Small Tax Cut Expected

Press, Volume CIV, Issue 30769, 5 June 1965, Page 1

Small Tax Cut Expected

(Parliamentary Reporter) WELLINGTON, June 4. The Budget to be presented in Parliament next Thursdaynight by the Minister of Finance (Mr Lake) is expected to be designed to check a toorapidly burgeoning economy. Even so, it is believed “on paper” concessions of up to £8 million will be made. These may include a small rebate in income tax. Other points in the Budget are likely to be:

1. An intensification of the “credit squeeze,” directed mainly at curbing finance for imports, the extension of individual manufacturing enterprises beyond “safe” limits, and house-building.

2. The introduction of a system of freezing part of farm incomes in order to spread taxation over a number of years, similar to the system adopted for woolgrowers.

3. The continuation and strengthening of the present system of developmental aid for the bringing into production of marginal lands. Subsidies and transport adjustments for the carriage of fertiliser could be an important part of this scheme. 4. The implementation of a recommendation by the 1963 Ross Committee that P.A.Y.E. taxation be abolished for those companies now paying it. This could be introduced as a progressive measure to take place over a number of years. 5. The increase to 20 per cent of depreciation allowance permitted to manufacturers on machinery. This would bring manufacturers into line with their Australian counterparts, and would assist the modernisation of New Zealand plants.

6. An increase in allowable interest rates, with even the possibility of completely freeing interest rates in accord with bank wishes.

Increased taxation on beer, cigarettes or petrol is not expected. Provision for the facilitation of migration by workers is unlikely, as the Minister of Labour (Mr Shand) has stated that migration, while necessary, has an inflationary effect. The views of economists, the Monetary and Economic Council and the writers of the pre-Budget economic review, all indicate that the emphasis—if economic factors alone were being considered —should be on anti-inflation measures. In the preparation of departmental estimates, cuts have been made where possible, less important projects have been deferred, and generally, departmental demands have been restricted. But this policy has had only partial success, and most departmental estimates will be

from 4 per cent to 7 per cent higher than last year. The Prime Minister (Mr Holyoake) said in Parliament last Wednesday that last year’s record expenditure of £64 million on education was likely to be increased by another £7 million. The works programme, despite deferments, is known to be nearly 10 per cent above last year’s figure, and many of these projects, as well as such items as school buildings, courthouses, and police stations, have already been deferred some months. Defence Vote Defence expenditure is also expected to increase sharply, because of the necessity to place orders now for weapons and equipment needed shortly. Today, there is no sure “lease-lend” system for ob-

taining first-line equipment from either Britain or the United States, as the Minister of Defence (Mr Eyre) found on his recent trip abroad.

It is a matter of some importance, however, that next year is election year, and that taxation concessions which will reflect any radiance next year have to be made now. It is inescapable that, in a three-year Parliamentary term, many decisions made in the second year take effect just before and during the election campaign the next year. This is why the Government, gambling on the known buoyancy of the New Zealand economy, may still be tempted to offer a small rebate on income tax. The effects of this could be deferred by making it apply to the second half of this financial year, as from October 1.