Big cut in death duties

Press, 22 June 1979, Page 1

Big cut in death duties

Higher charges on alcohol and tobacco, a big reduction in estate duties, and slightly reduced income tax for some later in the vear are features of the "Budget’s tax provisions.

In a move to help farming. the Budget will increase the level of death duty exemption for all estates, in stages over the next four years. The first immediate step is to raise the level at which duty is payable from $25,000 to $lOO,OOO. The remaining stages will raise that level to $150,000 in April next year, and to $250,000 in April, 1982. In the alteration of death duties, the rate initially will be 35c in the dollar on estates between $lOO,OOO and $250,000. On estates in excess of that, the rate will be 40c in the dollar.

The cost of the exemptions is expected to be S6M this year, and full implementation of the measure is estimated to cost S44M, on present values. Mr Muldoon said there was inadequate provision for estate duties in view of land price increases, as

they affected medium-size estates, most of which were farms. “As a result, it has been necessary to raise substantial sums and the repayment has severely curtailed the farming effort over subsequent years,” said Mr Muldoon.

Mr Muldoon announced that legislation would be introduced in this session to allow the Government to change tax rates when Parliament is not in session. The power to reduce tax rates would improve the effectiveness of the present policy, he said. The property speculation tax has been abolished from last night. Mr Muldoon said that the measure had outlived its usefulness, “if indeed it ever had any,” as the economy had stabilised since the tax was introduced and upward pressures on property prices had reduced.

The foreign travel tax will be abolished after midnight on June 30, to be replaced by a departure tax on all tickets supplied in New Zealand for international travel after that time.

The new tax will be at

the rate of $25 for an adult, and $5 for a child aged under 12. It will be taken in addition to the existing airport departure charge of $2, which will be renamed the airport development charge.

New income tax rates, to apply from October 1, were aimed at offsetting the effect of monetary restraint, rising prices and inflation, said Mr Muldoon. They also aimed to reduce marginal and r verage tax rates, and thus provide a greater reward for effort.

On incomes between $4500 and $lO,OOO a year ($B7 to $192 a week) the Budget will lower the tax rate from 38 per cent to 35 per cent. The 35 per cent rate will also apply to incomes between $lO,OOO and $ll,OOO, now subject to a 48 per cent tax rate. Changes are made in the level at which a spouse’s earnings may reduce the rebate for single-income families. The effective tax rate on the spouse’s earnings becomes 34.5 per cent over the income range $520 to $2600, and the amount which may be earned before the single-income fam-

ily rebate reduces will rise from $lO4O to $1144. The income level at which the young-family rebate starts to abate is increased from $7BOO to $9360. The Budget will alter the rate of P.A.Y.E. deductions on secondary-employ-ment earnings and on extra emoluments to 35c in the dollar, from October 1. Mr Muldoon said that the effect of the income tax reductions,, and altered family rebate levels, combined with a rise in family benefit, would mean an increase in the net weekly income of a single-income family with two children, by about 8 per cent. The estimated cost of the tax measures is S2I4M. In a bid to stem the drain on foreign exchange through invisible payments, the Budget removes from customs exemption vehicles brought into the country by returning New Zealanders, from last night. The move includes motor-cycles and motorscooters. Vehicles brought into the country by immigrants will still be exempt, Mr Muldoon said an ex-

ception would also be made for New Zealanders who had already bought vehicles overseas before the Budget, with the intention of bringing them, home.

There was evidence that the previous exemption from customs duty and sales tax encouraged the use of travel funds to buy vehicles, he said. The Budget moves to restrict the use of farm motor-cycles for non-farm uses. The concessions under which sales tax on farm bikes may be refunded is tightened to apply only to machines with a capacity under 350 cc.

The exemption on gifts was also lifted. From today, gifts under $15,000 are exempt from duty in any one year.

A further exemption is applied to interest and dividends to an aggregate of $2OO received by individual taxpayers. This replaces two present measures: a general exemption of $lOO, and a dividend rebate applicable to those with a total taxable income of less than $BOOO.