The Daily News. WEDNESDAY, JUNE 29, 1921. THE INCOME TAX.

Taranaki Daily News, 29 June 1921, Page 4

The Daily News. WEDNESDAY, JUNE 29, 1921. THE INCOME TAX.

TKere has recently been issued and circulated t by a group of farmers and private companies carrying on business mainly as stock and station agents, a pamphlet containing arguments against the excessive income rax these concerns are being called upon to bear. The object in view is to bring sufficient pressure to bear on the Government to alter the present method of imposing this tax on companies by making a tax on the individual shareholders and not on the profits of the companies. The main argument is that, inasmuch as the large companies have to pay the maximum rate of taxation (on incomes of £lO,OOO a year and over), the small shareholders have to pay the maximum graduated rate fixed for the largest incomes, as the only rebate allowed by the Government is where the investor’s income is below £4OO, and the dividend is less than six per cent, on the paid-up shares, when a small allowance is made. The governing principle of all taxation is that it should be just, fair and equitable, so that the balk of liiP t burden shall fall on those shoulders best able to bear it. The Government has to raise a certain portion of revenue by means of direct taxation by one way or another, and the chief methods take the form of taxes on land and incomes, and customs duties. These are the most easily raised. The Government finds it easiest, to tax companies rather than shareholders. The question is, however, whether that method is equitable, or whether it imposes a hardship on the investors, especially those who can least afford to bear the burden, and it is on this matter that the pamphlet expresses a decided and uncompromising negative, besides expressing the opinion that the present system ‘ ‘ cannot continue without disastrous results to the country.” An extract from a recent speech made by a former British Chancellor of the Exchequer (Mr. R. McKenna) is quoted, wherein the following view is expressed: “I think the proposition is indisputable that heavy taxation restricts enterprise. . .

The stimulus which urges men to venture upon new developments is in large measure the scope of additional profit.” These big trading concerns, which include many farmers’ co-operative companies. are on sure and unassailable ground, and are rendering a national service in drawing the attention of the public to the inequalities and positive dangers of the present system of company taxation. The tendency for some time past has been to establish large business Concerns in order to make, the most of the turnover, minimise management expenses, and secure larger profits. Economically the system is sound, and of benefit to the public, but our taxation system cuts at its very roots, penalising the big concern, and offering a premium for it to split up into smaller companies. This should not be, for it is desirable to encourage healthy trading conditions, and so keep down the cost of living. The country admittedly has to raise a large sum by direct taxation annually in order to meet its liabilities, and big trading companies should pay their full share. There is no objection to that. It is, however, the basis of payment that is the point, at issue. A company’s income is considered as one income and is taxed on the full graduated scale. A shareholder with, say, £lOO in a company is taxed the same as one with £lO,OOO. The rate, too, is very heavy-—the heaviest in the 'world—being 8/9 in the £ on an income of £lO,OOO. Really it amounts to 10s in the £, because certain items of expenditure that have to be provided for by a prudent company are not allowed by the Taxation Department. At Home the Government taxes on a different principle. A small direct tax is made on the company, and the. shareholder is

taxed on his individual income. Of course .this is the only sound principle, one, by the way, which is followed by every other country in the world except our own “advanced” New Zealand. Really the system here is iniquitous, and must do a great deal of harm unless it ij speedily altered. It will succeed, in drying up the springs of revenue. Indeed, it is already doing’ so. Read the reports of the big trading companies, and it can be seen that the policy being followed now is not particularly to put themselves out to earn big profits whilst the present confiscatory system of taxation exists. If no alteration is made along the lines of the English system, then there is the possibility of the big trading companies going into liquidation, returning their money to shareholders, or splitting up into smaller businesses. That would be retrogression that should be averted by the Government. There are other aspects of the subject that may profitably be discussed on another occasion.