Tax Allowance Aimed To Attract Industry To Coast

Press, Volume CII, Issue 30212, 17 August 1963, Page 15

Tax Allowance Aimed To Attract Industry To Coast

(New Zealand Press Association) WELLINGTON, August 16. The object of the special tax investment allowance for the West Coast was to make it attractive for persons or firms wishing to establish new industries or contemplating expansion to select that area, said the Minister of Finance (Mr Lake) in a statement today.

• The 20 per cent, allowance was announced in the Budget. It is In respect of purchases of new plant, machinery, and buildings for approved projects in the counties of Inangahua. Buller, Grey, Westland and associated towns. Mr Lake said it was intended that this allowance would counter-balance the decline in some traditional industries, notably coal mining, by providing alternative employment for the population and would ensure that housing and other existing services were not wasted. The tax concession was dependent upon the particular project having the prior approval of the Minister, but this did not mean that approval would be difficult to obtain, said Mr Lake. The Intention was merely that there should be some safeguards to ensure suitable and orderly development. “There should be no hesitation in applying for approval if, with the attraction of the tax concession, the West Coast can be considered as a possible site for new or extended activities.

“It is intended to interpret proposals announced in the Budget lit erally, and even if there is doubt about any proposals, there would be no harm in submitting them.” The allowance for the West Coast covered a wider range of plant than th? general 10 per cent, allowance announced in the Budget. In addition, the West Coast allowance might be approved for buildings associated with the project, said Mr Lake. Big Deduction

The effect of the allowance was to permit the taxpayer, in the first year of use of the asset, to deduct an amount equal to 20 per cent of its cost, in addition to all

allowable depreciation. Over the life of an item of plant, assuming it wss eventually scrapped at no value, the total deduction would therefore be 120 per cent, of the cost of the plant, said Mr Lake. In the case of a company paying tax at 10s in the £ a tax rebate of £2OOO would be obtained in the first year of use for an item costing £20,000, giving a net cost of £lB,OOO. In addition, the company would receive the normal deductions for special and ordinary depreciation on the gross cost of £20,000.

In the case of individual taxpayers, the tax benefit from the allowance could be as high as 13s 6d in the £. In which case the net cost of a £30,000 item of plant would be £17,300. Mr Lake said for plant which was subject to ordinary depreciation at 10 per cent, on the diminishing value the combined deduction In the first year of use for ordinary and special depreciation, plus the 20 per cent. Investment allowance, would be 40 per cent of the coat At the end of four years it would be more than 70 per cent of the cost.