LABOUR HOSTILE

Evening Post, Volume CXV, Issue 38, 15 February 1933, Page 10

LABOUR HOSTILE

[TAX ON CONSUMPTION

COST'OF LIVING FACTOR

ME. HOLLAND'S SPEECH

'■•■'• 'Art assertion that the Sales Tax ■■'Bill-violated the solemn promise made by the Prime Minister in his Budget speech of October last that there would be no further taxation imposed during the current year was made by the Leader of the Opposition (Mr. H. E. Holland) in the House of Representatives last night. In stating Labour's antagonism to '. the Bill, Mr. Holland contended that the tax was an iniquitous one in that it burdened the poor more heavily than the rich, and was cumulative in its effect's. .•■•.Mr.' Holland said that the Hon. W. Downie .Stewart, in his Budget of 1927, condemned the sales tax on the ground that :it would not be as equitable as the then tax on income, and that "such a tax being on both luxuries and necessities, must hit the poor (who have ■ a smaller margin beyond necessary expenditure) more- heavily than the rich." . Certain newspapers had taken exception to Mr. Holland's ''attitude on the sales tax, arid the editors of these papers showed a lack of economic knowledge that was amazing. The tax was paid in a way that :. " . was calculated to blind the mass of the people to the fact that they were being taxed, and'they were prone to regard the" matter as one of- higher priced goods/ It was not aj'newtax, and Mr. Holland showed that it had been imposed from the earliest times, but that popular discontent had invariably prevented it'from becoming permanent. Egypt and Rome had both levied a sales tax in the face of the antagonism of the people, and in France its im- ' position from time to time had resulted in ' widespread popular discontent and rioting. -. ■ Commenting on'the Spanish sales tax, __dam.' Smith, writing in the eighteenth • century, when the tax was 6 per cent., attributed the decline of Spanish agri- • culture to its effects, and it had also been debited with the ruin of Spanish manufactures. The extension of the sales-tax: to the Netherlands was the occasion of a furious Dntch .Tevolt which had asserted the independence of Holland.- In Germany, tiie tax had led to -so many abuses that it soon had to be' abandoned, and in the. United " States, during the Civil War, ■it Was dropped because of its violation of all , the fundamental principles of taxation • and its adverse effect on prices. '. ■" TWO PRECEDENTS: "A commodity tax in England, had been,lifted by-Gladstone, and it was considered that his action in reducing the: multiplicity of taxation which had been imposed by his predecessors had given him his-chief title to fame. The- • sales tax prevailed, in both Germany -arid Bussia, and it would be interesting to know whether the Prime Minister, would; be prepared to teE a Tory audience why he had followed the lead of these two countries. It was not ' until 1930 that Australia was misled in : the same direction. The tax was in- , .traduced by.Mr. Scullin,.who had made .the same apologetic kind of speech as the Minister of Finance had when mov- ' ing the second reading. The' rate in Australia was originally fixed at 2. •per-cent.- The Labour Party in New Zealand did not. hesitate to condemn .any Labour. Government when it had , done something wrong, and Mr. Scullin ' had wrecked his Government by acting "~-~~~.-r.ri': the' advice of- badly-informed ,pe,ople. , , It, was .worthy of note, added Mr. ', Holland, that whenever the sales tax had been introduced, it had been levied ■ initially at a low rate, and.had.after- ' wards been increased. •" New Zealand ■ had imposed; a high rate from the'be--'ginning, and would like an assur- : ance from the Minister of Finance that : this rate was not to be lifted higher in '. years to come.- In Canada, the sales tax had .been adopted since 1920, and the rate had moved up and down, the repeated reductions constituting the .proof of its unpopularity. At one time "it constituted 24 per cent, of the national revenue of Canada. "MEDDLESOME MEDIOCRITY." "The rate in Australia," said . Mr. Holland, -.*' was increased from 2_. ' per cent. —to 6 per cent., and -there is a danger of this "history being . repeated in New Zealand. The increase in the sales tax ; was . recommended to the Australian Premiers' Confererice by" that meddlesome -mediocrity' among economists, Professor ;D.. 8.. Copland, along, with certain others. It will be remembered that Professor Copland was. sent here by the Bank of New South Wales to advocate -the pegging up of the exchange, rate." For the year 1931-32, the yield had, been £8,425,067, the estimate being £8,500,000. This was a remarkable,feat in estimating. How- - ever, the,then Prime Minister of Australia, Mr. Scullin, did not include the sales tax in- a Customs Bill. He made .'it. a separate measure, and gave the House an opportunity to debate it in that form. The reason why it,had been_ brought down in the Customs resolutions in.New Zealand was in orderto^ rush it through the House in the initial stages, and so prevent' objections being, made to the members of the' Coalition. It was idle to say'that the Government's action- had been in order to anticipate business people ' making transactions . before the measure became law. Mr. Holland.said that the, scope of -' sales'and'turnover taxes varied greatly. ' Some extended to all transactions, both wholesale and -retail, and others to wholesale transactions only. Certain taxes"-included both goods and services, while others included only goods. "This Bill," he said, "provides only for the taxing of certain classes of goods. -It allows services to go free. While Tan. not in favour of the- tax ■ being applied, I think it is manifestly . -unfair to apply it to the sale of commodities by business people while at the sametime the services of lawyers, doctors, insurance people, commission agents, and others are exempt. There is no.- doubt- that the tax will be cumulative or" pyramided.' A general sales tax of 5 per cent, will, in the end, constitute" far more than 5 per cent, of the original selling price. Professor Seligman says: 'The general sales tax is a. discredited remnant of an outworn system; it is essentially undemocratic in its nature; and it would, if enacted, exaggerate rather than'attenuate the present inequalities of wealth and opportunities.'" . COST OF LIVING. Mr. Holland said that the Prime Minister's contention that, the tax would mean no material increase in the cost of living was not borne out by the experiences in other countries. In Canada, for instance, it had been estimated that in the automobile industry the tax paid-amounted to 15 or'2o per cent, additional on the consumer's price, and. this could also happen under the Bill now before the House. There was no doubt that the tax was highly productive, but it was equally unpopular because it was shifted to the purchaser, and so acted as a general .consumption tax, the weight of which was, of course, the most difficult for "

