Long-awaited tax news probably out on Aug. 20

Press, 7 August 1985, Page 1

Long-awaited tax news probably out on Aug. 20

By

MICHAEL HANNAH

in Wellington

The Government intends to present its tax reform package in Parliament on Tuesday, August 20, the Acting Prime Minister, Mr Palmer, announced yesterday.

The timing is provisional, depending on the agreement of the Opposition to a presentation at 7.30 p.m. on the Tuesday evening, with arrangements for equal time to be given to an Opposition spokesman to reply to the financial statement by the Minister of Finance, Mr Douglas. The proposed date, however, means that a rise in the minimum wage will be decided and probably announced before Mr Douglas 4 presents his financial statement.

A rise of $75 to make the minimum wage $175 a week has already been tipped by the Prime Minister, Mr Lange, though the issue is still being discussed in the tripartite wage talks. The minimum wage has been a central issue in the

wage talks, which are due to end by August 18, though they are likely to close on Friday, August 16. The wage round will then begin, with parties knowing both the new minimum wage and the Government’s proposed tax changes for next April and October.

The minimum wage is considered likely to relate to the tax reforms Mr Douglas will announce, particularly if some reform of social welfare benefit payments is included.

No indication was given yesterday of the date for the introduction of the goods and services tax legislation, and the announcement of the tax rate, which are expected about the same time as the financial statement.

However, it is most likely that both the GST rate and the tax reforms will be known before Government members head for the Labour Party’s annual conference, to be held in Christchurch at the end of this month. A full debate on economic issues is still expected at the conference, following on from heated exchanges at earlier regional conferences over GST. The Government will be banking on the tax reform package to take the heat out of the debate to allow an endorsement of the tax measures by the party conference.

Mr Douglas refused to give away any details of his proposed tax statement yesterday, when pressed by Opposition questions in the House. But from his answers, it is evident that some changes to tax rates will apply from next April to offset the tendency for inflation to push taxpayers into higher tax brackets. Mr Douglas was asked whether he intended to use the revenue the Government gains from this movement,

known as fiscal drag, to offset the effect of high wage demands. He replied that his statement later this month would detail the Government’s proposed changes to income tax rates. He said he was very conscious of fiscal drag. The future of tax exemptions on life insurance and superannuation seems unlikely to be included in the financial statement. Answering a later question, the Associate Minister of Finance, Mr Caygill, said that the preparation of a discussion document on the taxation of superannuation schemes was taking longer to complete than was originally expected. The Opposition spokesman on revenue, Mr Michael Cox, asked whether Mr Caygill was aware that Treasury officials were saying the document could be “some months” away. Mr Caygill said he was not aware of these statements, and would only say that the document was “some little time” away. He said the document would be released, however, once it was completed.