INCIDENCE OF SALES TAX

Press, Volume LXXI, Issue 21386, 31 January 1935, Page 10

INCIDENCE OF SALES TAX

DECISION OF CITY TAILORS COMMENT BY MINISTER FOR CUSTOMS CONSEQUENCES OF REFUSAL TO PAY % The decision of certain tailoring firms in Christchurch to suspend payment of sales tax pending a reconsideration of the incidence of the tax on the tailoring trade by the Minister for Customs, the Rt. Hon. J. G. Coates, was commented on by Mr Coates in a statement made to "The Press" last evening. Mr Coates said that the position of the trade would be considered by the Customs Department very shortly and that a decision as to the liability of the tailors under the Sales Tax Act would be made probably early next week.

"I am not going to dispute their arguments at present, as there is a proper method of arranging these matters," said Mr Coatcs. "I would suggest that it would be better poliay for them to continue paying the tax. That is not a threat, but I had hoped that they would leave the matter in the hands of the Minister, who knows their position intimately. The retail tailoring trade is having a very bad run and I am very sympathetic with the tailors. Their position is quite exceptional. But if they reach a position where they don't pay, they are almost holding out a threat. I know they do not mean it that way, but it may make it more difficult for me if they take up an attitude which suggests a stand against making payment." Opinion in Christchurcli There appears to be considerable difference of opinion among tailors in Christchurch as to the unfairness or otherwise of the incidence of the tax. At a meeting of master tailors held last Monday it was decided that a letter be sent to the Government stating that the firms represented had decided to furnish returns to the customs as required by law, but that no further tax be paid pending the reconsideration by the Minister as promised to the Dunedin Tailoring Trade Committee. It was reported that the motion was carried with only one dissentient; but enquiries made yesterday show that some representatives of the largest firms connected with tailoring, who were present, and at least one leading master tailor, did not vote on the motion.

One tailor interviewed yesterday said that, personally, he thought that it was fair that the tax should be paid, and that there was no doubt as to the meaning of the act. lie considered, however, that the tailor was often placed in the position of having to pay tax on an article which he could not sell, as when a suit was made for a man who died before delivery was made. Dentists, he said, paid the tax indirectly, as it was passed on to them by the wholesalers from whom they bought their materials; but tailors had to pay tax not only on the materials, but also on the cost of the labour involved in making a suit. Heavy Penalties The manager of one large city firm said yesterday that those who had supported the motion stating their refusal to pay the tax could not have considered thoroughly the consequences. They had thrown away 5 per cent, discount, and had in addition laid themselves open to the penalty of 10 per cent, payable after a certain lapse of time. But there was a further complication. Exercising the immensely wide powers conferred by the Sales Tax Act, the Collector of Customs could collect the unpaid moneys from any firm or person who happened to owe money to the person refusing to pay. Not only could the amount of the tax actually owing be recovered in this way, but a further sum might be claimed to cover payments due at a later date. Collection of outstanding payments had actuallv been made from this particular firm, although none of these had been on account of the tailors' refusal to pay the tax. The manager thought that the unfairness of the tax consisted in the basis of assessment of the sales value on which the tax had to be paid. For the purpose of the tax the labour cost of the finished article was loaded with an additional 45 pei cent. This seemed to be too high a value. An alternative basis, by which the assessment value was the retail price of the article less Yl\ per cent., worked out to the same value as that on the basis of labour cost. There was; however, no doubt that tailors were meant to pay the tax as manufacturing retailers under the act. Meaning of the Act The demands of the Dunedin tailors, who have asked Mr Coates to reconsider the application of the act to tailors, were: "that bespoke tailors be classed as retailers only, not as manufacturing retailers, and paying tax on materials only; and that a refund of the amount already paid as sales tax be made to the payers."

Under the act a retailer is a person, not being a licensed wholesaler, who engages in the trade or business of selling goods. A manufacturing retailer is a retailer who manufactures goods for sale. The tailors contend, it was stated yesterday, that they do not manufacture goods for sale, as the goods are ordered before they are made. They say that they are not manufacturing retailers because, further, their goods have no wholesale value. If they can prove their contention they are not liable for the tax, as the ordinary retailer pays tax only on imported goods; but one tailor said that it was clear that they were intended to pay.