The Temuka Leader TUESDAY, AUGUST 4, 1885. TAXATION V. INTEREST.

Temuka Leader, Issue 1374, 4 August 1885, Page 2

The Temuka Leader TUESDAY, AUGUST 4, 1885. TAXATION V. INTEREST.

The following is an article contributed by the gentleman signing liimaalf “ Cockatoo,” who wro'e the poetry entitled “ The Farmer’s Wife,” which we published in our issue of July 28th last ; It is a long while since Sir Waller Raleigh declared that when he wanted taxes he went to the farmers, because, like their own sheep, they submitted quietly to tiie shearing. Government must have taxes, and sheep must be shorn, but “ good shepherds shear their sheep—they do not flay them neither will they permit other men to devour their flocks. The farmers of New Zealand cannot complain of any unreasonable taxation by Government, for unless a farmer has properly to above the value of £SOO, he is exempt from all direct taxation, and if he has property above that value, ft tax of § of penny in the £ upon the surplus amount (as in 1884) is a mere flea bite. Ttie rate winch the farmer pays for highways, drainage and irrigation ought not to be looked upon as taxes, but as annual payments for which be receives full value in the shape of good roads, and in the comparative safety from floods and droughts. Again, those indnect taxes which a farmer pays in the shape of revenue and protective duties are no heavier upon him than upon other classes : in the former case they shonld be cheerfully submitted to, as the loyal contributions of all good subjects towards Government expenses for the benefit of the community ; in the latter case, moderate proteciiv* duties should be as cheerfully submitted to, upon the ancient and time-honored policy of “ fostering and encouraging native industries,” But Government have not only the right (0 tax all classes for the benefit of the community ; they have also the duty of protecting all classes. And this duty consists not only in defending their country from foreign foes and in police protection, but, in the encouragement of all those sciences, arts and industries which benefit their coun'ries, and in the repression of all kinds of evils which lend to discouiage such sciences, art* and industries. It has been the wise policy of New Zealand Governments “to foster and encourage local industries ” by placing moderate duties upon many kinds of imported goods. By taxing these imports Government prevents the underselling of Home manufacturers by imported manufactures ; she increases her levenues, and her sources of revenue; she saves much money from going out of the colony ; she finds employment for much capital in the colony; and lastly, though not least, she increases the employ ment, and therefore the wages, of the working classes. But at the present time, owing to the low price of nearly all kinds of agricultural produce, and especially of wheat, there is no industry in New Zealand that requires the encouraging and fostering of the Government more than that of farming; and all the other industries of New Zealand put together have no better right than that of farming to any assistance which Government can give. Everyone knows also that when farmers are doing badly all other trades suffer, and therefore anything which can be done for the benefit of the farmers would be an advantage to the rest of the community. Government cannot perhaps raise the low prices of agricultural produce, but it can do something which would equally assist the farmers. It can reduce the present extoitionate rates of interest throughout the colony. Not only that, but it can have the honor of setting a noble example, which will most assuredly be followed by all the other colonies, and which indeed might prove to be a check upon excessive usury throughout the world. This it can do by establishing a National Bank. Not so long ago, in Old England, the coat of sending letters from one part of the world to another was enormous. At the instigation of Howland Hill, the Government took the business in hand for the benefit of all classes, and reaped not only the thanks of all Englishmen, but set an example which has been copied all the world over, to the incalculable blessing

