INTEREST-FREE LOANS

Wairarapa Times-Age, 24 May 1940, Page 4

INTEREST-FREE LOANS

AND WAR GIFTS TO STATE POSITION AS TO TAXATION. STATEMENT BY MINISTER OF FINANCE. (By Telegraph—Press Association.) WELLINGTON, This Day. Taxation questions which have been raised in connection with donations and interest-free loans to the Crown were discussed by the Minister of Finance, Mr Nash, in a. statement issued yesterday. He said that there appeared to be some doubt and speculation as to the exact position, and cnat it was proper that the facts snould at once be made clear to those who desired to assist the Government by making donations of loans free of interest. “Under the existing law, said Mr Nash, no deduction is permissable for income lax or fSocial Security purposes in respect of any donation, regardless of the purpose for which the money is to be expended. If a taxpayer desires to give money out of his income for any purpose whatever, he obviously must determine precisely how much he can afford to give out of the income which he has available for that purpose —that is to say, out of the income remaining to him after he has paid his taxes in the ordinary way. “If an exemption for taxation purposes were allowed in respect of donations, the result would be that the revenue in effect provided part of the gift attributed to the donor. For example, if a person whose income tax rate is 5s in the pound gave £lOO to the War Funds, and was allowed a corresponding deduction in his taxable balance, clearly the revenue as a whole would gain by £75 only. Quite apart from this point, the grant of an allowance of this nature for taxation purposes might result in serious interference with the collection of revenue for ordinary purposes. Having regard to all the circumstances, it does not seem than an exemption in respect of donations can be justified.

“I find that rumours have been current to the effect that persons who lend money to the Government free of interest will be assessed for income tax upon the income which they might have obtained upon the amount of the loan had the money been invested in some other way,” continued the Minister. “These rumours are wholly without foundation. “Persons are liable for income tax only upon income received, and where a person has lent money to the Government free of interest, he receives no income from that loan at all; he is accordingly not chargeable with taxation upon any hypothetical interest or income which he would or might have received had the money been otherwise invested.” “Those taxpayers who are possessed of Government securities or of deposits in the Post Office Savings Bank, and who do not wish to realise their securities may, if they desire to assist in this way, donate to the Government the interest to arise upon their.securities or deposits during the continuance of hostilities, or during such other period as they may care to specify. “The appropriate method of achieving this object will be explained upon individual application to the Treasury, or (in the case of Post Office deposits) to Post Office officials, 1 from whom authority forms may be obtained. Future interest given in this manner will not be assessable for taxation purposes, as the donors have given up their right to interest for the period specified by them, with the result that during that time they derive no income from the sums invested.”