Payroll Tax Defended

Press, Volume CX, Issue 32391, 2 September 1970, Page 18

Payroll Tax Defended

CN.Z. Press Association) WELLINGTON, Sept. 1. The recently - introduced payroll tax had advantages over any form of sales tax, Parliament was told tonight by the Minister of Finance (Mr Muldoon).

Opening the second reading debate of the Payroll Tax Bill, the Minister said; “A good deal of this tax will be passed on. But some of it will not appear in prices. The effect will be less than with a sales tax, which would be passed on immediately, with a margin added. It is clear that the passing on of the payroll tax will be delayed.” Mr R. J. Tizard (Lab., Pakuranga), said a Labour Government would not take the tax off—with good reason. The tax would be built into the price structure, and prices would not drop if the tax were abolished.

“The only time to oppose this tax is right here and now. We will fight it every inch of the way,” he said. The Opposition has already indicated that it opposes this new form of tax. When the bill was introduced, the Opposition took the question to a division.

The tax, a Budget proposal, applied from August 1. The first payment is due on September 20. Mr Muldoon has said the expected annual return from the tax will be more than $3O million. The bill sets the tax at 2 per cent of all remuneration liable. Basically, employers with a monthly wage bill of more than $650 will pay the equivalent of 2 per cent of wages in tax. Remuneration liable includes salaries, wages, bonuses, commissions, benefit allowances, directors’ fees, honoraria and certain other payments. Among those exempt are religious and charitable organisations. Some exporters qualify for limited rebates.

Mr Muldoon admitted that the tax was a controversial one. He also said that there would be some minor amendments at a later stage of the bill’s consideration in the House.

Mr Tizard said the payroll tax gave the impression that it was something “suggested in haste by some bright boy in the backroom.”

"It looks like it was brought in quickly as a short-term, stop-gap move when the Minister discovered he was short of finance,” Mr Tizard said. The Government had given too much away to the well-to-do and the wage earners would be the ones to be affected most It was a “taxgatherer’s tax imposed for the convenience of tax administration,” he said. Mr E. S. F. Holland (Nat, Riccarton) maintained that

the payroll tax, in a small way, would encourage discipline in the granting of higher wage rates. “We must have some discipline in wage rates if New Zealand’s exports are to remain competitive,” he said.

Mr M. A. Connelly (Lab., Wigram) said that the bill was supposed to help overcome the shortage of labour but it would drive workers away from New Zealand. It would also have an anti-social effect because many employers provided occupations for “marginal workers,” such as handicapped or semi-crippled persons.

The purpose of the payroll tax was to eliminate inefficient labour, and the first casualties would be those marginal workers, Mr Connelly said. If the tax was to be truly economically effective the Government should ensure that it rested where it was levied. It should not be possible to pass it on. By imposing the tax “across the board” all firms were able to pass it on, Mr Connelly said.

The Associate Minister of Finance (Mr Pickering) said the tax was not a bogey. “It does not come to New Zealand dressed in a Springbok jersey.”

He followed Mr Muldoon’s lead in emphasising the slow effect the tax would have on prices. He also pointed to the tax’s encouragement for employers to be responsible and prudent in labour management

The debate was interrupted by the 10.30 p.m. adjournment.