HIGHER TAXATION

Manawatu Standard, Volume LIII, Issue 62, 9 February 1933, Page 7

HIGHER TAXATION

SALES IMPOST LEVIED TO-DAY

NEW DUTIES ON SUGAR AND TOBACCO

PETROL TAX UP TO ELEVENPENCE

In accordance with the terms of resolutions introduced in the House of Representatives, last evening, by the Minister of Finance and Customs, lit. Hon. J. G. Coates, additional Customs and Excise duties are levied on various goods, a general sales tax of 5 per cent. is levied, with numerous exemptions, and a gold export duty is imposed. The total yield from all sources is estimated at £2,540,000.

The principal features of the new imposts are: —

The duty on motor spirits is increased by threepence a gallon to elevenpence a • gallon; estimated to produce £500,000.

Cut and plug pipe tobacco duties are increased by eightpence a pound; additional revenue estimated at £100,000..

Another halfpenny per pound has been placed on sugar; estimated revenue £300,000. An export duty of 12s 6d an ounce is placed on gold; Expected to realise £140,000. .

The resolutions became operative to-day

The sales tax, which is estimated to yield £1,500,000, is based on the wholesale selling price of goods, and will be collected by the Customs Department through a system of licensing of wholesalers and manufacturers. The sales tax provides for numerous exemptions, including bread, meat, milk, butter, cheese, fruit, sugar, fuel and lighting, fertilisers and farmers’ requirements. The resolutions were approved by 42 votes to 28.

MINISTER’S STATEMENT. “MATTER FOR REGRET." IMPOSTS ESSENTIAL. Per Press Association. WELLINGTON, Feb. 8. In making liis announcement of the new taxation imposts the Minister stated: “It is a matter for much regret that in times like the present, it should be necessary to impose further imposts upon the community. The Government realises only too well the difficulties under which business is being carried on to-day. We are, however, faced with a prospective budgetary shortage of £9,500,000, and the financial stability of the Dominion directly depends upon bringing this shortage down to a safe amount. The utmost is being done in other directions by means of economies, savings in interest, drawing upon reserves, etc., but it is quit© evident that the budgetary situation cannot be kept under control, and that must be done at all costs without obtaining a substantial amount from additional taxation. The Government feels confident that the people will recognise the absolute necessity of the measures proposed and will do their part in assisting the Government to pilot the Dominion through the present crisis. The resolutions now before the house are part of the policy of the Government to achieve the object stated. “As had already been announced, it is proposed to obtain about two and a-lialf millions by additional taxation. The various sources of taxation have in the past been largely availed of, but it is now necessary again to have recourse to Customs duties on articles such as sugar, tobacco and motor spirits. It is also proposed to obtain some additional revenue from gold exported. With respect to these articles, the position is as follows:

LEVY ON GOLD EXPORTS. BENEFIT OF HIGHER PRICE. The Minister continued: —“As members are aware the present price ol fine gold (i.e., 24-carat gold) in London is about £6 10s per ounce, which is equivalent to £5 Us lOd per ounce of 20 carats on which the existing 'gold export duty is based. This means that the present value of 20carat gold in New Zealand currency is £0 Os, as compared with the price under normal conditions of £2 10s lOd per ounce. In view of the premium which is now obtainable from gold exported from the Dominion, it has been decided to obtain additional revenue from this source. Under the present duty Acts, export duties on gold exported from New Zealand are payable as follow : On North Island gold obtained by alluvial or dredging processes, 2s per ounce.

On other North Island gold, 2s 6d per ounce. On South Island gold obtained by alluvial' or dredging processes, no duty.

On other South Island gold, 6d per ounce. Of these duties, 2s per ounce (payable in the North Island only) is allocated to the local authorities in the district in which the gold is produced, and the sixpence per ounce is ultimately credited to the aid of miners’ pensions.

“The resolutions now before the House provide for an additional 12s 6d per ounce of 20-carat fineness to be paid in respect of all gold exported from. New Zealand, wherever it is produced.

“It is intended that this duty should be made payable on old gold, jewel lery r , plate, etc., exported as such, or on gold obtained by' melting down such jewellery, plate, etc. This object is achieved by the amendment proposed in the resolutions of the definition of gold in the Gold Duties Act, 1908. Jiis proposed that this additional revenue to be obtained from the export of gold is to remain in the Consolidated Fund. Provision for this will be made in the confirming legislation.

HIGHER DUTY ON SUGAR.

LOCAL PROTECTION MAIN-

TAINED

CUSTOMS AND EXCISE INCREASE

“The chief source of supply of refined sugar is from the refinery at Auckland. The duty on such sugar has been increased from id to Id per lb. It will be seen from the resolutions that it is proposed to make the duty on imported refined sugar lfd per lb, and that the duty on raw sugar is set down at Id per lb. “Tire former,” Mr Coates added, “is to grant the local manufacturers the same measure of protection which they have enjoyed for several years and the latter is to ensure that the duty' is charged on sugar refined in New Zealand. As indicating that the extra duty will not be a great burden on the" community, I may mention that according to information in my possession the retail price of sugar in London and Wellington has been about the same, and the New Zealand price, even with the increased duty, should be much lower than that in Australia.

