THE PRESS MONDAY, SEPTEMBER 13, 1976. Travel tax goes astray

Press, 13 September 1976, Page 16

THE PRESS MONDAY, SEPTEMBER 13, 1976. Travel tax goes astray

The reason for the Foreign Travel Tax Regulations was made clear by the Prime Minister (Mr Muldoon) on Budget night. “ Until our external situation improves", he said, “it is necessary for the Government to put a brake on overseas travel expenditure Now, barely six weeks later, the Minister of Customs (Mr Wilkinson), whose

department implements the regulations, has suggested that the tax might undergo “ shift of emphasis ”, from the need to deter foreign travel to a need for additional revenue. Perhaps this is the first glimmer of acknowledgement by the Government that the tax’s original effect is not being attained. Reports from the travel industry certainly indicate that the tax has not dampened the enthusiasm of New Zealanders for going abroad, and it may be assumed that the demand for foreign exchange has not dropped appreciably. Indeed, the demand for foreign exchange may even be greater than it

was before the Budget, for one of the disturbing aspects of the tax is that it invites travellers to evade it, legally, by drawing additional funds to pay for part of their travel bill after they have left New Zealand. The average holidaymaker on a package tour or paying excursion fares will not find any benefit in resorting to this evasion. But the

saving in tax could be considerable for businessmen and independent travellers capable of making their own arrangements once they are out of the country. They can also meet these costs without touching a cent of their overseas funds by using an international credit card and squaring the account after returning home. Although some restraints on travel were forecast, the complex method of applying them to only the transport costs of an overseas journey was cer-

tainly unexpected. The Customs Department has received many inquiries for rulings on anomalies arising from package tours, group travel, sea cruises, rental cars, trans-continental rail and bus journeys—even the hiring of elephants by an expedition soon to set off for India. Elephant hire has been ruled taxable; car hire is tax-free.

Some dispensations have already created precedents that might later rebound on the department. For instance, airline employees and others in the travel industry who are eligible for heavily discounted fares pay tax on only the cost of their tickets. If the ticket is free, they pay no tax; if it is 10 per cent of the full fare, they pay only one tenth of the tax paid by other passengers on the same flight. Will employees enjoying staff-discount privileges in other industries that produce taxable commodities expect similar tax concessions on their discounted purchases?

Surely a less complicated method of achieving the Government’s object would have been a simple cut in travel allowances. The allocation of $lOOO a month (the maximum is $4OOO a year) is generous, especially considering that much of the cost of an overseas holiday can be paid for before the traveller leaves New Zealand.

If the Government was simply looking for another source of revenue, a tax on the allocation of funds at the point of issue—the banks—would have been a lot more expedient: and far less embarrassing to the country’s travel agents who became licensed tax collectors overnight. Mr Wilkinson’s fears that such a scheme would have been open to abuse holds little weight in view of the contempt and misuses which the present legislation unfortunately fosters.