FBT ‘fizzer’ warning to Government?

Press, 12 August 1985, Page 35

FBT ‘fizzer’ warning to Government?

The failure of many businesses to file first-quarter Fringe Benefit Tax returns holds a GST warning for the Government, a British tax accountant believes.

Mr Tony Anderson, a VAT specialist, said that the low volume of FET returns suggests that many business people either do not understand the new tax or do not take it seriously. This was a pointer to the Government on the need to ensure widespread understanding and acceptance of the Goods and Services Tax. If the Government did not listen carefully to feedback from the business community over GST, it would have

the same non-acceptance problem as had already shown up over FBT. This would have very serious repercussions in terms of Government revenue expectations and an orderly transition to the new system. The forthcoming select committee hearings would provide an opportunity for business to make its views clear, and the Government should take careful note of any practical suggestions, he said.

Mr Anderson has joined the Auckland office of Arthur Young, chartered accountants, as a senior tax consultant from the firm’s

London office. He will be giving members of the firm and its clients the benefit of his experience with the British VAT system.

Mr Anderson also sees problems for the Government if current rumours about GST being introduced earlier than the announced date of October, 1986, prove to be true.

An earlier introduction without warning would seriously jeopardise public acceptance of GST, he said. It would compound implementation problems for the business community and create instability and confusion for the consumer.

Even so, he believes that GST in New Zealand offers a better deal than VAT in Britain could ever have done, because of its greater simplicity. He commends the principles of limiting the number of rates tc- two—zero rating and a percentage rate yet to be announced—and of applying the tax to the widest possible range of goods and services. Ireland, for example, operates five different rates, said Mr Anderson, while Britain, though it also applied only 15 per cent and zero, had had to allow many zero-rated categories, ex-

emptions and special situations because of European Community guidelines.

In New Zealand, although the basic necessities would be subject to the tax, it was expected that price increases would be covered by income tax relief. Overall, it would be a fairer system and one that consumers would more readily understand and accept.

Mr Anderson said that to achieve the tax savings necessary to satisfy low earners on the one hand and high-tax payers on the other, the GST rate might well have to be as high as 15 per cent.