Manufacturers Want Taxation Overhaul

Press, Volume CIV, Issue 30738, 30 April 1965, Page 4

Manufacturers Want Taxation Overhaul

(Xeu> Zealand Press Association) WELLINGTON. April 30. The Manufacturers’ Federation says if New Zealand is to have greater economic growth, a major review and overhaul of taxation is essential.

This view is contained in the federation's submissions on taxation which were presented to the Minister of Finance, Mr H. R. Lake.

The submissions go on to say that so long as the incidence of taxation is higher in

New Zealand, so long as maximum tax rates are reached at lower income levels and so long as special deductions such as investment allowance and export incentives are at lower rates in other countries, it will be impossible for industries in New Zealand to lie completely competitive. Discussing the possibility of a free trade area between New Zealand and Australia, the federation says at present even a limited one cannot be fair to New Zealand industtries because treatment in some important aspects of taxation is not equal. The following are the main points of the submission:— The federation urgently desires simplification of taxation legislation and procedures. This will involve re-drafting of some part of the act in a more positive form. Since living standards and incentives are so closely related to growth, the Government’s continuing policy should be to reduce the present high rates of company tax and dividend tax combined, primarily by a stricter control and limitation of Government expenditure. Fair Basis The only fair and equitable basis of taxation incentive for export is a deduction directly related to increased export sales and not calculated in any way by reference to profits earned in a particular year. (The federation’s recommended basis of export incentive is: “That a special tax deduction should be allowed in any year the rate of 20 per cent of the increase in exports in that year as compared with exports in the agreed base period.”) For the purpose of deter-

mining the increase in va'ue of exports to which the taxation export incentive should be relaxed, the base period decided upon at the beginning of the scheme should remain unchanged for five years.

The need for accelerated depreciation in respect of factory buildings should be recognised, and higher and more realistic rates should be established. The investment allowance on plant and machinery should be increased to 30 per cent. Excess retention tax should be abolished Because of inflationary effects on income over toe la.-t 25 years, it is the federation s considered opinion that to stimulate productivity and encourage growth, the Government should readjust the taxation scale applying to in dividual earning so that the tax rates at various salarv levels are more equivalent to those in force in the more sophisticated economies. Traditional Payment The P.A.Y.E. method of taxcollection should not apply to any company, the present artificial distinction between companies formed before or after July 26, 1957. should be revoked, all companies in future should pay income tax in the traditional way as provided for in the general pro vision of the land and income tax act. Income from company dividends, which in some circumstance is al present subject to P.A.Y.E. taxation, should not be included as income on which provisional tax should be paid. Land tax should be abolished. Provision should be made for lossess incurred by wholly owned subsidiary companies to be offset against profits of others in the group, in arriving at the taxable profit according to the consolidated accounts.