UNFAIR REVENUE

Grey River Argus, 15 February 1933, Page 5

UNFAIR REVENUE

SALES TAX DEBATE Mr Holland’s Exposure OF ILL-EFFECTS ELSEWHERE. ‘ WARNING FOR GOVERNMENT. (Special to “Argus.’’) WELLINGTON, February 14. In the House, Mr J. G. Coates moved tho second reading of the Sales Tax Bill to-night. Mr Coates’s only defence of another piece of class legislation was that the country needed revenue. In stating Labour’s antagonism to the Bill, Mr TI. E. Holland contended that the Sales Tt ix was an iniquitous one, in that it burdened the poor more heavily than the rich, and that it was cumulative in its effects. Air Holland said that Mr Downie Stewart, in his Budget of 1929 had 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 ploor (who have a smaller margin beyond necessary expenditure) more heavily than the rich.’’ Certain newspapers had taken exception to his (Air Holland’s) attitude on tho Sales Tax, and the editors of these papers showed a lack of economic knowledge that was amazing. ■ This tax was, paid in a way that was calculated to blind the mass of 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 a new tax, and Air Holland showed that it had been imposed from the earliest times, but that popular discontent had invariably prevented it from becoming permanent. The Sales Tax, he said, prevailed in both Germany and Russia, and it would be interesting to know whether the Prime Alinister would be prepared to tell 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 there introduced by Air Scullin, who had made the same apologetic kind of speech as the Alinister of Finance had when moving the second reading. The Labour Party in New Zealand, said Air Holland, did not hesitate to condemn any Labour Government when it had done something wrong, and Air Scullin had wrecked his Government by acting on the advice of badly-informed people. It was worthy of note, added Air Holland, that whenever a Sales Tax had been introduced, it had been levied initially at a low rate, and it had afterwards been increased. New Zealand however had imposed a high rate from the beginning, and one would like an assurance from the Alinister of Finance that, this rate was not to be

lifted higher in the years to come. In Canada the Sales Tax had been adopted since 1920, and the Tate had moved up and down, the repeated reductions constituting proof of its unpopularity. “The rate in Australia,’’ said Air Holland, “was increased from 21 per cent, to 6 per cent., and there is danger of this history being repeated in New Zealand. An increase in the Sales Tax was recommended to the Australian Premiers’ Conference by that meddlesome mediocrity among economists, Professor 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. However the then Prime Alinister of Australia, Mr Scullin, did not include the Sales Tax in his Customs Bill. He made it a separate measure, and he 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 order to 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 action had been in order to anticipate business people making transactions before the measure became law. UNFAIR DISCRIMINATION. Mr Holland said that the scope of sales and turnover taxes varied greatly. 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 I am. 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 same time 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. The 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 sale 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 of opportunities.’’ HIGHER COST OF LIVING. Air Holland said that the Prime Ministers contention that the tax would mean no material increase in the cost of living was not borne out by experiences in other countries. In for instance, it had been estimated that in the outomobile industry the tax paid amounted to 15 or 20 per cent, additional on the consumers’ 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 gen-

era! consumption tax, the. weight of which was, of course, most difficult for the poorest citizens to bear, and least onerous for the well-to-do. In Australia the tax had proved so extremely unpopular with nearly- all sections of tho community that the present Commonwealth Government had promised that it would be the first tax to he repealed. ANOTHER AUTHORITY. Mr Holland quoted an article from the “Encyclopaedia Brittanica, ” which stated that, because the rate was small, it was always argued that tax 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 consists of expenditure on services. The article also stated that turnover tax was utterly unsuitable for any- nation which had a large international trade, and thus it applied to New Zealand. PREMIER’S PLEDGE BROKEN. ‘ ‘ How will tho Prime Minister explain his dishonouring of his Budget promise?'’ said Mr Holland. “He stated in his Budget of October last that there would be no increase in taxation this 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 ho find anything in the dictionary which will help him to adequately explain why ho has gone back on Ihe promise ho made from his seat in the House? Are the members of the Coalition to be required to follow their leaders in the Government lobby whenever the Prime Minister decides that the time has arrived for him to dishonour another of his public promises ? A WARNING. “This tax is the 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 another substantial decrease in wages, which are already below subsistence level. The Bill will relieve the wealthier members of the community against increased graduated income taxations, 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.’’