SALES TAX.

Press, Volume LXIX, Issue 20776, 9 February 1933, Page 10

SALES TAX.

A 5 PER CENT. IMPOST. s METHOD OF COLLECTION, n ii _ 0 E MINISTER EXPLAINS PROCEDURE j t - i [From Oitb Parliambntart Reporter.] WELLINGTON, February 8. ' i The procedure to be followed in t tho assessment and tho collection of I the sales tax was explained fully a by tho Minister for Customs, Mr I Coatcs, in his speech in the House t of Representatives to-night. 1 8 Tho tax is to be at the rate of 5 y per cent., and it is to be collected a on sales from wholesaler to re- t taller, and not on sales from retailer to the consumer. i t Mr Coates said: It is unnecessary for ( me to say that no Government likes to r adopt a new system of taxation, especi- E ally in the times through which we are ; now passing. It is, however, a fact E that the existing methods of obtaining t the public revenue are not producing the j results which are necessary. The Gov- j isrnment has given very careful consid- { (■ration to the different systems that may be adopted for collecting increased ) revenue, and has been driven to the oon- J rlusion that the best remaining method is by means of a sales,tax. This sy.v , tcm, although new to New Zealand, has < been in force for varying periods * Canada, Australia, and certain Contiii- j cntal countries. As would be expected, j the procedure adopted by different Gov- , emmcnts varies according to the local 1 conditions. Tho principles which tho I Government proposes to follow in New ' Zealand have,been based upon tho leg- J illation of other countries, but modi- ; tied to suit the circumstances of this Dominion, j In considering the Bill which the Government will lay before tho House , for collecting the sales tax, I would ask boa. members to remember that I fully 1 recognise that it is desirable that the 1 details should be discussed with the mercantile and manufacturing communi- ] ties ®o that the procedure proposed : might, if possible, accord with commer- * rial practices. Those interested would have been consulted before the Bill was j introduced had this been practicable. 1 It will be evident that this could not be dome, but when tho Bill is introduced 1 tlx# Government will be glad to obtain : from those concerned any information ! and advice that will render the adminis- ' tration of tl»o Act a,j little irksome as : possible while at the same time achicv- - ing the objects aimed at. It is proposed that the sales tax is to bo collected by (ho Customs Department, and I should like before going further to correet arty misapprehension that might arise in the public mind that the sales tax , proposed by the Government is a species of Customs taxation. The essence oi a , Custom* duty is that it is levied only upon goods imported,into New Zealand, while tho sales tax now proposed is to be paid on goods sold in the Dominion, whether imported or not. Bringing the Tax into Force. It will bo evident that if tho sales tax were brought into foreo in the ordinary way, i.e., after the Bill had "been passed by Parliament, an opportunity would bo afforded to merchants to dispose of goods before the ' ix became effective. As this would lead to a considerable loss of revenuo, it has been decided to bring the sales tax into foreo immediately by means of resolutions of the Committee of Ways and Means. . Varying Forms of Sales Tax. There aro various methods by which the sales tax may be collected. c.g., it might bo charged when goods aro sold to the consuming public. On the other hand, it may be levied when tho goods aro sold by wholesalers to retailers, with a special provision made for goods manufactured and imported by retailfirs. A gain, it may bo charged on each ficcasioa on which a sale occurs. By the last-mentioned means n. sales tax may bo charged many -times on the ' same goods. The Government has carefully considered the various methods and is of tho opinion that tho socond one, being in effect that in force in Canada And Australia, is most suitable for the conditions existing here. . Basic Principles. The main features of the sales tax proposed by the Government are the following:— {!) The tax ii payable on tho wholesale selling value or on a valuo as near to that value as can b< assessed. (Later on I will explain this in more detail.) (2) For the purposes of the sales tax traders.are.regarded as forming two classes, wholesalers and retailers. Manufacturers (other than retail manufacturer*) ore t.o bo put on the same footing as wholesalers. No doubt difficulty will arise in dealing with many firms who are both wholesalers and retailers, but provision will be inndo in tho Bill which will, I think, satisfactorily meet this position. (3) The tttfc is payable when sales aro rnada by wholesalers, including manufacturers, to retailers or consumers, and net when sales aro made by retailers to consumers. When, however, goods are manufactured by retailers (who for the purposes of the sales tax are called manufacturing retailers), or imported hy them, the tax is payable at the time of manufacture or of importation. (4) No sales tax is payable when goods are sold by wholesalers to other wholesalers, or to manufacturers who are not retailers. Similarly no tax is payable when goods are sold by manufacturers to other manufacturers (not being retailers) or to. wholesalers. (5) It is not proposed to make the tax payable on goods imported by private persons for their own use and not for resale. In any case it is considered that tho cost of - collection and the harassment that would bo caused to parsons receiving small parcels from abroad would mere than outweigh any WVflnuo which might -be obtained. (U) Provision will, bo mado in the (till for the .exemption from the tax of » largo number of classes of goods. _ Amount Expected to be Collected. Th® rilte of tax to be charged depends upon 'tho amount of revenue required %y tho Government from this source. In Australia therato ia, T understand, now ftted 3fc 0 per cent. This also is the rate in Canada. The Government has decided ).<» silopt 5 per rent, as the rate in New Zee hud with a deduction of 5 per cent.

