‘Better’ alternative to GST offered

Press, 2 December 1985, Page 2

‘Better’ alternative to GST offered

PA Wellington The New Zealand Democratic Party has launched its 1987 election campaign with the release of details of its proposed transfer tax, an alternative to GST. Mr Alisdair Thompson, the party’s spokesman on taxation, trade and industry, told party members at a function in Wellington on Saturday evening, that unlike GST transfer tax was “simple, efficient and extraordinarily cost-efficient.’’ It would be applied by charging 0.5 per cent each month on all types of withdrawals from monetary institutions, and would yield • the same take as that projected for GST — $2.7 billion gross. Mr Thompson said transfer tax had the advantage of costing nothing to collect or police, as it would be charged automatically

each month. It also would make real income tax cuts possible. Bank computers would do all the accounting, and the total collected each month would be direct-credited automatically to the Inland Revenue Department. Mr Thompson estimated that GST administration would cost the Government $54 million a year. . “A side benefit of transfer tax will be a reduction in the level and frequency of multi-million dollar short term financial speculations.

“This will move the money — such as that used to speculate in foreign currency dealings — into longer term loans to the private productive sector,” he said.

Answering criticism from political opponents that transfer tax would encourage people to revert to

keeping their money under the mattress, Mr Thompson said an individual withdrawing $2OO a week would pay only $4.66 tax a month. The party also outlined how it would spend the revenue from the tax.

The first $5OOO of income would be tax free, and a rate as low as 28c in the dollar would apply up to $30,000 of income. Above that a tax rate of 42c would apply. The party would increase the mortgage interest exemption, wipe the superannuation surcharge, and restore life insurance tax deductibility to its former level.

Wholesale taxes would be reduced by $2OO million, and the balance of the transfer tax revenue spent on further tax relief or reducing the deficit, Mr Thompson said.