STILL MORE TAXES

Wairarapa Times-Age, 2 August 1939, Page 9

STILL MORE TAXES

(Continued from page 5.) There is a heavy increase in the cost of defence, toward which the votes for the three services on the Consolidated Fund have been increased by £1.114.000. Tile various increases referred u> have been offset to the extent of £185.000 by a net decrease of this amount in other votes, leaving a net aggregate increase in the estimated Consolidated Fund expenditure of £2.270,000. SHRINKAGE IN REVENUE.

On the revenue side of the account there is a total net shrinkage estimated at £822,000. The importation of raw materials in preference to finished goods under the import selection policy will, it is anticipated, reduce Customs duties by £1.650.000 in comparison with last year's receipts. The yield from income tax at the existing rates is estimated to return £705.000 less than for 1938-39, while the revenue from stamp and death duties is anticipated to be lower by £130.000. Against these reductions are offset an increase in railway interest of £500.000, while other items have been increased by £1,163.000. of which £990,000 represents the profit derived from the issue of our own silver coins. These, with other minor increases and decreases, are estimated to reduce the total revenue by the £822,000 referred to.

Allowing £200.000 for supplementary estimates and contingencies, the budgetary position is:— £ Expenditure 38.243.000 Revenue 35,760.000 Leaving a shortage of £2.483,000 TAXATION INCREASES. In arriving at these results the expenditure estimates have been carefully overhauled, while, on the other hand, every endeavour has been made to arrive at as accurate an estimate of the revenue as possible. The position therefore is that we arc faced with the problem of increasing the revenue from taxation by £2,500,000. The problem is not an easy one, and the Government nave given very careful consideration to various alternatives in order that the additional burden might be so placed as to bear as lightly as possible upon the people. To meet the position it is proposed to obtain a further £1,000,000 from income tax, £200.000 from additional death duties. £300.000 by increasingbeer duty from Is 3d to Is 9d a gallon, and £1.000.000 through raiding the petrol tax by fourpence a gallon. THE NEW INCOME RATES. For individuals the present rate of income tax is Is 8d in the pound, increased by 1-100th of a penny for every pound of taxable income up to £5500. and thereafter by 1-150th of a penny up to a maximum of 8s 2d in the pound for earned income. On unearned income these rales are increased by onethird. To obtain the additional revenue it is proposed to increase the basic raje by fourpence, making it 2s in the pound, and to continue the graduation beyond £5500 at l-100th of a penny instead of 1-150th of a penny, as at present, up to a maximum of 8s 7d in the pound reached at £7900. At the same time the amount of the general exemption will be reduced from £2lO to £2OO. This will have the effect of bringing within the scope of the tax a few more single men without dependants and of increasing the taxable balance of all other taxpayers by £lO. In regard to companies, the basic rate is to be raised from Is to 2s in the pound to bring it to the same level as proposed for individuals. The rate ol graduation, however, is to be reduced from the present rate of l-100th of a penny in the pound up to £5500 and l-150th of a penny thereafter up to a maximum of 7s 6d in the pound to a rate of l-125th of a penny in' the pound up to a maximum of 7s lid reached at £8875. HIGHER DEATH DUTIES. To obtain the £200.000 from death duties, it is proposed to increase the scales for estate succession and gift duties by approximately 20 per cent, discontinue the present exemption of £lOOO for life insurance moneys, and slightly reduce the present exemption for estates passing to widows.

The life insurance exemption was introduced in 1925, but experience has shown that there is no real justification for it, and it is not granted in Great Britain or in any of the Australian States. Concerning the exemption to widows, the present allowances are £5OOO in respect of estate duty and £19.000 for succession duty . The exemptions now proposed arc £3OOO plus one-third of the difference between this and the amount of her succession up to £4500. making a limit of £3500. In the case of succession duty the proposed exemption is £5OOO plus a third of the difference between this amount and the amount of her succession up to £lO.OOO. making a limit of £6666 13s 4d. Even with all these adjustments. death duties in New Zealand on estates below £5OOO arc appreciably lower than those charged in Great Britain or in the Australian States. Statistics show that the great majority of estates in New Zealand are for amounts below £3OOO, and ii such an estate is left to a widow no duties arc payable. In regard to the proposed increase in beer duty Mr Savage mentioned that the rate was Is 6d a gallon in 1934. but was then reduced to Is 3d.

MEETING DEFENCE COSTS

Most of the additional revenue required is to be obtained from income tax on the one hand and petrol tax on the other. The former is regarded by the Government as the appropriate field for providing for normal expansion of State activities, while the latter is considered in the light of a special contribution towards the additional heavy costs of defence. Petrol tax has been chosen because, directly and indirectly, it roaches every section of the community and all should share in the cost of defence. The tax has the merit, of pressing much more lightly upon large families than oilier forms of indirect taxation and a good deal of it is in the nature of a luxury tax. The rates of the mileage tax imposed by section 4 of the Motor Vehicles Amendment Act. 1934-35. upon motor vehicles using motive • power, other than petrol, such as Diesel oil. will be increased correspondingly.