2 Per Cent Tax Not From Employees’ Wages

Press, Issue 32333, 26 June 1970, Page 1

2 Per Cent Tax Not From Employees’ Wages

(from Our Parliamentary Reporter) WELLINGTON, June 25. A 2 per cent payroll tax, calculated on the size of an employer’s payroll, but not applying to payrolls below $7BOO a year and not to be deducted from the wages of employees, is provided for in the Budget.

“The estimated yield from the payroll tax for a full year is s33m, and for the current financial year, s2om,” said Mr Muldoon.

“This extra revenue should ensure some immediate dampening of inflationary pressures, and in the longer term, provide a means of financing what I regard as a very necessary restructuring in personal income tax. “It is clear that this form of indirect tax cannot be passed on to consumers in full, as is the case with sales tax. Furthermore, it is capable of being varied in amount or in the scope of its application to achieve desirable economic objectives. “The tax will initially be a flat 2 per cent on all remuneration which is liable for the tax,” said Mr Muldoon. “It will not be deductible for income tax purposes. Subject to exemptions, the gross amount of all salaries, wages, bonuses, commissions and benefit allowances which are paid to employees will be liable.” Other Fees

Directors’ fees, honoraria and other payments would also be liable to the tax. These would include commissions to insurance agents, or collectors, and payments made on labour-only contracts.

Provision for the expenses of insurance agents or collectors would be made by taxing them on only 80 per cent of their gross commissions.

In addition to the exemption on payrolls of less than

$7BOO, the new tax would not apply to farmers, whether acting as individuals, partnerships, trusts or companies, on payments made to farming employees. Another exemption was granted to agricultural contractors in respect of the wages paid to their employees working on farms. The exemption here covered shearing, scrub-cutting, harvesting, fencing, drainage, aerial topdressing and other forms of fertiliser or seed spreading. Co-operative milk, dairy and pig-marketing companies and meat processing firms would also generally be exempt, said Mr Muldoon. They would be liable in respect of employees engaged in

store trading, or local meat sales.

Retiring allowances and pensions to former employees and their dependants were also excluded, as were employer contributions to superannuation funds. Payrolls for public and private hospitals, registered schools, play centres and charitable bodies were also exempted. Local Bodies

The normal administrative work of the Government and of local bodies would be exempt, but payments made in trading activities would be taxed.

The tax, said Mr Muldoon, would apply on salaries and

wages and other forms of liable remuneration on and after August 1, and the first payment would normally be due on September 30. He pointed out that the exemption on payrolls below $7BOO applied to a full year. An exemption of $5200 would be allowed for the period from August 1 to March 31, 1971.

There would be a rebate against payroll tax equivalent to 1 per cent of export sales which qualified for the income tax rebate for increased exports, and also of newsprint and aluminium This should ensure that exporters of these goods would not be adversely affected.