SALES TAX.

Auckland Star, Volume LXIV, Issue 31, 7 February 1933, Page 9

SALES TAX.

COATES' DILEMMA.

WILL CAUCUS AGREE ?

RAISING FARMERS' COSTS.

another TEST OF "LOYAETY"

(By Telegraph.—Parliamentary Reporter.) WELLINGTON, this day. Although the Coalition has negotiated its exchange hurdle, it still has to face another barrier, the very eight of which may produce within the party's ranks a crisis so grave in political consequences ae to cause the recent situation to pale into insignificance. This obstacle is the sales tax. No political party, however secure on the Treasury benches ib may be, likes the-idea of imposing or increasing taxation, especially when the impost is to be one of which the people have no experience. However, with the present prospective Budgetary outlook the Finance Minister is faced with the unpleasant necessity of utilising all taxation devices'to help make up the anticipated shortage in revenue for 1933-34, and the introduction of a sales tax is part of Mr. Coates' taxation programme. The Uncoated Pill. Under ordinary circumstances the expected opposition to this measure of indirect taxation would not, be sufficient to .stay the Ministerial hand. If the object of the legislation were to obviate the. 'necessity of another straightout wages cut, or to conserve reserves and direct taxable capacity, it is reasonable to assume that it would receive the support of the rank and file of the party concerned. Objection might be taken to the complicated nature of the legislation, and the fact that it involved increasing the cost of living, but there the criticism in normal times would probably end. In the present instance, however, the position is entirely different, and Coalition supporters are being asked, to swallow & pill without the sugar coating which enclosed the high exchange. The sales tax is favoured by Cabinet becatise there is' no other stronger revenue producer to be found in what remains of the taxation field. It really represents" the last desperate throw of the Treasurer's dice, but, following so closely in the wake of the exchange inflation t decision, it is likely to find many of the members of the party in a highly- embarrassed position. Some supporters of the Coalition voted with the Government on the Indemnifying Bill out of party loyalty, the majority because they believed that exchange manipulation would bring immediate arid substantial relief to the primary producer. Will the same support be accorded a - measure that will mean increasing the costs* of the farmer, even though its adoption is due in a measure to ;tfc« burden/which' the- increasing of exchange rates has imposed on _New Zealand's external debt service? Upon the answer that question' ultimately receives will largely depend the security of the Coalition administration. Ministers Apprehensive. So fiar caucus has not discussed and analysed the sales tax proposal, and until members have had an opportunity of fully considering the. concrete scheme it would be futile to attempt to forecast with accuracy the course events are likely to follow. Nevertheless it is known that Ministers are apprehensive as to the reception caucus will give the sales tax idea, although there is no willingness in official circles to predict that a "stand or fall policy" with respect to this measure' will be adopted. On the other hand, observers find it difficult to see how Cabinet, with it« knowledge of the limited nature oi revenue-producing sources, can do othei than insist on support for a device which it is estimated will yield at least a cool million towards the • £2,400,00€ uequired. "In addition, the country's reactions tc the report that sales tax legislation is under consideration have been the reveree of encouraging, notwithstanding that no details of the method of operation or application of the tax were given. Already letters of protest Tiave been pouring into the Ministerial mail bag, which has been a receptacle alsc for numerous, requests from different interests for the inclusion of certain lines on the exemption schedule. Fate in Its Hands. On the evidence available it would appear that if Cabinet decides that, irrespective of opposition, the sales tax must be sponsored as a major item oi policy, then it will take its_ fate in its hands. In the end, as was the case with the high exchange, Cabinet maj secure a majority. The first and the most vital step ahead of Mr. Coates however, is to "sell" the sales tax idea to the Coalition caucus.