Govt advice to Aust on tax scheme

Press, 15 May 1985, Page 12

Govt advice to Aust on tax scheme

NZPA-AAP Canberra The New Zealand Government, struggling to gain acceptance for its planned goods and services tax at home, has been handing out advice to the Australians about how to set up their own indirect tax scheme. The Australian Federal Cabinet has begun considering a draft White Paper on tax reform which is expected to be released publicly towards the end of this month.

The paper is believed to contain three options for a broad-based consumption tax—a value added tax, a general tax on goods and services, and a retail turnover tax.

New Zealand has given the Treasury information on its plans for indirect taxation and the paper is believed to include observations on indirect taxes in Britain and the United States.

The White Paper has been prepared to set the ground for the national tax summit conference to be held in Canberra in July. The draft paper contains a detailed analysis of areas of the service industry which could be taxed. These include such things as restaurant meals, car servicing, and rent payments. However, mortgage repayments on the family home are believed to have been excluded from consideration. The paper estimates what revenue will be obtained from extending indirect taxes, how many collection points would be needed, the costs of administering the different options and how they would affect low income earners. The Prime Minister, Mr Hawke, and the Treasurer, Mr Paul Keating, both support a tax on consumption to allow the Government to make further cuts in P.A.Y.E. income taxes. Meanwhile, the Australian Council of Trade Unions’ senior vice-president, Simon Crean, has reiterated his opposition to the package put to the A.C.T.U.’s tax committee by the Government. Mr Crean indicated that the A.C.T.U. wanted to es-

tablish that tax reform could not be achieved by widening the income tax base before it considered other options. The unions would have to be able to show their members that they would be better off because of tax reform and had argued against a consumption tax because higher income earners would have been the main beneficiaries. The A.C.T.U. opposed increases in indirect taxes which would result in inflation and which would be regressive. Social welfare lobbyists opposed broad based consumption tax in a paper

listing their objections: • It would have a heavily regressive impact on low income earners and this could not be compensated effectively. • It would have a seriously adverse effect on inflation and employment. • There were other preferable ways of obtaining enough tax revenue to phase in selective income tax cuts. • It would not substantially reduce tax evasion and avoidance. • The current level of indirect taxes was already high by comparison with other countries. • It would increase poverty traps.