MINISTER DEFENDS TAX SYSTEM

Press, Volume CIV, Issue 30744, 7 May 1965, Page 3

MINISTER DEFENDS TAX SYSTEM

(N.Z. Press Association) WELLINGTON, May 6.

The Minister of Finance (Mr Lake) today replied to criticism by public servants alleging “unfair” tax demands for last financial year,

He was commenting on a complaint by the chairman of the Canterbun' section of the Public Service Association (Mr J. M. McKenzie) who said 43.000 public servants had been assessed for 27 fortnightly pay periods in the financial year but had been allowed dependents, superannuation, insurance and other tax deductible items on 26 pay periods. Mr McKenzie said they

would have to pay an extra £215,000 in tax.

He explained that under the tax laws in New Zealand and overseas countries generally, most types of incomes, including salary and wages, were returned for income tax purposes in the income year to March 31, in which they were actually received.

“Salary and wages are usually paid for pay periods of a week, fortnight or four weeks, none of which fit exactly into a calendar year,” said Mr Lake.

“Because of this, the salary and wage earner includes in his tax returns for most years, something less than 365 days’ pay. Every so often, the position is balanced when an extra pay day is received in an income year, however,” said Mr Lake. Mr Lake said this situation occurred in the 1965 income

year for a number of salary and wage earners, including most public servants. “This has always been the position, but is highlighted since P.A.Y.E., in that a taxpayer who receives an extra pay in an income year receives more exemption for P.A.Y.E. than he is really entitled to for a year.” “This means P.A.Y.E. deductions will be slightly overpaid in a year in which the salary and wage earner receives less than 365 days’ pay—but will be underpaid compared with his tax in an end-of-the-year assessment in an income year in which he receives more than 365 days pay,” said Mr Lake. The Minister gave other factors which could account for taxpayers having extra to pay in an end-of-year assessment.

He cited payments of

arrears of salary in which the flat P.A.Y.E. tax deduction might be insufficient to meet the Social Security tax and ordinary income tax on the extra salary, according to the rates of tax applicable to the taxpayer. Mr Lake said those taxpayers whose only income was from salary or wages of £l3OO or less—apart from interest of not more than £3o—were able, as “pay-period taxpayers,” to retain any advantages in their P.A.Y.E. tax deductions.

“If taxpayers in this range and class of income have partial exemptions not provided for in their tax code such as life insurance premiums, they should furnish returns,” said Mr Lake.

This would be in spite of the fact that according to their own calculations a refund was not due.