VAT in Budget?

Press, 1 November 1984, Page 26

VAT in Budget?

PA Wellington Introduction of a comprehensive value-added tax is likely in next week’s Budget, according to a preview published by the Wellington stockbrokers, Jarden and Company. Jardens say their analysis and predictions draw heavily on Treasury recommendations to the Minister of Finance in its “Ecomomic Management” papers. Implementation of a value-added tax would extend indirect tax to areas which are currently excluded such as food, clothing, footwear, furnishings and services. But it would see a lowering of sales tax rates on such products as cameras, computers, whiteware, brbwnware (computers, videos etc.), cars, boats and caravans.

Jardens say the thrust of the Budget will be to reduce

the internal deficit. Ways to do this will include reduced assistance to industry, adjusting of badlytargeted social welfare, housing and education expenditure, adjusted prices for State industries and removal of tax breaks on significant sources of income, as well as'restructuring indirect taxes by such methods as introducing VAT. Jardens say budgetry assistance to industry will be given a phase-out timetable similar to that given to SMPs. Cuts are likely in aid to forestry, fishing, mining and petroleum exploration, and the South Island transport subsidy is likely to disappear.

Cuts in Government spending on State enterprises offer scope for immediate savings. Cuts in social welfare spending are likely to include an end to

Housing Corporation interest concessions and National Superannuation for the wealthy. The family benefit may be taxed and wealthy families may have to pay greater education costs. Jardens do not expect a .capital gains tax to be imposed. Instead current tax exemptions are likely to be removed, including the insurance and superannuation deduction (including that for existing policies), fringe benefits, employee allowances and tax-free dividends. There is unlikely to be an increased tax on alcohol, and tobacco is also likely to escape. For the financial sector, Jardens expect the Minister to announce a broad policy of market liberalisation aimed at improving the efficiency of the financial system and the capital market.