Douglas defends tax changes

Press, 1 December 1988, Page 6

Douglas defends tax changes

By

OLIVER RIDDELL

in Wellington Taxation changes brought in by the Labour Government have been defended and promoted by the Minister of Finance, Mr Douglas, on. his overseas trip. At a Canadian Tax Foundation conference in Vancouver yesterday, he said the new system was much fairer and more secure. “We are replacing a tax system which appeared to be progressive with one which is progressive,” The tax base was broader. Distortions which discouraged people from working and earning, or which favoured one form of investment over another, had been reduced. In the last four years, the Labour Government had transformed New Zealand’s taxation system from one of the most burdensome, inefficient and unfair systems to one of the best, he said. The problems of lowincome people caused by the relative burden of a

broad-based consumption tax were best handled by redistribution via the income tax and benefit system. The same day GST had been introduced, substantial cuts in income tax had been implemented* and restructured social benefit payments had been increased by 5 per cent — the estimated net price impact of the new tax after removing existing sales taxes. Mr Douglas said New Zealand’s historical solution to its problems had been to socialise its losses and privatise its gains. In order to achieve its tax objectives, the Labour Government had had to reduce the high growth rate of Government expenditure, which represented the true tax burden, he said. Although expenditure and other policy moves had provided the Government with some room to maneouvre in the income tax area, more expenditure control was needed to reduce the deficit.