Sales tax cut, prices to fall

Press, 27 March 1986, Page 1

Sales tax cut, prices to fall

Wellington reporter Radios, televisions, stereos, and a range of other goods will fall in price on Tuesday when the Government introduces the first step in its goods and services tax reform package. Wholesale sales tax rates will be cut to a flat 20 per cent from the present rates of 30, 40 and 50 per cent on some goods. The impact on retail prices will be varied depending on the tax and retail mark-ups. The Minister of Con-

sumer Affairs, Mrs Shields, said yesterday that most goods could be expected to come down an amount considerably bigger than the cut in the wholesale sales tax. That was because retailers tended to build into their margins some accommodation for the level of tax at the wholesale stage, Mrs Shields said. Alcohol, tobacco products, fuels and oil are not included in the tax cuts. Cars with an engine rating bigger than 1350 cc are the only vehicles to

have a sales tax cut, from 33 per cent to 30 per cent. The step will standardise the sales tax on vehicles. Price deductions on goods subject to the sales tax cuts meant that they would be closer in price to what they would be after the introduction of GST, said the Minister of Finance,-Mr Douglas. In some cases, there would be no change in the price of an item when the remaining wholesale sales tax on it was wiped and GST imposed at 10 per cent.

The Ministers issued a list of price reductions on selected goods which they expected to see flow from the sales tax cuts: • A 22 inch colour television retailing at $1299, with a 40 per cent retail mark-up, could be expected to fall almost $lOO. Colour televisions previ-

ously attracted sales tax at 30 per cent. ® A Walkman-style tape recorder selling in shops for $BO with a 30 per cent sales tax and mark-up, should fall about $6. © About $4 can be expected to be knocked off a $26.95 calculator on 40 per cent sales tax and mark-up. A cigarette lighter retailing at $1.95 should cost about 39c less.

• A $385 engagement ring should drop about $55, assuming 40 per cent mark-up. • A $49.95 camera, previously taxed at 50 per cent, and assuming a 30 per cent mark-up, would cost about $lO less. A $657 camera marked up 40 per cent could be expected to drop about $l2O. ® Photographic film would drop between 70c and 90c on $5 and $6 colour print film, assuming mark-ups of 30 per cent.

Mr Douglas said the Government intended to phase down vehicle sales taxes “as and when revenue and economic conditions permit.” No reason existed why vehicles should be subject to higher tax rates than other commodities as they could no longer be regarded as a luxury item but were an important item in the budgets of New Zealand households, Mr Douglas said.

The announcement of the wholesale sales tax cuts has been carefully timed to give retailers the Easter break to prepare and to coincide with the start of the new financial year on April 1.

Mrs Shields said all retailers would be able to get agreement with their wholesalers to in effect sell back existing stocks and repurchase them at the lower wholesale price.