The Gisborne Herald IN WHICH IS INCORPORATED “THE TIMES.” GISBORNE, MONDAY, MARCH 20, 1950 WILL P.A.Y.E. COME IN N.Z.?

Gisborne Herald, Volume LXXVII, Issue 23207, 20 March 1950, Page 4

The Gisborne Herald IN WHICH IS INCORPORATED “THE TIMES.” GISBORNE, MONDAY, MARCH 20, 1950 WILL P.A.Y.E. COME IN N.Z.?

ALTHOUGH it is not part of the published policy of the National

Party to establish the “pay-ns-you-earn” system of income tax collection, the hope expressed by the Prime Minister, Mr. Holland, last week that P.A.Y.E. mig-lit one day he introduced in New Zealand may he a pointer to Government thinking on taxation reform. His comment recalls the fact that, as lonyayo as 1911’, Mr. Holland appealed to the then (.lovernment to investigate ways and means of establishing P.A.Y.H, but the acting Minister, Mr. Nordmeyer, rejected the proposal, principally because of practical dilficulties—lack of staff, accommodation and calculating machines. Many of these then insuperable problems have since disappeared—the department is now better boused, new branches have been established in provincial centres, and staff, though probably still short, has been increased.

The new Government, which, in addition to Mr. Holland, has another influential advocate of pny-as-you-earn in his deputy, Mr. Ilolyoake. now has the opportunity to initiate a general inquiry into a system which is vogue in Britain. Canada, the United States and Australia. The principle met with strong opposition in each of the first three countries, but in every ease it was adopted. Many Aspects For Review

There are mnnv aspects of taxation to be considered before a decision can be made about pay-as-you-earn, as Mr. Holland said last December. It will form one item in a comprehensive examination of the whole system of taxation which the National Party has promised. Among the many obvious fields for inquiry are the balance between direct and indirect taxation, between national and local taxation, land taxation, company taxation and the incidence of taxation on different forms and levels of income and the restraints imposed by taxation on economic and social progress. The new administration, with a new policy and new ideas, provide the opportunity for the widest examination, preferably by a Royal Commission, of a system in which many defects have grown up in the last 20 years. A study of the Australian P.A.Y.E. system, of which the Prime Minister is a strong admirer, commands interest. Under the Commonwealth scheme, employers deduct income tax and social security taxes from each weekly pay envelope, much the same way as the New Zealand social security tax is collected. Everybody with an income of over £lO4 must furnish a tax return each year. The Taxation Department determines exactly the amount of tax and gives full credit for dependants, union dues, medical and funeral expenses, life insurance, superannuation, friendly society payments, rates and taxes on the home, and gifts to charity. An assessment notice showing income tax and social security contribution payable is issued during the year following the year of income. Two Systems of Deduction

The approximate amount, payable, however, has already been collected from employees by deductions from wages and from nonemployees by provisional tax and contribution. The amount shown on the assessment is, therefore, adjusted against the amount already collected and any difference is either collected or refunded.

An employer may make deductions from pay under two systems: (1) A group scheme covering most employers of over 10 persons. The amount deducted is sent to the Taxation Department and each employee receives annually a group certificate from his employer showing the amount of deductions during the year. The employee uses the group certificate for that year to meet, in full or in part, the assessment on that year’s income when it is received. (2) A stamp system, used by small employers. It involves a stamp deduction card in two parts. Each four weeks, the employer buys stamps, also in two parts, for the amount of deductions from each pay and sticks one part on each half of the card. At the end of the year, or when an employee leaves.his service, the employer gives the employee one half of the card and sends the other half to the Taxation Department. The employee’s half is then used in the same way, as the group certificate.