Budget Expected To Announce Tax Increases

Press, Volume XCVII, Issue 28620, 24 June 1958, Page 12

Budget Expected To Announce Tax Increases

(From Out Parliamentary Reporter) WELLINGTON, June 23. If the Budget on Thursday turns out to be one of the most drastic in Parliamentary history, the Government will still be able to claim that people were fairly warned. Durinc the last two months, at least half the members of the Cabinet have delivered warnings of the financial position to come. The pattern being followed by the Minister of Finance (Mr Nordmeyer) is one of attempting to reduce individual expenditure, while keeping Government expenditure in works, transport and electrical undertakings at a high level.

Mr Nordmeyer has the added burdens of having Jo provide for certain increased .social benefits, and to prepare for"the assistance of certain industries “by the approved means and by some which are only in the development stages.” Mr Nordmeyer’s Budget can, therefore, be expected to contain:— (1) Provision for increased taxation, with revised P.A.Y.E. schedules designed probably to operate from September 1. The likelihood is that the increases will most affect those without dependants and earning more than £lO4O a year. (2) The imposition of sales tax on a wide range of goods not regarded as essential, a definition which is likely to produce violent argument. Expected to figure in any sales tax schedules are liquor, cigarettes. imported fabrics, electrical gear. and some machinery. • An impost on motor-cars, for instance, is a strong possibility. (3) Provision for increased taxation on petrol. It is all imported, much of it is now used to duplicate public systems of transport and in the Government view it is a legitimate “luxury” item when used in private vehicles. (4) The implementation of another of the Labour Party’s election pledges. This could be the merging of the age benefit with universal superannuation. It could be an increase in pensions, not a costly matter for the amount of individaul benefit conferred. Somewhat more remote at this stage would be the promised increasing of the family benefit to 15s a week. The capitalisation of this benefit for housing finance is regarded as unlikely at this time, because of the amount of money involved. Devaluation Rumour One early rumour that appears most unlikely to achieve substance was that to improve trade relations, New Zealand currency would be devalued to the level of Australia’s. It is understood that devaluation was not even discussed during Mr Nash’s recent visit to Australia, and that there are “no tags” on Australia’s offer of help. The probability that the tax on petrol will be materially increased is indicated by the fact that the National Roads Board has chosen to wait for the Budget before giving its estimates final approval. This may merely show uncertainty, as any increase is unlikely to be allowed to go to Roads Board use.

The extent to which the Budget will be effective will lie not so much in the amount of money it will bring into the Treasury as in the way it will form and control, the country’s spending. In his report tabled in the House of Representatives during the short session earlier this year, the Secretary of the Treasury (Mr E. L. Greensmith) advised the Government to spend less to balance the decline in available goods. Although Mr Nordmeyer sees its wisdom, the advice is regarded at Cabinet level as negative when a positive solution is needed. The Government recipe is to retain full employment' and increase production. Defence Spending

Defence expenditure is likely to be considerably more than £3 million over last year’s figure. The works and State electricity programmes cannot well be curtailed at this stage, and although a further study- of the power programme has been promised, this is not likely to affect expenditure in the coming year. With exchange allocation and import control now developing to their full effect, the expected sum to be taken in Customs duties during the year must fall. This may have to be compensated by increased Customs duties on the lines that are still coming into the country. The costs still being incurred in bringing the Post and Telegraph Department’s services up to date may have to be met by higher charges.