LOAN BASIS

Waikato Times, Volume 127, Issue 21228, 26 September 1940, Page 8

LOAN BASIS

CONTRIBUTIONS FOR WAR MINIMUM SUBSCRIPTION RAISING AT LEAST £8,000,000 2 1 PER CENT FROM 1943 (By Telegraph.—Press Association) WELLINGTON, Wednesday The Minister of Finance, the Hon. W. Nash, announced tonight that arrangements had been completed for the issue of a war loan locally, and prospectuses would be available throughout the Dominion by the end of this week. “As has been previously indicated, war expenditure during the present financial year is estimated at about £38,000,000, of which approximately half will be in New Zealand and the other half overseas,” said Mr Nash. “Of the amount required to be raised in New Zealand, special taxation is estimated to provide £14,000,000, leaving approximately £5,000,000 to be raised by loan. In addition to this £5,000,000 is needed for local requirements. As pointed out in the Budget, we must endeavour to raise within New Zealand some portion of the amount required to meet expenditure abroad, thus relieving as far as possible the drain upon the resources of the British Government. First Interest Paid In 1944 “The present loan issue is estimated to provide a minimum of £8,000,000,” continued the Minister, “but, as set out in the prospectus, persons who have already contributed free-of-interest loans will have the option of converting them into this issue. Persons who have made gifts to the War Expenses Account may reduce their contributions to the loan accordingly.” The prospectus provides for the issue of Government stock, which will be non-interest bearing to October 1, 1943, and will thereafter until October 1, 1953, when the principal is repayable, bear interest at per cent per annum. The first interest payment of £1 5s per cent will be made on April 1, 1944, and thereafter payments will be made half-yearly. Any stock issued to an applicant in the terms of the prospectus' will be accepted at par at any time before maturity in payment of death duties in respect of an applicant’s estate. The price of the issue is £IOO per cent and is payable as follows:—On application, £3O per cent; on’December 16, 1940, £4O per cent; on March 25, 1941, £3O per cent. The loan is being raised in accordance with the provisions of the New Zealand Loans Act, 1932, whereby interest and principal are a direct charge on the public revenues of the Dominion. Applications for the issue of stock will be received by the Reserve Bank of New Zealand up to October 18, when the loan will close. The Minister has indicated that for the purposes of the Finance Emergency Regulations, 1940 (No. 2), he will not regard any person as having subscribed in due proportion to his means unless such person has subscribed to this loan at least the amount of income tax payable by him in respect of income derived during the year ended March 31, 1939, being the tax normally payable in February, 1940, decreased in the case of individuals by £SO, and in the case of companies by £7O. For the purposes of computing this minimum subscription, which must be calculated to the nearest multiple of £lO, any income that was free of income-tax in the hands of the recipient shall be deemed to have been subject to such taxation. Tax-Free Income Included Tax-free income which would be taken into account in this way includes dividends, other than those from companies incorporated in New Zealand, interest from tax-free Government stock and from tax-free company debentures, tax-free income derived from abroad, and also farming income where the land used had an unimproved value of less than £3OOO.

The Trustees Act, 1908, authorises trustees to invest in Government securities, and special provisions affecting trustees are contained in regualtion 20 of the Finance Emergency Regulations, 1940 (No. 2), the effect of which is that no obligation or limitation imposed on any trustee by virtue of any trust instrument or otherwise shall prevent or excuse him from compliance with any direction, notice or requirement under those regulations. Copies of the prospectus and forms of cash application will be available within a day or two at the Reserve Bank, Wellington, the district Treasury offices at Auckland, Christchurch and Dunedin, at any postal money-order office, or from members of any Stock Exchange in the Dominion, but neither banks nor stockbrokers will receive any commission for their services in connection with this loan. Generous Response Hoped Commenting on the issue, Mr Nash stated that, wnile all were expected 10 contribute a minimum in accord with their means, the prospectus was a general invitation to everyone to assist the war efforts by subscribing as much as possible. “I hope,” he said, “there will be a generous response to the invitation to subscribe to the loan, the proceeds of which will be used solely for equipping and maintaining our armed forces in the Dominion or overseas and other war purposes.”

Regulation 14 of the Finance Emergency Regulations, 1940 (No. 2) states: “(1) If the Minister has reason to believe that any person has not subscribed in due proportion to his means to any loan for the time being authorised to be raised by the Minister for the purposes of the

War Expenses Account established under Part 1 of the War Expenses Act. 1939 (hereinafter in this regulation referred to as a war-purposes loan), the Minister may, by notice in writing under his hand or by successive notices, require that person to subscribe to that loan, within such time or times as may be specified in the notice or notices, such amount as may be therein specified.” HELP FROM BANKS FACILITIES TO CUSTOMERS (13y Telegraph.—Press Association) WELLINGTON, Thursday From inquiries locally it is learned that the banks have not at the moment considered what measure at assistance they will be prepared to offer those subscribers who may be compelled to take up war bonds, but it is understood the banking system will afford all reasonable assistance and facilities to customers to enable them to subscribe.

HARDSHIP FEARED

COMPULSION IN LOANSTOCK EXCHANGE COMMENT “SPECIAL INCOME TAX” (By Telegrnpn --Press Association) AUCKLAND, Thursday The war loan terms were condemned as too drastic by the chairman of the Auckland Stock Exchange, Mr J. W. Frater, who said compulsion would have an adverse psychological effect and result in considerable hardship on business and industry. Compulsion had not been tried in any other part of the Empire so far and was equally unnecesssary here. The terms were a blow at the patriotic incentive which was strong in New Zealanders’ hearts declared Mr Frater. The restriction on death duty clause would have the effect of weakening the market for scrip, thus compelling holders who had to sell to accept loss. He considered that a straight-out loan at 2£ per cent, involving £200,000 yearly interest would have met with a splendid response, and would have obviated a great deal of hardship. “Special Income Tax” “What has been done is in effect to levy a special income tax on those who in February. 1940. paid over £SO of income tax,” sajd Dr. H. A. Cunningham. an authority on taxation. It was not merely a loan because the stock received in exchange, being free of interest for the first three years and afterward carrying a low rate, was probably worth little more than half its face value. That represented a serious added burden in the case of many taxpayers, particularly business people, who had been recently assessed under the new provisions relating to the valuation ol stock-in-trade.

Dr. Cunningham pointed out that in the case of previous loans taxpayers coul $ appeal to a specially constituted board of appeal and afterward to a judge of the Supreme Court. It was now left to the Minister of Finance to decide whether a person had subscribed in due proportion to his means.