Aim of travel tax could change, hints Minister

Press, 7 September 1976, Page 27

Aim of travel tax could change, hints Minister

LES BLOXHAM, travel editor of “The Press,” seeks clarification from the Government an its policy relating to the 10 per cent foreign-travel tax.

The foreign travel tax may be here to stay—not on the premise of deterring people from going overseas and thereby saving foreign exchange, but purely as a means of producing additional revenue for the Government.

This possible “shift of emphasis” has been suggested by Minister of Customs (Mr Wilkinson) in answer to a series of questions from ‘Tuesday Travel’ about the tax. Mr Wilkinson said that because “factors could arise which might shift the emphasis from the need to deter foreign travel to a need for additional revenue" he was not prepared to say what the future might hold.

But the Minister did say that the Government would “review” (he was asked whether it w’Ould “remove”) the tax when New Zealand returned to a favourable balance-of-trade situation and that there W’ere reasonable grounds for believing that it could be maintained. Mr Wilkinson said he estimated that the tax w’ould produce about SI2M by August next year and could be responsible for the saving of about S3OM in overseas funds. However, he emphasised in giving the estimates that they could “not be assessed with any degree of precision.” In answer to another question, Mr Wilkinson said that the Government had considered applying the tax to the actual funds drawn for overseas travel, but felt that such a scheme would have been abused. These are the questions (originally submitted to Mr Muldoon, as Minister of Finance), and the replies of Mr Wilkinson, to whom they were redirected:— In your Budget announcement you stated: “Until our external situation improves it is necessary for the

Government to put a brake on overseas travel expenditure.” Can this be interpreted as meaning the measure will be a temporary one? Yes. this is a fair interpretation at this stage. I am not prepared to say what the future holds because factors could arise which might shift the emphasis from the need to deter foreign travel to a need for additional revenue. 1 can only say that the tax was introduced primarily as a means of reducing the present heavy expenditure on travel. If so, what degree of improvement would you wish to see before removing the tax? A substantial degree of improvement. When we get back to a favourable

balance of trade and we have reasonable grounds for believing that the situation can be maintained then we will certainly review the foreign travel tax. Do you think that the tax is having the desired effect of easing the demand for funds; or do you see a risk of additional funds being withdrawn by travellers attempting to evade the tax by purchasing as much of their travel as possible overseas? It is too early yet to say to what extent the tax is having the desired effect. No. the uncertainty of not having firm travel arrangements would, I am sure, dissuade most travellers from waiting until they are overseas to make bookings I am advised that the WellingtonLondon economy air fare, plus tax, is still well below the total cost of the economy fare to Sydney, plus tax, and the economy fare from Sydney to London, even if the fare for the second leg is bought tax-free in Sydney. The same applies if you travel at special excursion fares. Did the Government consider applying

the tax to the actual funds required by travellers, and if so, why was it decided td tax only the transportation costs of overseas travel? Yes, we did consider applying a tax to travel funds but we felt that it would almost certainly lead to misuse of overseas funds and to retention of funds in overseas accounts that would otherwise come to New Zealand. It would be very difficult to positively identify the reasons for which overseas funds are sought and we could have a situation where funds supplied tax-free to meet other commitments were being used to pay for overseas travel. How much revenue do you expect the tax to produce over a period of say, 12 months; and do you have an estimate of the amount of overseas exchange the tax might save? This cannot be assessed with any degree of precision. We have worked oh a rough revenue estimate in the region of $l2 million for the first 12 months and a savings in overseas funds of about $3O million. But I would stress that these estimates are subject to influences that cannot readily be measured at this stage.

Remember the mystery picture we published two weeks ago? We asked where it was taken, and the year. Many readers correctly identified the scene — Rocks Road, between Nelson city and Tahunanui — but no-one got the date. The picture, reproduced with permission of the \>x ander Turnbull Library, was taken in 1923. Mrs E. 11. Rogers, of Whareama. Stoke, wan the closest with her estimate — 1926 — and she will receive $5. Out Nelson reporter, IJ.uiy Simpson, took this photograph of the same view today.