of the, amount due when prompt payment 13 made. -It is expected that in a full year the amount which will be collected from the tax at the rate fixed is £1,500,000. Procedure for Collection. It is " evident that the introduction of a new system of taxation, such as a sales tax, will cause some inconvenience to tho commercial community, but as I have indicated, every effort has been made to reduce this to a Ininimum, and I.feol sure that commercial men will do their best to assist tho Governme'nt in this matter. Among the more important provisions necessary for the collection of the tax are the following:— (1) Every wholesaler and manufacturer (including retailers who manufacture goods for sale) will require to be licensed before March 31. A small fee not exceeding £1 will be payable on tho issue of the license, but it is not proposed to have annual licenses or annual fees. If a licensee carries on business at more places than one in tho Dominion one license only will be required, and one fee only will be payable. It is proposed that tho places at which the licensee carries on business should bo shown in tho license or subsequently ' endorsed thereon. (2) All wholesalers (including manufacturers other than retail manufacturers) aro required to deliver to the Collector of Customs for the district, not later than the 28th day of each month a return showing (inter alia) the sale value of goods sold by them during the preceding month, and at the samo time pay the sales tax duo on those goods. The first return required will be for tho poriod commencing on February 9 and ending on March- 31, heneo this return will be due not later than April 28. (3) All manufacturing retailers a ,- e required to deliver to the Collector of Customs for the district riot later than tho 28th day of each month a return showing (intor alia) the sale 3 value of goods manufactured by them during the preceding month, and at the samo time pay the amount of sales tax due on those goods. In determining the amount of sales tax due the manufacturing retailer will be allowed to deduct tho amount of sales tax shown to have been paid on materials used by him in manufacture, whether imported by him or purchased from wholesalers. As in tho case of wholesalers, the first return will be for the period ending oo March 31. (4) All'retailers (including manufacturing retailers) will be required to pay tho sales tax on goods imported by them when tho goods are entered at the Customs for home consumption. (5) The sale value of goods sold by wholesalers and manufacturers (other than manufacturing retailers) is to be the value at which the goods are sold when sales are made by wholesalers to the general public. Provision is made for payment of the sales tax on an assessed wholesale value. (6) The sale value of goods made by manufacturing retailers is to bo the fair market value of tho goods if *thsy were sold to a retailer. (7) Tho sale value of goods imported by retailers (including manufacturing retailers) is tq be the value for duty, plus the ant?, and in -addition 20 per eent. of;the /tptal. . The.object of this: procedure is'to° bring the sale value as nearly as practicable to what would ba the selling price to a retailor. (8) If'the collector is satisfied as to the correctness! of the returns furnished by licensees ho is authorised to accept tho same and assess the sales tax accordingly. (9) If tho collector is not satisfied as to the correctness of the returns ho \a authorised to assess the sales tax at such amount as he tliinks proper. . (30) From any assessment of sales tax made by the collector there is a right of appeal td the Minister or to the Court. The Minister may himself hear the appeal or. may for this purpose appoint a delegate who need not be a Government official. (11) Provision is made for dealing with various special circumstances or conditions which may arise, e.g., persons leaving New Zealand without paying the tax, the collection of the sales tax due by defaulting taxpayers from moneys owing to them, the cases of companies in liquidation or being wound up, and the tax owing by deceased persons' estates. . , ' (12) Provision is made for refunding the sales tax over-paid and for tho drawback of the sales tax paid ' on goods which are afterwards exported. Penalty for Late Payment. It is proposed that when the tax is not paid within two months after the ' due dato of payment a surtax of 10 1 per cent, should be imposed. I may say | that in some countries when a licensed wholesaler orders goods another wholesaler he quotes his license ! number on the order for tho goods and , gives a certificate that they are for rcsale by him. Such goods are then ex- . empt from the sales tax in respect of the transaction between the two wholo- [ salers, the tax being collected when the goods are sold to a retailer. In the circumstances of. this Dominion this provision is regarded aa being somewhat Cumbrous, and, to assist the mercantile £ community H is proposed to gazette j and issu,e to licensees lists of persons who «Te Itterised' under the Act. The . sales tax will not" be .payable when ■ sales arc made by wholesalers to other . wholesalers mentioned in these lists. It is hoped to place tho Bill before members during the next day or two.