MONEY & GOODS

Wairarapa Times-Age, 31 August 1940, Page 9

MONEY & GOODS

DANGERS OF DISTURBING BALANCE

EMPHASISED BY MR COATES.

WAR SAVINGS AND EXCESS PROFITS.

(By Telegraph—Press Association.)

WELLINGTON, This Day.

A warning that if the volume of consumable goods’failed to keep pace with the national income, New Zealand would find itself in difficulty, was given by Mr Coates (Opposition, Kaipara), when discussing taxation on the issue of National Savings Bonds in the House of Representatives yesterday. When Mr Coates suggested that the interest to be paid on the bonds would be 3 per cent, the Minister of Finance, Mr Nash, nodded his head. Mi’ Coates said he took it that if the national security tax disappeared at any time, provision would be made to adjust the tax already paid on the bonds. Mr Nash: “Yes.”

Ordinarily, the bondholder would pay taxes each year, but the clause in the Finance Bill collecting the tax on issue of the bonds appeared to be a very ingenious way of collecting taxes years ahead, Mr Coates said. The Minister of Supply, Mr Sullivan: “Ingenuity seems to be a characteristic of Ministers of Finance.”

Mr Coates pointed out that the money invested in the bonds would already have paid taxation. The increase in national income last year of £12,000,000 was fine as far as the tax gatherer was concerned. If the national income rose, and consumable goods were allowed to fall behind, the country would have rising costs and prices, more pounds and less value. There was a job of work ahead to keep a balance, or as near a balance as possible.

Mr Sullivan: “This takes it out of circulation.”

Mr Coates replied that the money was going to be spent by the Government. The question was immediately raised whether money could be better spent by the individual than by the Government.

When discussing a clause dealing with companies, Mr Coates said company taxation was practically doubled, and prices fixed. Increased taxes could come only from profits. The danger was that the Minister of Finance might find himself mighty short of money. The goods in stock and on the shelves must gradually disappear, and less taxable income would be available.

Mr Sullivan: “There is a set-off in the rapid development of our own production.”

Mr Coates: “It is the restriction of imports which brings down the amount of available goods determining the amount of the national income. While wage earners may think they are getting high wages, increased costs and prices for their essentials and taxation on top mean that they will find limited goods available to them.” “We are in the position today that money is urgently required for war purposes in particular,” said Mr Coates. “Some companies have apparently attempted to escape the effects of the taxation passed in 1939.” Mr Dickie (Opposition, Patea): “Not in all cases.”

Mr Coates said the question was whether it was right or fair that the companies should pay as originally intended. It would be discovered that in certain large .companies the dividends would drop from 7 or 8 per cent to 2-J per cent. That would hit hard the class which depended for its income on those companies. Mr Nash: “Only two companies are affected.”

Mr Holland (Opposition, Christchurch North): “Is there pot one in Christchurch?”

Mr Nash: “No. This is to stop it in the future, in the main.” Mr Coates said the public had had confidence in the companies and the reduction of dividends would affect the people very badly. Mr Nash: “It shows the extent to which they were avoiding the payment of taxes.”

The opinion that it would be better to have a concise Bill dealing with excess profits taxation than a measure which had to be altered afterward and caused disturbance and misunderstanding was expressed by Mr Coates. The intricate measure would break new ground, though there was an excess profits tax in the last war. Mr Nash: “It lasted only a year.”

Mr Coates: “I hope this one won’t last even a year. Is the tax to be for the war or after?” “Only for the war,” replied Mr Nash, “and only for those who make profit out of the war.”