Large tax cuts predicted

Press, 15 July 1982, Page 2

Large tax cuts predicted

PA Auckland Substantial tax cuts for most wage and salary earners, and a large measure of tax reform, should be in the Budget, according to one of New Zealand]s leading tax experts, Professor Geoffrey Schmitt. In an interview, Professor Schmitt, who is chairman of the Planning Council’s economic monitoring group, said that the Budget Would be a “happy” one, even though an across-the-board wholesale sales tax was on the cards. Apart from the Prime Minister’s commitment to reduce personal tax .as part of

a wage-tax trade-off, he said, Mr Muldoon seemed to favour a whole new tax structure to lighten the burden on middle-income earners. “I think we are going to see a substantial lowering of the personal, income tax taken by the Government — perhaps by $lOOO million or 20 per cent of the total take — which means a reduction of income tax for just about everybody,” Professor Schmitt said. He said that Mr Muldoon seemed impressed with the report of the task force on tax reform (of which Professor Schmitt was deputy chairman), and it was likely a number of the proposals

would be incorporated in the Budget. These include: @ Aiming for a more-or-less fiat rate of tax on middle-income earners. ’ @ Progressive move to a tax on consumption such as value-added tax (V.A-.T.) or a flat-rate wholesale-sales tax as a first step. ® Voluntary aggregation of a husband’s and wife's income (for tax purposes only) being taxed say on the rate of 1.7 persons instead of as two persons. “Because of the wage-tax trade-off, I do not think the Prime Minister will try to recoup all the fall in the personal income tax take by

a wholesale sales tax. My feeling is that he will try to get about half of it back,” Professor Schmitt said. A wholesale sales tax would be difficult to enforce if it were selective and it would be better, and fairer, if it applied on all items. V.A.T. which was applied selectively in Britain, was difficult to enforce and required one V.A.T. officer for every hundred V.A.T. payers. On the aggregation of a husband's and wife's income for tax calculation, Professor Schmitt said that Mr Muldoon had shown considerable interest, although he had suggested it might be compulsory rather than voluntary.