Tax payments to be $500M

Press, 20 February 1988, Page 33

Tax payments to be $500M

PA Wellington Personal tax payments would rise $350 million in 1988-89 as a result of the tax changes announced in December and last week, said the Minister of Finance, Mr Douglas. Company tax payments would go up $l5O million, according to figures he gave. Over all, the tax changes would bring in a total of $5OO million more to Government coffers. Personal tax cuts to 24c and 33c, announced by the Government on February 10, would reduce the tax take $390 million, Mr Douglas said. However, another $740 million

would be gathered as a result of changes to provisional tax rules for personal tax and the removal of concessions for superannuation contributions, work-related expenses and personal rebates. Cutting the business tax rate from 48c to 28c would bring company tax payments down $770 million. But that was more than made up for by provisional tax changes, taxing superannuation funds and other business tax measures, which would bring in $920 million.

As a result of the extra income the Government would save about $3O

million in debt-servicing costs. “These estimates are based on very conservative assumptions about the impact of the tax measures announced,” Mr Douglas said. “They also take into account the likelihood of less buoyant economic conditions in the year ahead.” The tax rate cuts were paid for mainly by abolishing superannuation tax exemptions and tightening up the rules for assessing provisional tax., “People can ’ see from the figures that the benefit of closing tax loopholes and concessions IS for the

most part being returned in lower marginal rates,” Mr Douglas said. The Opposition spokeswoman on finance, Miss Ruth Richardson, said the figures “expose as fraudulent the Government’s claim that it was delivering tax cuts to New Zealanders.” “The tragedy of the Minister of Finance’s disclosure is that the $530 million of extra tax will have to be paid at the expense of business and job opportunities.” Mr Douglas knew business prospects were , bleak, but he was heaping fresh costs on to the private sector’s shoulders. Q

“When the economy is flat and new taxes must be paid only one thing can give — job opportunities,” she said. Mr Douglas also said the figures did not take account of expenditure savings, asset sales and plans to pay off national debt announced in the December 17 economic statement. The asset sales and debt retirement programme would save a “considerable” amount in debt-servicing costs because the interest costs on those investments were much higher than the dividend the Government received from the ?ssets.