GST will not boost total tax revenue, says Mr Douglas

Press, 1 June 1985, Page 2

GST will not boost total tax revenue, says Mr Douglas

Bv

GEOFF MEIN

in Timaru The total tax revenue collected by the Government will not be increased by the goods and services tax, said the Minister of Finance, Mr Douglas, yesterday. Speaking at by-election meetings in Timaru, Mr Douglas said GST was a shift in the source of revenue from a tax on income to a tax on spending. Wage and salary earners would get back all the money the Government collected in GST. “We are looking at proposals where a one-income family on the average wage will effectively pay no income tax,” he said. GST would allow a return to a tax system that rewarded effort, gave the right incentives, and shifted some of. the burden away from wage and salary earners. Mr Douglas said GST was emerging as a dominant form of indirect taxation throughout the world. When run at a single rate on a broad base it gave the greatest security against evasion and the least prob-

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lems for business and tax administrators.

GST was the only system that would raise sufficient revenue for the Government to implement meaningful tax reform, he said. Taxes similar to GST

were being used in up to 40 countries, and several more planned to introduce them. The tax worked equally well in developed industrial nations and less-developed countries. The Government planned an extensive education programme to assist traders when the tax was introduced in April next year. “This tax will not confuse people. It will be simple,fair, and easy to operate for large and small businesses alike,” said Mr Douglas. He rejected suggestions that taxing basic necessaries would hurt low-income earners more than those at the top end of the income scale. Surveys showed that out of every $lOO spent on food in New Zealand, the richest 10 per cent of households spent $l2 and the poorest 10 per cent spent only $5.50. For every $lOO spent on clothing and footwear, the richest group spent $19.50 and the poorest, $2.50. Mr Douglas said that exempting such items from GST would pass benefits to the rich much larger than to those who most needed help and protection.