Single rate recommended rate recommended

Press, 22 June 1985, Page 1

Single rate recommended

rate recommended

PA Wellington The Brash panel’s recommendation that there be a single rate of GST with no exemptions — except for land and residential rentals — is in line with,Government policy. “Both multiple rates and exemptions would increase compliance costs very substantially,” the report found. The panel made no recommendation on how much the tax should be.

Dr Brash’s panel considered 1067 written submissions before reaching its findings. The report recommended a threshold of $20,000 above which taxpayers would be liable to register and to charge and account for GST.

“A threshold of $20,000 per annum is low enough to ensure that virtually all full-time traders are ‘within the system,’ thus minimising unfair competition with other small traders just above the threshold,” the report said. The report said the level of $20,000 a year of taxable supply was high enough to exempt most hobbyists, part-time traders, and many non-profit organisations, where compliance costs

would be out of all proportion to the revenue to be gained by taxing this output. The report found that GST should be applied to rates.

The report found it would involve significant distortions if privately run rubbish collection companies were obliged to pay GST on their charges, while a similar local authority service was subsidised by being funded in part by rates on which no GST had been paid. However, the report noted that many of the local authorities which made submissions to the panel were expecting further consultation with the Government on the rating issue. The report found it would seem simplest to treat the different parts of central Government in the same way as it was proposed to treat different parts of a large company with zero rating of transfers within the company.

“This way input taxes could be claimed back by each department in the usual way,” the report found.

Mr Douglas said exporters whose exports repre-

sented a minimum of 75’per cent of total sales should be permitted to lodge a monthly return.

He said the Inland Revenue Department would give special priority to the issue of exporters’ refunds. The report suggested GST paid on goods exported should be refundable because of the zero-rating proposed for exporters. Mr Douglas agreed with the committee’s recommendation that the procedure for writing off bad debts under GST should be the same as that existing under the Income Tax Act, 1976.

It was suggested by several people in their submissions that because of the significant expenditure to be incurred on new equipment, the Government should make some contribution to the purchase of that equipment.

Mr Douglas said assistance in this area would be similar to that provided for the introduction of metrification and decimalisation. In 1967, when decimal currency was introduced, the conversion costs of existing cash register equipment were deductible for tax purposes.

Another recommendation agreed to by Mr Douglas involved gifts of cash, goods, and services, and the sale of gifted goods and services, not being regarded as involving taxable supply. The panel saw no justification for sports or service clubs being able to claim GST paid on their goods and services bought while not being required to charge GST on sales. Referring to companies, the report said the rules for group companies should be similar to those used in the Income Tax Act. Commenting on the submissions. generally, the report noted that the most common areas of concern expressed involved: • The high cost of complying with the legislation. • The consequences of taxing particular goods and services. • The cashflow impact of GST on some activities. The report noted that by far the most widespread concern about the proposed form of GST related to the perception that it would impose very heavy costs on those obliged to account for thp fay

1C L.CIA. Further report, page 9.