 . 84 135 142 20,000 . . 122 199 -217 30,000 . . 246 357 408 x 50,000 . . 487 791 958 70,000 . . 851 1381 1780 90,000 . . 1319 27S5 130,000 . 4088 5380 138,000 . . 2904 4555 6018

£ £ £ £ 500 M . < 25 21 32 1,000 .... 50 70 90 2,000 .... 249 280 3,000 . 200 533 570 4;ooo .... 266 2-8 920 960 5,000 .... 333'. 1-8 1,412 1,450 6,000 ...« 400 2,007 2,040 7,000 ....■ 466 2-8 o o 555 8,000 .... 533 1-8 2,932 3,120 9,000 .... GOO 3,307 ;:.,,;.. 10,000 .... 666 2-8 3,682 4,400 20,000 .... 1,333 1-8 7,432 8,800 4o,ooo .... 2,666 2-8 14,932 17,600