“Tax May Cause Rise”

Press, Volume CIII, Issue 30602, 19 November 1964, Page 1

“Tax May Cause Rise”

(N.Z. Press Association) WELLINGTON, November 18. Overseas shipping companies had no case for increasing freight rates because of withholding tax provisions in the Land and Income Tax Amendment Bill, the Under-Secre-tary of Finance (Mr Muldoon) said in Parliament tonight.

He discounted warnings by Opposition speakers that the bill could lead to shipping companies attempting to increase freight rates still further.

Speaking during the second reading debate on the bill, Mr Muldoon said the Government. in effect, would be taking the tax from the British Exchequer rather than from the companies. “Any special concessions they may have with the British Government are no concern of ours,” he said. “What we are doing is taxing them here, instead of letting their country of domicile tax them for income derived in New Zealand.” He said that under the 1956 agreement, which covered the fixing of freight rates, there was no provision for tax paid by shipping companies in either New Zealand or Britain to be included as a cost. BASIC RATE Under the bill more than 800 firms in New Zealand—either branches of foreign concerns, or businesses with 25 per cent or more overseas control —will have to payhigher basic income tax. If they earn more than £3600 a year, they will have to pay Ils in the £ tax.

The Minister of Finance (Mr Lake) said he did not expect an increase in shipping freights as a result of the new tax affecting the shipping companies as they would obtain a refund in the United Kingdom on whatever tax they paid here. A new double tax agreement to be negotiated with Britain would not exclude shipping companies as the last agreement had. While it could be argued that the British refund would be slightly less without a profits tax there, the shipping companies were, in his opinion, possibly going to be better off.

Mr M. A. Connelly (Opp., Riccarton) said the Government was tampering with the legislation because of basic weaknesses in Government policy. Labour policy was to expand national income and increase revenue at existing or reduced rates of taxation. The Government’s election policy was to simplify the tax structure but the bill only made it more complicated. The Opposition would simplify tax laws and the method of collection. The Government had no constructive policy on encouraging foreign investment in a form which was in the best interests of the country. The withholding tax could result in shipping freight rates increasing. This meant the

cost of transporting goods overseas would rise.

Sir Leslie Munro (Govt., Waipa) said that if freight rates were increased it would be the result of slow work on the wharves.

Mr R, J. Tizard (Opp., Pakuranga) asked that the Government had increased taxation for firms which were not domiciled in New Zealand—yet excluded insurance companies.

“Why are life insurance companies singled out for favoured treatment? This is discrimination,” he said. Mr Tizard said shipping companies could attempt to raise shipping costs under th j guise of the increase. “If this happens, we shan’t have got anywhere with the bill,” he said.

Mr N. E. Kirk (Opp., Lyttelton) said shipping rates could increase by £750,000 because of the withholding tax. These charges would be put on the primary producers How was it that charges vital to the country could come as such a surprise to the Government? If the cost of the tax was going to result in such an increase, the £750,000 accruing to the shipping companies must have been overlooked when charges were investigated. The whole question of transport charges should be 'reviewed, said Mr Kirk.