INCOME TAX EXEMPTION.

Taranaki Daily News, 24 June 1921, Page 7

INCOME TAX EXEMPTION.

DAIRY COMPANIES’ LOSS. COMPLAINT BY THE CONFERENCE. (From. Our Special Reporter.) Palmerston N., June 21. The question of the removal of the exemption from payment of income tax, which had been the -privilege of dairy companies for some years past, formed the subject of discussion at the annual meeting of the National Dairy Association to-day.

The matter was touched on by the president (Mr. A. Morton) in the course of his address, when he remarked as a result probably of the financial stringency, and the desire of the Government to make use of every source of revenue, legislation had been passed withdrawing from co-operative dairy factories the exemption from income tax which they had enjoyed for years. Though not a serious matter to companies on a sound footing, it would prove irksome to companies who were not bo sound, and who desired to set aside reserves to improve their financial position. Now any reserves so set aside would be liable to taxation. This was unfortunate, because there was never a time when it was more necessary to stabilise the financial position of the jeompanies than the -present. Dairy factories had been very harshly treated by the railway tariff revision, freights having been more than doubled as compared with pre-war times. In reply to Mr. Sinclair (Opotiki), the chairman stated that the first intimation the Association had of the Government’s intention to remove the exemption of income tax was that it had been done. In any case he did not think, in view of the exigencies of the time, that the Association would have been wise to make any protest. Mr, J. S. Connett (Bell Block) considered the president had taken a lenient view of the matter. The Government’fl action was hot in the best interests of the industry. Directors now had to fight the suppliers to build up reserves, and now that these were taxable it would be impossible for factories to improve their financial position. It was a matter that hit some dairy factories very hard. His factory had set aside £4OOO towards rebuilding their factory! At that time they did not know of the Government’s action, and they had since ascertained that the Government would deduct £960 from this in taxation. However, they had been able to get over the matter by the issue of new shares. The principle of taxing reserves was a wrong one. Every company should be encouraged to make its financial position strong by building up reserves, especially when there were so. many suppliers who were anxious to get the last penny out of the company, and the Government was going to assist them. Personally ) he could nnt see where the Government i was going to benefit. # Mr. Corrigan (Hawera) considered I that the Government were using the banks in order to get the taxation. The banks had insisted that Id per pound of butter fat should be dented to reserves, and now the Government was taxing the reserve. The president stated that the banks had not stipulated that this penny per pound should be placed to reserve.. It could be placed to share capital. Mr. Forsyth (Eltham) did not think the matter was of much consequence. Most of the companies were under-capi-talised, so could get over the difficulty by paying out'interest on share capital. He also considered that 5 per cent, depreciation was a sufficient amount to write off, if a reasonable amount was put to repairs and renewals.