The Dominion. THURSDAY, JANUARY 26, 1933. THE SALES TAX

Dominion, Volume 26, Issue 104, 26 January 1933, Page 8

The Dominion. THURSDAY, JANUARY 26, 1933. THE SALES TAX

Less than a year ago- there was some discussion of the sales tax. At one stage it seemed likely that it would be applied by Mr. Dowme Stewart in order to raise the £2,200,000 of revenue he required from taxation. At the end of April, however, Mr. Stewart was able to announce that he could dispense with new forms of taxation by pledging Soldiers’ Settlement mortgages with the banks for an equivalen amount.

If, however, the ostensible deficit in the coming financial year is to be kept‘within manageable; proportions, resort to the sales tax may be difficult to avoid. Most industrial nations, excepting Great Britain, have already had recourse to this fiscal device. Within t e British Empire it has been used by both Canada and Australia, an has proved extremely lucrative to their Treasuries. New Zealand s industrial development is by no means so advanced and that fact mav qualify the revenue of a local tax. The case for and against the sales tax has been conveniently summarised. It is favoured because it taxes all alike; is easy to collect; provides a large and steady revenue regardless of profit fluctuations; is comparatively painless to the consuming public; and makes all citizens tax-conscious and therefore economy-conscious. Opposition is offered on the grounds that it overburdens the poor man who must buy necessities; underburdens the rich man who will net feel it in proportion to his wealth; and restrains consumption and therefore production. How far these pros and cons apply must largely depend, of course, on how the tax is levied and on the scope of exemptions.

Governments generally have been reluctant to adopt the sales tax. It is a post-War development forced on by financial necessity. Once admitted, however, and its rich yield tested, it has usually proved ineradicable. In recommending it to the Australian Premiers’ Conference, the advisory committee of treasurers and economists said : “In ' an emergency of this kind, when income taxation is reaching its limit, ' recourse must be had to some form of taxation which falls on everyone’s consumption without directly increasing the cost of production to any considerable extent.”

That is just the sort of recommendation that might be expected to appeal to a hard-pressed Finance Minister at the present juncture. Practically every'other tax resource has been exploited to the limit. New revenue must if possible be found to set off against new budgetary obligations and, perhaps, tax relief given in other directions. But the new imposts should not bear directly on production toward whose easement the whole Government policy is directed.

/ . Hence the sales tax seems to fit the prescription. It is, unfortunately, open, to the objections already stated. It will add to consumers’ and, therefore, ultimately to producers’ costs and, in its initial stages, must cause further disturbance and unsettlement to trade and business. Yet of many evils it may be the least, especially U care is taken to apply it on the single-turnover system and if small articles of daily necessity are exempted.