8.—5

92

W. GOW

There is the question of ability to pay ? —The question of ability to pay comes in. The people would probably rather pay indirectly, through the company taxation. I think Mr. Clark was only estimating when he made that statement. Ido not think it was the result of a close investigation. But if it still be true that such would be necessary, well, I do not think that any Government would do it, and it is not within the region of practical politics. But I say, as a matter of equity, as a matter of principle, that the Government ought to contemplate doing it as soon as possible. The Chairman.] You adhere to tho view expressed in the majority report, to which you were a party ?• —Yes, I hold to that view.

Dunedin : Thursday, Ist May, 1924. Arthur Clothier examined. The Chairman.] I understand that you were for many years in the Valuation Department ? —I commenced in the property-tax Office in 1883, and, with the exception of a brief break of some five or six years in my service, I was there continuously until I retired in 1918. For twenty-five years I was in charge of the Otago and Canterbury district, principally Otago. After my retirement 1 commenced practice on my own personal account as a valuer, and have made my special business the preparation of land-tax and income-tax returns. You have made a study of land and income tax, have you ? —I have made it my hobby. Have you prepared a written statement setting forth your views ? —Yes, sir. It is as follows : — First, I would call attention to the land-tax imposed on lessees Under section 52 of the Land and Income Tax Act, 1923, which reads as follows : " Any person owning any leasehold estate shall be deemed for the purposes of this Part of this Act (though not to the exclusion of the liability of any other person) to be the owner of the fee-simple and shall be assessed and liable for land-tax accordingly. . . . The provisions of this section shall not apply to leasehold estates in any land of the Crown, or in any Native land, or in any land vested in fee-simple in any person who in respect thereto is wholly exempt from land-tax." The effect of this is that any person who leases land from a private individual has the unimproved value of such land added to the unimproved value of his own freehold, and is charged graduated land-tax on the total of the two, less the amount of land-tax, if any, payable in respect of such leased land by the owner thereof (see section 2). The following is an actual example of the working of this section : A owns land of the unimproved value of £9,345, and leases from B, C, D, and E other lands the unimproved value of which is £39,515, and is charged tax on the total, £48,860. This amounts to £690, less the tax paid by B, C, D, and E, £414, so that A has to pay the balance, £276. The graduated tax on his own freehold (£9,345) is £55, so that Ais actually paying £221 on his leasehold land, the tax on which has already been paid by the owners. The charge in this particular instance is equal to Is. 4d. per acre on the area A leases. I consider this double taxation to be inequitable, and that the section (which was originally introduced in the Finance Act, 1917), should now be repealed. I may mention here that in the preceding year the tax was £550, and in the year before that it was £350. The difference is due to the difference in the rate. The provisions of the Act so far as land-tax is concerned are, to say the least, very intricate, and I believe that a straight-out land-tax at a flat rate on both town and country lands would give more general satisfaction to the taxpayers as well as being simpler in administration and collection. My experience tends to show that (apart from a laudable desire to pay as little as possible) the taxpayer does not object to pay so long as he feels that his neighbour is doing the same. With regard to income-tax, I do not think there would be much, if any, objection on the part of the farming community to pay a small tax at a flat rate, deductions, of course, being allowed for mortgage interest and other expenses as already provided for in the Act for businesses other than farming. And any objection that does exist might, I think, be largely removed if more stringent measures were taken to enforce compliance with the obligation to make returns. Apparently the minimum penalty provided for in the Act (405.) does not act as a deterrent, and should, I think, be substantially increased. The cases of non-compliance are numerous, and in some instances flagrant, and afford good grounds of complaint from those who comply with the law. As regards the payment of income-tax by companies, I personally see no reason why in this respect companies should be -placed on a different footing from any other commercial firm or individual. The tax itself when distributed over the number of shares in a company can only come to an infinitesimal sum pier share, and ample provision exists in the Act for the relief of hardship in the case of small individual shareholders ; whilst, on the other hand, it might in many instances prove to the advantage of a large shareholder to have the tax deducted from his dividends rather than to include the dividend in his return. The balance-sheets of companies are usually prepared by officers of reputed knowledge and experience, and, as I have already said, the payment of the tax does not materially affect the individual shareholder, and this method of collection has the additional advantage of being both accurate (the tax being calculated from the balancesheet) and economical and without friction. Mr. Hunt.] You are an experienced land valuer, arc you not ? —So far as the valuation of country lands is concerned, I do not profess to be an experienced valuer, but I have had a large amount of experience in the valuation of town lands. Are you also an experienced business man ? —I have earned my own living during the last sixty years. What at ?--Anything honest. I mean, you have not had much to do with the management of companies ?—I was brought up in one of the largest companies in England—the Great Western Railway.