the poorest citizens to bear and the least onerous for the well-to-do. In Australia, the tax had proved so extremely unpopular with nearly all sections of the community that the present Commonwealth Government had promised that it would be the first tax to be repealed. In its 1931-32 annual report, the Melbourne Chamber of Commerce stated: "It would be difficult to recall any other piece of legislation in the history of the .Commonwealth that has caused so much trouble and confusion in business circles. To conform to the regulations of the Sales Tax Acts, many firms had to abandon a large part of the office system, suitable to the peculiar nature of their businesses, and to work their staffs overtime, increasing costs, and in turn the price of goods to the consumer, without corresponding benefit to the public revenues." Mr. Holland quoted an article from the thirteenth edition of thei*'Encyclopaedia Britannica," which stated that because the rate was small, it was always argued that it would not be noticed, but it entered insidiously into every phase and item of expenditure, and in such a manner as to take no account whatsoever of ability to pay. It was further pointed out that if services, were excluded from the scope of the tax, its inequality was exaggerated inasmuch as a considerable part of the expenditure of the richer classes consisted of expenditure on services. The article also stated that a turnover tax was utterly unsuitable for any nation which had a large international trade, and thus- it applied to New Zealand. BUDGET PROMISE. "How will the Prime Minister explain his dishonouring of his October promise?", said Mr. Holland. "He stated in his Budget that there would be no increase in taxation Vthis year. The Prime Minister is the first citizen in the land, and it is a serious thing when he repudiates his previous statement so lightly. Can he find anything in the dictionary which will help him to adequately explain why he has gone back on the promise he made from his seat in the House? Are the members of the Coalition to be required to follow their leaders into the Government lobby whenever the Prime Minister decides that the time had arrived for him to dishonour another of his public promises? This tax is a violation of a solemn promise made to the country by the Prime Minister—it will lift, and is lifting, the cost of living to the people in the mass, and coming hard on the heels of'the increase, in the exchange rate, it is' equivalent to yet ariother substantial decrease in wages which are already below the subsistence level. The Billnwill.relieve the wealthier members of the . community against increased graduated income taxation, and it will load more grievous burdens on the shoulders'of the poorer citizens of New_ Zealand. If it is passed into law, it will stand for another milestone on the unhappy road along which New Zealand is being goaded towards insurrection." ''• •