EXCESS RETENTION TAX OBJECTED TO

Press, Volume CV, Issue 31016, 23 March 1966, Page 3

EXCESS RETENTION TAX OBJECTED TO

(Neto Zealand Press Association)

WELLINGTON, March 22. The Governmen has set up a committee to report on the incidence —and possible abolition—of excess retention tax.

Announcing this in a statement tonight, the Prime Minister (Mr Holyoake) said the Under-Secretary of Finance (Mr Muldoon) would be chairman.

The decision to establish the committee comes after a meeting today between a combined deputation and the Prime Minister, the Minister of Finance (Mr Lake), and the Minister of Customs (Mr Shelton).

The deputation represented the Associated Chambers of Commerce, the Employers’ Federation, the Manufacturers’ Federation, the Retailers’ Federation, the Constitutional Society, the United Kingdom Manufacturers’ and New Zealand Representatives’ Association, and the Law Society.

The Prime Minister said one of the combined deputation’s submissions was that excess retention tax should be abolished. “Submissions made today by the combined deputation have been put forward in a constructive and co-operative manner,” he said. Mr Holyoake said that some of the matters raised were already under review, and others would be considered, particularly when the budget wa s being framed. The Government committee to investigate the incidence and possible abolition of excess retention tax will include representatives from the Inland Revenue Department and the Treasury. It will report to the Minister of Finance.

The president of the Associated Chambers of Commerce. Mr G. E. Stock, said that, in short terms, the deputation’s joint submissions were:

(1) Direct taxation in New Zealand forms too high a percentage of total taxation. A shift of emphasis to indirect taxes is highly desirable, would be fully justified and would place New Zealand more in line with other countries as regards the ratio of direct to indirect taxes. (2) We advocate that attention be given to the scales for middle-level incomes, which are taxed at rates which are dispro- ' portionately high and which are depressive in their effect of the energy and enterprise of the individual. The Minister of Finance ha s agreed that personal tax rates in New Zealand are among the highest in the world. The figure at which the maximum rate of tax applies, namely £3600, should be raised and the steepness of the rise in rates reduced.

(3) Having particular regard to the super-imposed tax on dividends, companies are at present bearing more than their fair share of taxation —a conclusion supported by the Monetary and Economic Council—and the existing rates should be reduced. (4) The burden of death dues should be further reduced to encourage maximum productive efforts in all fields, but particularly in primary production. It needs to b e borne in mind that although the existing maximum effective rate of estate duty is 40 per cent, the operation of the graduated scale can have the effect of imposing rates as high as 59 per cent additional estate accumulated as a consequence of increased productive efforts. Inquiry Question

“We would like to refer to the question of whether a public commission or committee of inquiry on taxation should be set up to take evidence, report and make recommendations to Government,” said Mr Stock. ‘This has been advocated in some quarters, and, as recently as February 28 the Leader of the Opposition (Mr Kirk) announced that if the Labour Party becomes the Government it will appoint a Royal Commission to review the structure of taxation and ire-draft the tax laws. “What we may hope to gain from this we do not know. Mr Kirk is reported as saying that the commission will review the structure of the tax laws, not the incidence of taxation, and he seems to be principally concerned with the P.A Y.E. system. “However, even if a commission were to address itself to all aspects of taxation, the organisations represented here today are agreed they do not want it. Commissions can be devices for delaying reforms which governments, and opposition members know full well already should be carried out.”

Commissions then produced reports which were a compromise between the views of opposing and varied interests.

Order of reference could be either too circumscribed or too wide so that what one wanted dealt with was not covered, or the importance of a particular advocacy was lost through its being merged with a host of other advocacies.

Finally, what a commission recommended was still subject to w’hat the government of the day was prepared to do. if anything. “For these reasons we say that, where important information relative to a public issue needs to be uncovered, a Royal Commission can be invaluable,” Mr Stock said. “But we do not need any more information than we already have about taxation and the need for relief in the fields of commerce, industry, trade and finance.

“The organisations here rep-

resented are agreed on a ease which they know very well to be in the interests of the economy of the country. “We have confined that presentation to the fewest possible headings, but these, in our united view, constitute the core of the case for tax reform in this country.

“We do not see it as our responsibility to suggest that new taxes—if any—should be imposed to make up for any loss of income to government resulting from tax reductions in particular fields,” Mr Stock said.

“Obviously it is the job of government to govern, to tax to the extent necessary to support the state, and to do so in directions which will encourage development.

“It is our job to point to taxes which oppress and which should be eased or abolished sc as to improve economic health and growth, while reserving the right to “run the rule” over any substitutory taxes which government may contemplate imposing after what we are sure would occur, as it has occurred in other countries, namely, a greater yield of tax revenues from lower rates in the areas we have mentioned.

“We do not suggest that the increased yield from lower taxes in recommended directions would necessarily obviate the need for other taxes, since we have already postulated a transfer of more weight to indirect taxes from direct taxes, but an improved yield from direct taxes at lower levels is undoubtedly a substantial and favourable factor from the point of view of the revenue,” said Mr Stock.