Flat tax ‘dead’

Press, 24 May 1988, Page 1

Flat tax ‘dead’

By

BRENDON BURNS,

political reporter

Any lingering hopes held by the Minister of Finance, Mr Douglas, for a flat tax rate were firmly nailed into a political coffin by the Prime Minister, Mr Lange, yesterday. In response to questions by “The Press," Mr Lange said there was now no proposal for a flat tax rate.

In February, when the new two-tier tax system with a lowincome rebate was announced to take effect from October 1, Mr Douglas said work would continue on the flat tax rate.

As recently as last month, Cabinet Ministers were confused about the future of the flat tax rate proposal. The Minister of Foreign Affairs, Mr Marshall, told "The Press” in April: "We clearly need to work out whether we are going to reconsider a flat tax rate fairly soon, because I am not sure that the Cabinet is clear in its own mind whether we just put it on the back burner or whether we abandoned it entirely.” Asked yesterday if the flat tax rate had been abandoned, Mr Lange said there was no proposal for such a tax.

Further questions about the tax were not relevant, he said. At the February press conference that announced the two-tier tax rates, Mr Lange said the flat tax rate could not be further developed until after the Royal Commission on Social Policy had reported. “The irony is that you don’t know whether the Royal Commission on Social Policy will come back and report in favour of a flat tax rate or a guaranteed minimum family scheme enhancement or not,” he said. The Royal Commission had said in March that it found arguments for and against the flat tax rate but further intensive scrutiny was required. With the apparent end to the flat tax proposal, its accompanying guaranteed minimum family income would also seem to have been quietly dropped. . These two measures were key elements in the radical December 17 economic package of last year.

Mr Lange’s clear preference was for a statement early in the New Year, but Mr Douglas successfully argued that the October stockmarket crash meant businesses needed earlier reassurance of the Government’s direction.

But Mr Lange remained unhappy with the package and cut short his holiday break, returning to his office on January

4. At a press conference on January 29 he accepted that aspects of the package had not been properly researched. Mr Douglas is in Ireland as part of his visit to Europe. He could not be reached for comment last evening.