and advantage of all kinds and conditions of men. Since then Governments have also added to their State business that of Savings Banks and the transference of money by means of Post-office orders. In doing these things Governments have not only greatly assisted their peoples, but have added greatly to their revenues. It is the delight of a sportsman to wait until two birds cross and then to knock them both down with one shot. It should be equally the glory of a statesman to assist the people and raise the revenue by one and the same act—when it can bo done. The last Government “imposed” a tax upon the farmers in ihe shape of an unreasonable and excessive increase in the tariff upon the railway carriage of grain. This was a good example of the most foolish kind of taxation. Although really in amount a very trivial affair, it yet irritated a great many people. It was also a tax upon corn, which is contrary to the New Zmlund policy of “ fostering and encouraging native industries.” As the price of corn for that year was generally unremuuerative it also violated what Thorold Rogers calls “ the fundamental canon of taxation,” vz., “ that all taxes are paid out of what can be saved.” It taxed also not only most of the corn which was exported, but much of that which was consumed in the country. It was not even fair as between the farmers, because whilst those living near ports or markets escaped scot free, those who lived at a distance had to submit to the “ imposition.” However, out of eyil comes good, aed the farmers have at least learned one lesson from it. That lesson is : that by combination, determination and energy, things which are wrong can be made right. The farmers need not and should not appear before Government as humble petitioners. Our legislators are at the present moment puzzling their heads as to how the expenses being incurred for defence purposes are to be paid. The ways of Governments are mysterious. The Government of New Zealand allows the present commercial banka of the colony to issue notes of their own in the proportion of three pounds value in notes to every pound they have in gold. (These notes of course are supposed to be backed up by other property bilonging to the Banks, of the nominal value of the notes). Upon these notes, the Government levies what is called a “ tax ” of two per cent, upon their nominal value. Really, Government is lending to the banks what is equivalent to money at 2 per cent ! Yet, when the banks lends these notes or credit them to their customers, they “ tux ” the people at the rate of from 6 to Sltylock and-hia-victims-alone-know-what per cent,, and call this “tax” by the name of interest. The banka must also make no small profit by people losing or the accidental destruction of notes. Notes that are lost or destroyed —unless the numbers are known and it can clearly be proved that they will never turn up again—mean that the banks gain to the amount of the nominal value of the lost notes. Bank notes are like T.O.U.’s, and the destruction or loss of them usually means the cancelling of the debt. But, great as the profit must be, the issue of notes is by far the smallest source of banking profits. The chief profit of banking is derived from using the amount left in the hands of the banks by their customsrs. (See Thorold Rogers). Of this a clear proof may be had by examining the last balance-sheet of the London and County Banking Company. This bank is not permitted the privilege of issuing its own notes. Except the Bank of England not many banks in England are alio wed to do so, and none o'"' them are allowed to issue notes of less than the value of £5. Yet the London and County Banking Company for the year ending 1884 pay a dividend to its shareholders of 21 per cent ! This, in spite of the terrible depression in agriculture, rnanufacteres, and trade ! It appears to me that the Colonial banks must be very badly managed, considering that the rates of interest on all kinds of loans are far higher than in England, and that they have besides the piofit derived from the issue of their own notes, which ought to be especially great from the general use in the colonies of £1 notes instead of sovereigns. Now, if the Government of New Zealand were to retain the sola right of issuing bunk notes, payable on demand in gold, and if it were to grant the use of these notes, or a credit account, either to banks or private individuals, either in exchange for gold or upon mortgage of laud, an enormous “tax” might be raised and the people of New Zealand immensely benefited. Instead of an “ interest ” of 2 per cent, upon about three and a-half millions of paper representing money, Government might “impose a tax ” upon its bank customers of from 3 to 5 per cent. The profits from the issue of notes being “by Car the smallest source of banking profits ” it is clear that the revenue might be materially improved ! Any lost notes would be so much profit to the State. Another advantage would be that all the bank notes would be guaranteed by Government to be backed with landed security and to be payable on demand in gold. The reduction of interest upon land mortgages would speedily reduce the rate of interest upon all other loans. There can be no better loan in the world than land in New Zealand, which is mortg iged to only twothirds of its rateable value. The interest upon English consols only amount to about 3 per cent., because they are guaranteed by Government. The interest upon land mortgaged to a New Zealand Government should be no greater because the Government would hold the titles to land of a third greater value than their loan. The fanners of New Zealand may not only ask the Government to assist them, but in return they can offer to very materially assist the Government. It remains for those who oppose the establishment of a National Bank to explain their reasons for objecting. One of their reasons might be that it would have a depreciating effect upon the value of bank sha-es. In answer to this the farmers may reply that extortionate interest has robbed them of their profits, and that it is having a very depreciating effect upon the value of land in New Zealand. (Indeed, extortionate interest has, has had, and always will have, a bid effect upon everything and everyone, even including tha money-lending fraternity). It is often said that the fanners have given too much money for the laud, but it would be much more just to observe that those who had given £2OO for bank shares which originally cost only £IOO, have been much more mistaken and foolish in

supposing that New Zealanders were always going to pay such rates of interest as will admit of banks yielding dividends offrom!sto 25 per cent., and in supposing that the Banks are always going to be assisted by being permitted to issue their own notes.