Tax exemption request ‘modest’

Press, 28 April 1981, Page 18

Tax exemption request ‘modest’

PA Wellington Life insurance companies are refusing to take a Government "no” to their request for a higher personal tax exemption on policy premiums. The Deputy Minister of 'Finance (Mr Templeton) has .questioned the Life Offices Association’s budget submissions, reminding them of the present ‘‘fiscal austerity.” . He said that even the present $BOO exemption was a hangover from the past which might not now apply. ■ He also criticised the basis of the association’s submissions, that a higher exemption would encourage savings. The association has revealed its submission and a supporting analysis by Professor David Sheppard, of Victoria University.

Professor Sheppard said the request for an increase in personal tax exemption from $BOO to $lOOO was a “modest” one. He said the consumers price index was 556 in 1976 when the allowance was last changed and stood at 1000 in April 1980. “Consequently, the value of the exemption in terms of its purchasing power has fallen .from $BOO to $444.80 as measured in 1976 prices; a full 44 per cent. The sought increase merely restores the value of premium deductability in terms of 1976 prices.” The association said the present exemption on life premiums and superannuation contributions “no longer gives enough encouragement for long-term contractual savings.” Its director, Mr Barry Bryant, said the association had received many inquiries from organisations with which it was not connected, ■suggesting the A exemption should be raised. The association did not accept Mr Templeton’s criticism nor his rejection of their case, said Mr Bryant.

“We believe the Government has recognised the situation. It is asking for an interest to be taken financially in the development programme. It is asking for more savings to provide the .capital and we are saying life associations are a source .of that investment.” The Government’s initial rejection of the submissions, •and rejection of similar submissions in pastj years, has encouraged the associatio to go public. Besides the $2OO increase

in the employee subsidised exemption for superannua- i tion payments, the associa- I •tion wants a $2OO increase in the self-employed category to $l2OO, plus another 50 per cent exemption on the next $lOOO of premium. It estimates the cost of $l3 million, “Less than 0.4 per cent of the 1980 tax revenue obtained from individuals,” which would provide an extra $B2 million a year for the life offices, resulting in about . $lOOO million more in long- ! term contractual savings in 10 years. .