The Press THURSDAY, SEPTEMBER 28, 1961. Suggestions Of Tax Increases

Press, Volume C, Issue 29630, 28 September 1961, Page 14

The Press THURSDAY, SEPTEMBER 28, 1961. Suggestions Of Tax Increases

The Canterbury Manufacturers’ Association has, not surprisingly, come to the support of the president of the Canterbury Chamber of. Commerce (Mr R. H. Clark) in his hope that the Government will resist the growing advocacy of increased taxation or other fiscal restraints on inflation. On balance. “ The Press ” shares the opinion of these two organisations that the Government should give its other economic policies time to work, though we wish we could share the confidence of some of their members. The plain facts are that internal demand is too high, that New Zealand as a whole is living beyond its and that our overseas reserves have so nearly vanished that heavy borrowing is necessary to maintain national solvency. It follows that any attempt to correct this situation, any attempt to reduce internal demand, must hurt someone, and that that someone is as

likely to be a manufacturer or a commercial man as anyone else. The Government’s responsibility, of which it seems aware, is to spread the sacrifice as equitably as possible so that no-one is hurt too much, though all may be hurt a little. The danger is that in giving effect to this principle the Government may not act resolutely enough, to the ultimate disadvantage of everybody. If its policy of gradualness is to work the Government will need the cooperation of everybody. High rates of taxation, for which the present Government is not responsible, and particularly the excess retention tax, which it has modified, have discouraged trade and enterprise from ploughing back as much into their enterprises as they might have wished. But has management in every case pursued a sufficiently prudent policy in' the face of this discouragement? Manufacturers could ask themselves how far they have contributed to

the run-down of overseas funds by supporting the expansion of industries under the shelter of import control. All businesses should consider how far this shelter and general prosperity have led to any slackening in the search for efficiency. The Manufacturers’ Association now finds merit in import control not as a protective device but as an instrument of deflationreducing overtime payments, above-award wages, and generally an uneconomic demand for labour. Import control does not yet seem to have had much effect on internal demand, judging by the latest retail statistics; and it is a roundabout way to cure the ills it helped to cause in the first place. Far more effective is the credit squeeze, which is beginning to show results, though, unfortunately, -at the expense of bankers’ freedom to exer cise their commercial foresight. The effects may be increased now that taxpayers are under notice not to depend on overdrafts for the payments due next March. They will have to start saving now; and that will be an incentive to them to watch their spending. The second major remedy of the Government is in reducing its own expenditure and in encouraging other public bodies to do the same. The most spectacular illustration of this policy is the closing of the uneconomic Maraetai power project, with a substantial release of labour to reduce the pressure of overfull employment. The Government has a duty to help the Mangakino community over its immediate difficulty (which would have come in a year or two in any case); but it would have failed in a much wider duty if it had wasted £2 million merely to put off the evil day. That is the kind of decision that businessmen and individuals, no less than the Government, are faced with in New Zealand's present economic troubles.