Tax changes wanted

Press, 31 August 1977, Page 31

Tax changes wanted

There can be no doubt that most New Zealanders < are unhappy with our system of taxation. Every day new voices ’ join the i chorus of those who are cla- ; mouring for changes in the tax structure. Everybody, of course, : thinks — nay knows — that I he is overtaxed, and that the world would be a much i better place if his personal rate of taxation were re- i duced. That goes without saying. i In some cases it might 1 even be true. 1 But as a nation, we are i not unduly highly taxed. In ; 1974, the latest year 1 have figures for, we were well i below the average of 22 ] O.E.C.D. countries; 12 paid < more tax, and 9 less, while i our tax per head of popula- i tion was about 85 per cent i of the mean average. i Labour politicians would < argue that our tax base is t too small, and that too much of the burden falls on I lower and middle incomes. ■ But most Labour politicians 1 agree that the emphasis ; must be shifted from direct i taxation to tax on spending. :

National Party supporters, on the other hand, would say that our tax system is disincentive, that it discourages people to work, and above all to save, and that the system is failing to bring forth the skills and initiatives needed to keep New Zealand competitive. It is not only here that the tax system is under fire. In most countries criticism is rife. The distinguished economist and Nobel Prize winner Professor Milton Friedman holds that a progressive tax system is bad for economic performance. He advocates a flat rate of income tax, because the present system penalises earnings and savings but not spending. This tax should be at a given percentage of net income for all taxpayers — to give the same proportion of gross national products as at present. Professor Friedman is in favour of value-added taxes — the system in force in the E.E.C. — and would do away with subsidies, and tax deductions such as life insurance and the like.