Idea to drop company tax ‘totally bizarre’

Press, 19 February 1986, Page 23

Idea to drop company tax ‘totally bizarre’

PA Wellington The Minister of Finance, Mr Douglas, has dismissed Opposition suggestions that company tax could be abolished as “totally bizarre.” “Abolishing company taxation would create a huge incentive to conduct economic activity in a corporate structure rather than in other structures such as in sole trader or partnership form,” Mr Douglas said. The party would be creating huge scope for tax avoidance.

The newly appointed Opposition finance spokesman on taxation and revenue, Mr Doug Graham, told NZPA the party caucus had been looking at different tax reforms over the last 12 months.

Indirect taxation was the right direction to move in; GST was the wrong tax. “GST is going to cause such a great problem we have to be ready with an alternative just as soon as

possible,” Mr Graham said. “We have to look at the company tax structure and realise that shareholders own companies and that there are ways of taxing profits of the company without imposing the tax direct. on the company.” The caucus was also looking at a direct expenditure tax which, although it did not exist in any country at the moment, taxed those who took out of the pool rather than those who contributed. “I am not suggesting that that is going to be the tax that we advocate any more than I am suggesting that company taxes will be abolished,” he said. But Mr Douglas said there were huge practical difficulties with a direct expenditure tax “not the least being integrating it with other countries’ tax systems.”

Mr Graham said the Opposition was also looking at tax havens to help

local exporters. “If we find that exporters are unable to compete because of an inflated currency, high internal costs, or inflation, we should look at the way the Americans appear to structure their export industries,” he said. “They use the concept of a tax haven to ensure their success, and we are looking at that.” Mr Douglas, said tax havens would simply subsidise exporters at the expense of other taxpayers. “The National Party is desperately floundering for’ new ideas. It had better do its homework before it comes out with any more new ideas,” he said. Mr Graham replied, “I am a little disappointed with Mr Douglas’s approach, which has been a dogmatic insistence on his own present preference irrespective of the opinions of others as to the desirability of this type of tax.”