An error partly corrected

Press, 18 December 1985, Page 20

An error partly corrected

The Government’s belated decision to bring forward the date on which it will reduce import duties on several hundred consumer items — from January 1 to tomorrow — goes some way to sorting out the tangle created by its earlier announcement. The Minister of Customs, Mrs Shields, and the Minister of Trade and Industry, Mr Caygill, have earned some credit for acknowledging that the original timetable was causing considerable disruption to trading and for endeavouring to correct this; they must also shoulder at least some of the responsibility for creating the problem in the first place.

Almost immediately upon the announcement being made last Thursday that duties on a wide range of consumer items would be reduced, shoppers, retailers, wholesalers, and importers began to react. Many retailers of items at present incurring high levels of duty, such as camera equipment and video recorders, anticipated buyer resistance pending the arrival on the shelves of lower-priced stock. The retailers accordingly marked down their stock and took the loss, just to clear their shelves. Within days of the announcement, new imports of high duty goods began to pile up on the wharves and at international airports. The importers were prepared to leave goods unclaimed — and unchecked for customs duty — until after the lower duties came into force on January 1.

These and other distortions in the market should have been foreseen by the Government or its advisers. The time between the promise

of lower duties and its application was certain to be disruptive. It is precisely for this reason that the common procedure for announcing changes to taxes, duties, and other Government imposts is to announce the change after the close of business for the day and have it take effect at some convenient time — usually midnight — before the start of business the following day. It appears that the Government was rather rushed in its decision-making this time; the subsequent removal of some items from the 48-page list of goods on which duties were to be reduced — because it was found between Thursday and yesterday that comparable articles are made in New Zealand — tends to support the notion of hasty drafting.

Although the rearranged timetable will reduce the disruption to trading that would have occurred otherwise, it does not address the question of whether a rebate should have been made on duties paid for items on the shelves. This would seem a fair way to even out another of the distortions created by changes. Importers, wholesalers, and retailers all stand to make a loss on goods in stock that have incurred the higher rates of duty. The amount of money the Government would have to pay back would not be large. The whole gamut of duty reductions will cost only $6O million a year. An audit of existing paperwork should be all that is needed to confirm eligibility for the rebate. The pity of it is that the idea of a rebate was not applied at the outset when stock-taking would have been much simpler.