Economic statement not properly researched: Lange

Press, 29 January 1988, Page 1

Economic statement not properly researched: Lange

By

BRENDON BURNS,

political reporter December’s economic statement was not properly researched, the Prime Minister, Mr Lange conceded yesterday, in announcing a likely delay to the introduction of the promised flat rate But interim cuts in existing personal and business tax regimes may be introduced on October 1. The timing of the GST increase to 12.5 per cent was still uncertain, he said. At a Beehive press conference, Mr Lange indicated he had not

been happy with all aspects of the December economic statement. It was his view that the statement’s immediate ending of tax concessions for superannuation, life and medical insurance required accompanying legislation. An article in “The Press” yesterday questioning the legality of the change had “wisely pointed out” the constitutional questions involved, said Mr Lange. The Government was now being advised on whether the tax concessions could be ended dur-

ing this financial year. Mr Lange said there were two reasons why flat tax rates might not be introduced in October. “I and the Government hav,e a choice, and the choice is to be politically proud and bulldoze ahead with a system where you could not be entirely certain that people would be winners.” Mr Lange said, for example, the December statement announced the planned change from Family Support to the Guaranteed Minimum Family Income (G.M.F.1.). But this new scheme to assist low income

families does not provide, as its predecessor had, for self-em-ployed people. The other reason flat tax rates may be delayed is the changed reporting time of the Royal Commission on Social Policy. It will now report next month on the key issues of income maintenance and tax reform, instead of reporting in full in September. This material can now be included in the Government’s tax benefit changes — but the time it takes to implement such changes mean this is unlikely by October.

Mr Lange would not be drawn on whether a three-month delay was likely in implementing the planned changes. "No, I can’t say that but there won’t be an inordinate delay,” he said. In the interim, reductions in the personal and company tax structures were possible from October 1. These would follow the Budget round and consultation on such issues as superannuation exemptions. Businesses were facing the closing of tax loopholes, said Mr Lange, and required tax reduc-

tions. “There will have to be a sweetener in that regard, of course, otherwise the disincentives of what we are proposing would impact too adversely on them.” He said caucus, which was briefed yesterday on the likely delay, was pleased to have the chance to make further input. “Caucus has a desire, and they will be accommodated in their wish, to have an active part in the perfection of those proposals.” He said the possibility of delaying the flat tax had first come

to his attention last week. He had talked to the Minister of Finance, Mr Douglas, and inquiries were made. Neither he nor Mr Douglas were prepared to “relentlessly’-’ pursue changes which might be inequitable, said Mr Lange. But the eventual changes would be “faithful” to what Mr Douglas had proposed in December. Business confidence would suffer because of yesterday’s comments, said the Prime Minister. Mr Lange said he was talking to the Attorney-General, Mr Palmer, about the question of the December statement’s announce-

ment which ended tax concessions for superannuation, medical and life insurance. He said he did not want to comment on whether people would still be able to claim exemptions for all of this financial year, if not next year. But yesterday’s article in “The Press,” in which Canterbury University senior law lecturer, Mr Philip Joseph, questioned the legality of the announcement, was commended by Mr Lange. “I think that the writer of that article has got a lot of technical insight.”