THE Wairarapa Mercury. SATURDAY, FEBRUARY 16, 1867. TAXATION AND CREDIT.

Wairarapa Standard, Volume I, Issue 7, 16 February 1867, Page 2

THE Wairarapa Mercury. SATURDAY, FEBRUARY 16, 1867. TAXATION AND CREDIT.

A fallacy which is no less gross than mischievous has been too long prevalent amongst us, which we hold it to be our duty to expose. This fallacy has served as a text for our Colonial Treasurers when making their financial statements. It has been industriously propogated by the Ministerial press. It is the key-stone, in fact, of the ruinous financial policy of the present and preceding administrations. That fallacy is that heavy taxes are necessary to maintain the colony’s credit in the English money market. It is unblushingly enunciated in the following passage from a leading article in

one of the Wellington papers. “ Many are grumbling,” says our contemporary, * that they are so heavily taxed, but it is necessary if the credit of the colony is to be maintained abroad.” The writer would thus wish his readers to believe that sound credit is the natural consequence of heavy taxes. A more pernicious fallacy could not well be propafated, and so long as it is accepted by ie public, a reduction in the taxation of the country cannot be expected. Fortunately it is so far from being true, that heavy taxes create credit, that it is the very opposite of the truth. It is obvious on the face of it that if with heavy taxes'a country has to borrow from the foreign capitalist the circumstance alone is rather calculated to decrease than increase the credit of that country. Heavy taxes indicate a reckless expenditure, and a reckless expenditure whether by a country or an individual is not calculated to increase its credit, but to have a very opposite result. The colony’s credit would not be less but greater if its burdens had, by a diminished expenditure, been reduced one-half, instead of being increased in that proportion. It would have this effect not only in the eyes of intending emigrants, which would in itself be a most important consideration ; but it would have this effect on the London money market. Heavy taxes may render loans unnecessary; but if with heavy taxes loans are needed, it is a proof of financial mismanagement, and financial mismanagement whether by a government or firm, does not usually increase its credit. The truth is the credit of the colony at this moment in the London money market is not the result of its heavy taxation, but it arises from causes with which our policy has had no connection, and over which our much belauded Finance Minister has not exercised the slightest influence. Let us for a moment turn back to the article from which wehave already quoted. The writer concludes that the knowledge that the Government was no longer striving to meet current expenditure by future liability was the most cogent reason for this new 'confidence. This circumstance, we will show, had but little or nothing to do with the fact recorded. The very sale of the debentures would indicate that the Government was striving to meet current expenditure by future liability; but we are not inclined to put much stress on this point. It is not the credit of this colony alone which has risen in the English money market. The colony of Victoria has been equally fortunate. The last mail brought us the intelligence of a disposition on the part of English investors to patronise the continued issue not only of New Zealand but of Australian debentures. The credit of the colony of New South Wales, where the taxation is as nothing compared with New Zealand, is much higher at home than is the credit of this colony. The “ Sydney Morning Herald ” only a few days ago, in reference to the altered opinion of the Stock Exchange says, in speaking of New South Wales, “ There is now a prospect of obtaining as much money as we can reasonably require at a rate of interest not disproportioned to what is asked of other borrowers similarly circumstanced.” The fiscal policy of the Government of New South Wales is totally unlike that which has been adopted here. The taxes, as we have said, are not half so heavy, but that colony equally with this is now favorably looked upon by English investors. The truth is neither the policy of our Ministry nor the opposite policy adopted by the Ministries of New South Wales and Victoria have had anything to do with this altered tone of the English money market: Before the panic there was a severe competition amongst borrowers, and those who were supposed to offer the best terms had the preference. Since the panic there is a competition amongst investors in India Stock and Colonial Government securities, the numerous other sources of investment which previously existed having by the panic either been dried up or rendered totally ineligible. Our credit is good at home and we rejoice at it; but it is clear that the fiscal policy of the Governmentis not the cause of it. That policy if persisted in will not attract but repel capital and labor and it is by capital and labor only that the resources of a colony are developed and its creditplaced on a sound foundation.