Tax increase ‘reneging’

Press, 23 February 1989, Page 21

Tax increase ‘reneging’

PA Wellington Raising income tax rates this year would be a “breach of faith” by the Government, the chairman of the Law Society’s taxation committee, Mr Don Simcock, said yesterday.

The Government would be reneging on its commitment to have lower tax rates as a trade-off for broadening the tax base, Mr Simcock said. The Minister of Finance, Mr Caygill, and his predecessor, Mr Roger Douglas, had said lower rates would come as taxavoidance loopholes were closed and more income brought within the tax net.

Mr Simcock said his committee had made extensive submissions on the Tax Reform Bill No. 6, which introduced a new international tax regime, last year. “The select committee chairman repeatedly made comments about the trade-off between tax

rates and the amendments that were being introduced,” he said. New Zealand taxpayers were being asked to shoulder the burden of new and administrativelycomplex taxes, like the international regime, and lower rates had been offered as a compensation for this. “We have some concern about the attitude of taxpayers. There could be a hardening of attitudes over what could be seen as a reneging,” Mr Simcock said.

Raising tax rates could be self-defeating for the Government if it meant taxpayers increased their efforts to avoid tax. The Law Society was not concerned about whether tax rates should be higher or lower, but about the process of law reform in which undertakings were given. “I would expect tax rates to remain stable for some years,” Mr Simcock said.