Special Tax Exemptions For Students Examined

Press, Volume CVII, Issue 31520, 7 November 1967, Page 9

Special Tax Exemptions For Students Examined

The special exemption for a dependant who is a fulltime student should not be extended nor should tuition and examination fees and students’ association membership fees be allowed as deductions in calculating assessable income. This is the recommendation of the Taxation Review Committee whose report was tabled in Parliament last week. The report says that where cases of hardship exist, the proper remedy is direct financial assistance. The value of any special exemption, reduced to terms of tax, varies according to the income of the person claiming the exemption. A special exemption gives more tax relief to a man with a high income than it does to a less fortunate taxpayer. If the parents of students were to be entitled to claim a special exemption parents with high incomes would be receiving a tax benefit disproportionate to that received by parents with low incomes.

The same argument applies to giving students themselves increased or additional deductions for their education ex-

penses. Not every student has assessable income and some have more than others. One student’s course may preclude him from earning except in the long vacation. Another may be able to take a regular part-time job during university terms and full-time employment in the vacations. Both could be registered as full-time students. The student 'with the higher personal inI come would stand to gain a greater tax benefit than the student with a smaller income. The student with no income would obtain no relief at all. Expenditure incurred in acquiring a university degree, or other higher education qualification, is essentially of a “capital” nature. The knowledge acquired is the student’s basic equipment which he will subsequently employ to derive an income. As long as the New Zealand system of direct taxation has an income base—and no alternative is recommended by the committee—then the cost of higher education should continue to be regarded as capital expenditure and be non-deductible for taxation purposes.