90 p.c. of tax paid by those on $25,000 or less

Press, 9 August 1985, Page 4

90 p.c. of tax paid by those on $25,000 or less

About 90 per cent of all income tax that was collected was paid by people earning $25,000 or less, the Under-Secretary of Finance, Mr de Cleene, told Canterbury University students yesterday.

He told about 80 students that the goods and services tax was to be introduced because the present tax system put the greatest burden on the “working class.” It had been proved in many countries that progressive marginal tax rates did not collect income tax. There was “increasing scope” for tax avoidance and evasion.

“The big people do not pay tax. If they do they should sack their lawyer or accountant,” said Mr de Cleene. The Government would remove the avoidance provisions by taxing somethine that could not be avoided—spending. “Even the lawyers and politicians cannot escape a spending tax,” he said. Mr de Cleene was speaking at part of a forum on GST organised by the Canterbury University Students’ Association. The deputy leader of the Democratic Party, Mr Knapp, spoke at

the university on Wednesday, and speakers from the National Party and unions will be arranged.

Mr de Cleene said he had seen the new tax figures which would be released on August 20, and they included cuts in tax rates.

He would not say at what level GST had been set, but in reply to a question said there would be no need for the rate to be increased later, “at least not under a Labour Government.” Mr de Cleene had been an advocate for a GST rate of 15 per cent because it would give “enormous” income tax cuts for people at the bottom of the scale.

The present rates did not encourage people to work. He said some truck-drivers were paid less than someone “sitting at home” on the domestic purposes benefit. "We are losing a lot of skilled labour like that, especially among women.”

The high tax rates for people earning more than $25,000 also discouraged people from working harder. Top marginal tax rates would be reduced.

Mr de Cleene said he was “floating” the idea of paying some of the benefits of GST and lower personal tax

rates to the “unpaid workers” at home. “We are disturbed that if we introduce GST it will hit the woman with the kids at the supermarket counter but the benefits would be paid back to her old man who then spends it at the pub and T.A.8.,” he said.

Few items would be exempt from GST so that the system could be kept simple and could not be avoided, and to keep down the cost of administering and complying with the tax. “If you exempt food do you include chocolate and caviar? When you eat at a restaurant does the costs of food and wages have to be separated from the price of the meal?”

Although requests had been made to exempt books from GST, no-one had been able to define books.

“You can’t just say books are printed matter—so are micro chips and computer software. What about books about Murray Ball’s Dog and ‘Penthouse’ magazine?”

The introduction of GST had been delayed to allow for more public input.

“But it will be a better bill for that and it won’t have to be amended every year like some sloppy legislation,” Mr de Cleene said.