‘Budget lacking in two areas’

Press, 18 July 1979, Page 5

‘Budget lacking in two areas’

PA Wellington The 1979 Budget fell short in two principal areas, according to the president of the Manufacturers’ Federation (Mr F. Tumovsky). It had foreshadowed changes in the encouragement of exports and overseas exchange earnings, but it had failed to provide the basis for a sounder economic structure for industry and reform of the tax system, he said at a lunch meeting of the Wellington Rotary Club.

The big problem with taxation was the imbalance between indirect and direct tax, Mr Turnovsky said. In the 1979-80 year, in spite of the Budget and earlier sales tax moves, income tax would be almost 75 per ceot of total taxation, compared with 733 per cen f last year. A shift in emphasis was needed to encourage in-

itiative and productivity, but manufacturers preferred a retail, rather than a sales, tax over as wide a range of goods and services as possible.

Such a significant change in fiscal policy would not work if it formed the basis of higher wage demands, Mr Turnovsky said, but if it could be shown employers had more money in their pockets it could succeed.

Sales tax was a fairly convenient way of collecting indirect taxation, but other options were available, he said.

Retail tax was collected from the final consumer at the time of distribution. It was • ot as easy to collect or administer, but it was more equitable and yielded a higher tax take. “To put it another way, a 6.7 per cent retail tax would yield the same result as does a 10 per cent sales tax collected at the intermediary stage,” Mr Turnovsky said. “In addition, the consumer would know precisely how much tax he has paid on his purchase. The same would apply in the case of services.” Manufacturers saw a great need to shift the taxation emphasis so that taxpayers retained more of their earnings. Apart from encouraging productivity and initiative, it helped savings which flowed into investment, which was of the greatest importance for export-led growth.