Direct tax – engenders ‘avoision’

Press, 19 May 1981, Page 6

Direct tax - engenders ‘avoision’

Tinkering with the tax system was no longer an answer, the member of Parliament for Manawatu (Mr M.'E. Cox) told the National Association of Retail Grocers and Supermarkets' conference in Christchurch yesterday?. .

Recent changes had delivered - the “death blow',’, to the present, taxation; system/ and New; Zealand had to stop adding dr subtracting bits to the' system, -he said.- Govern-. merits struggled to get’funds to meet - the ’ demand for Governihent; expenditure, and -were under - pressure 4o increase the 'internal- deficit: .

Mr Cox told the association that rit should be looking < at(chariges to the'tax system. ■ Alternatives included cutting . back on Government spend- . ing, designing', an;-entirely new system, introducing ,a . system . such' as. value-added tax, introducing a retail turn- . over.-tax, or increasing-, the existing-wholesale tax system. .

While New Zealand’s tax take was lower than average compared with its., trading ■ partners,.; Mr Cox said that ‘the high proportion of direct taxation caused problems. About $1.4 billion was. lost to the Government through . “avoision" — a combination ■of legitimate tax avoidance arid , illegal tax evasion. . . ? Another problem with, the present systemiwas the par-; rowing tax base;?As. more people retired, fewer would be left to meet the direct’tax -burden. - ■ “Before this happens. I believe that, we must move to 'increase the taxation on expenditure and relieve the . taxation on earnings.” he said.?;We must tax the purse, not the pay packet.” .

Considering the. tax alter- . natives, Mr. Cox said . cutting ’ Government spending would be . difficult because' of the . need to retain health, education. and social welfare. ser- r : vices. Complete restfuttur-; ir.g of the tax system would "b' ' ’ -

take too ;iong:.and turnover tax would be ; extremely inflationary. ■ - ' ■ He said the association should look carefully at value-added tax, which would affect retailers more than anybody else. If a value-added tax of ,10 per cent were introduced for all goods and services, ■.; except for basic', foods, children’s clothing, • and ’ education equipment, there would be a reduction, of 32 per. cent in direct taxation.. -• , . -.'’Answering -a »question -from ’ the floor, Mr Cox-agreed: that the - Value-added tax.-would cost . more, than the; present' system to..administer. Thdfe

i would also be ■;a.Torig? intro/, ductory period. . ‘ ■ “To the retailer' it would. spell a lot of -problems- It ■ ".basically makes■ the.retailer. a tax gatherer . over and ■ above ■ the .taxation that • you ■ normally .gatherJrom wages . under' the P.AIY.E.' ’system, he said/; . •'? ' ■ ?'The advantages would be that -immediately? $BOO. -million worth of sales tax would 4

be introduced into the system together with the additional 32 per cent tax not deducted from wages, salaries and profits.”./;. ; ■?, '■-, Earlier in the day the director of advocacy for. the Employers’ Federation (Mr Max Bradford), outlined pro- ' posals for industrial relations i reached in talks between the Employers’ Federation, the Federation of Labour, and the Government' last year. The proposals involved having industry. groups, rather ’than craft-based unions as at' present, which would mean areduction in the nurribers ofawards and agreements negotiated. • ; ' •• Mr Bradford'- urged/the..

association to look into whether the wholesale and retail trades could be as. a single industry. ’ group. With 176,000 establish- ■ ’ jnents employing 40,000 people, it would be the single ; biggest industry group ir. ■ New Zealand. ,y'lt would be up to the industry to decide whether a I

further breakdown was necessary or desirable. However, he pointed out that fragmentation often worked against, employers.

The three main unions involved in the industry — the Storeman and Packers’ Union, the Drivers’ Union and?, the Shop Assistants’ ' Union — were well on the way, to forming a joint union. ’- Mr Bradford said the 1980 s would be a time of rapid change in the retail industry. Two changes, which were ; most important from the industrial. point of view were “no” frills” food barns and . generic marketing, which involved products being sold - under .. the retailer's own name. '' . .

In “no, frills” food barns, which had already -been built in J Auckland, staff could be reduced from the usual 35 or 40 to-only, eight or 10, . \ ? .-•The. conference which ended' last evening, passed a remit calling for a preliminary? report on the feasibility of holding , a $1 million food fair in Auckland in 1983.