N.Z. has ‘highest cosmetics tax’

Press, 14 June 1978, Page 12

N.Z. has ‘highest cosmetics tax’

New Zealand women pay the highest tax in the world on shampoos, toiletries, and make-up, according to the New Zealand Cosmetic and Toiletry Manufacturers’ Federation. The chief effect of the high sales tax has been a fall-off in sales and a consequent reduction in staff by Christchurch cosmetics and toiletries manufacturers, it says. There is a 40 per cent sales tax in New Zealand on these items, compared with 27 per cent in Australia, 22 per cent in the United States

and 8 per cent in Britain. “Yet the cosmetics industry uses only a limited amount of overseas funds for imported raw materials. Labour, packaging and other processes, which constitute the biggest proportion of the production value, come from New Zealand,” the federation says. “Virtually all make-up sold in New Zealand is made locally.” It is a relatively important industry to the country, the federation claims, with more than 30 firms involved employing about 1500 people.

The 40 per cent sales tax is added on to t » wholesale price of an item — say. for pvample, a bottle of shampoo.

Shampoo that sells for $3.15 in a chemist’s shop or supermarket will probably have a wholesale value of only $1.50. Added on to this is the sales tax (60c) and the retailers’ mark-up.

Because the retailer adds his mark-up (on average. 50 per cent) to the taxed value of the goods, the customer, who always bears the brunt of such a tax, pays not only the sales tax to the Government. but the mark-up on this as well. Christchurch’s two major cosmetics manufacturers — Spencer L. Ayrey, Ltd, and Wilfrid Owen, Ltd—both say that since the introduction of the heavy sales tax two years ago, sales have been steadily decreasing and employment has been affected. Mr P. N. Ewing, sales director for Spencer L. Ayrey, said that since the introduction of the tax there had been a distinct drop in the company’s unit sales. “This has caused us to reduce our labour force — both in the field and in the factory and office — in the last two years,” he said.