Sir Robert criticises tax timetable

Press, 12 March 1985, Page 8

Sir Robert criticises tax timetable

The Government had set itself too tight a target for introducing the goods and services tax, said the former Prime Minister, Sir Robert Muldoon, yesterday. The Inland Revenue Department’s resources would be stretched and taxpayers and their advisers would also have a difficult task to get ready by the starting date of April 1,1986, he told a seminar of accountants in Christchurch, NZPA reported. Most countries that had introduced a value-added tax had had an initial period of considerable confusion. In most, it had led to a change of Government at the next election, he said. Sir Robert said that the most important defect of the introduction of the goods and services tax was that there was no agree-

ment yet that transferring revenue from personal income tax into a tax which appeared in costs, would not be taken into account in wage fixing. The Government had no deal with the Federation of Labour and would face wage demands based on the increase in the consumer price index caused by the tax unless some deal could be struck during the next 12 months, Sir Robert said. He believed a White Paper and draft bill on the tax would be made public in about a week. About two or three months would be given for public discussion before final decisions were made and announced in the second half of the Budget in September. The tax would begin on April 1, 1986, with corresponding income tax re-

ductions. “My belief is that the Government has set itself too tight a target, both from my knowledge of the operation of the departmental mechanism in this country and also from the experience of other countries in introducing this type of tax,” he said. The resources of the Inland Revenue Department would be stretched. The department would also be reviewing the personal income tax scales and law, looking at negative income tax as an alternative form of concession to low income families and working on the reform of company taxation and various capital tax options mentioned by the Minister of Finance, Mr Douglas. Taxpayers and their advisers would also have to be

prepared by the starting date. All kinds of mechanical equipment would have to be recalibrated. Sir Robert said that the Government prepared for four years for the introduction of decimal currency, a similar exercise. The effect would be to reduce the tax on what was broadly termed luxuries while imposing a new tax on day-to-day necessities. The tax on alcoholic beverages could, for example, come down, while a new tax was imposed on water from the tap, he said. Sir Robert said that the cost and inconvenience factor would have the greatest impact on small businesses with relatively small turnovers, especially those which had only rudimentary records and a wide range of old stock of various kinds.