YIELD OF £1,040,000. “The additional revenue expected to be received during a full year from these proposals is as under: - £ Sugar ... ... ... 300,000 Tobacco 100,000 Motor spirits 500,000 Total from Customs and Excise duties ... 900,000 Export duty on gold 140,000 Total £1,040,000

THE SALES TAX.

LEVY OF 5 PER CENT. WHOLESALE PRICE AS BASIS. Referring to the decision to impose a sale tax, the Minister said: “It is unnecessary tor me to say that no Government likes to adopt a new system of taxation, especially in the times through which we are now passing. It is, however, a fact that the existing methods of obtaining the public revenue are not producing the results which are necessary. The Government has given very- careful consideration to the different sy-stems that may bo adopted for collecting the increased revenue, and has been driven to the conclusion that the best remaining method is by means of a sales tax. This system, although new to New Zealand, has been in force for varying periods in Canada, Australia and certain Continental countries. As would be expected, the procedure adopted by different Governments varies according to the local conditions. The principles which the Government proposes to follow in New Zealand have been based upon the legislation of other countries, but mo dified to suit the circumstances of this Dominion. In considering the Bill which the Government will lay before the House for collecting the sales tax, I would ask honourable members to remember that I fully recognise that it is desirable that the details should be discussed with the mercantile and manufacturing communities so that the procedure proposed might,\ if possible, accord with commercial practices. Those interested would liave been consulted before the’ Bill was introduced had this been practicable. It will be evident that this could not be done, but when the Bill is introduced the Government will be glad to obtain from those concerned any information and advice that will render the administration of the Act as little irksome as possible, while at the same time achieving the objects aimed at. “It is proposed that the sales tax is to be collected by the Customs Department, and I would like before going further to correct any misapprehension that might arise

PIPE TOBACCO. LEVY OF 8d PER LB, “Provision is made for an increase in the duty of yiipe tobacco by 8d per lb, or Id per 2oz tin,” the Minister added. “The duties now proposed on imported tobacco are as under: — Tobacco (cut), 6s lOd per lb. Tobacco (plug), 6s 8d per lb.

“The rates of Excise duty on similar kinds of tobacco made in New Zealand, whether from imoprted or from locally grown leaf, have been increased by 8d per pound and are now fixed at 4s OJd and 3s lOd in the case of cut and plug tobacco respectively. The extent of the protection accorded to the New Zealand tobacco grower and manufacturer has been maintained. I may point out that even with these increased rates on tobacco, the duties now proposed are less than those in force in the United Kingdom and Australia. In the former country the rate on the bulk of the importations is at present 9s 6d per pound, and in the latter country 9s 3d and 9s per pound on cut and ydug tobaccos respectively.

DEARER PETROL?

DUTY OF lid ON MOTOR

SPIRIT.

' “Provision is made for an increase in the duty on motor spirits to lid per gallon,” continued Mr Coates. “It is proposed that the additional revenue to be obtained from the increased duty on motor spirits, is to remain in the Consolidated Fund and not be transferred to the Main Highways Account and certain local

bodies. “Provision to this end will be contained in the Customs Bill, which will be introduced at a later date to confirm the resolutions.

in the public mind that the sales tax proposed by the Government is a species of Customs taxation. “The essence of a Customs duty is that it is levied only upon good? imported into New Zealand, while the sales tax now proposed is to be paid on goods sold in'the Dominion whether imported or not. “It will be evident that if the sales tax were brought into force in the ordinary way, i.e., after the Bill had been passed by Parliament, an opportunity would be afforded to merchants to dispose of goods before the tax became effective. As this would lead to / a considerable loss of revenue, it has been decided to bring the sales tax into force immediately by means of resolutions of the Committee of Ways and Means.

“There are various methods by which a sales tax may be collected. For example, it might be charged when goods are sold to the consuming public. On the other hand, it may be levied when goods are sold by wholesalers to retainers, with special provision made for goods manufactured and imported by retailers. Again, it may be charged on each occasion on which a sale occurs. By the last mentioned means a sales tax may be charged many times on the same goods. The Government has carefully considered the various methods, and are of the opinion that the second one, being in effect that in force in Canada and Australia, is most suitable for the conditions existing here. MAIN FEATURES OF TAX. “The main features of the sales tax proposed by the Government are the rollowing:— “ (1) The tax is payable on the wholesale selling value or on a value as near to that value as can be assessed. Later, I will explain this in more detail.

“ (2) For the purpose of the sales tax, traders are regarded as forming two classes—wholesalers and retailers. Manufacturers (other than retail manufacturers) are to be put on the same footing as wholesalers. No doubt difficulty will arise in dealing with many firms who are both wholesalers and retailers, but provision will be made in the Bill which will, I think, satisfactorily meet this position. “(3) The tax is payable when sales are made by wholesalers, including manufacturers, to retai.ers or consumers and not when sales are made by retailers to consumers. When, however, goods are manufactured by retailers (who for the purposes of the sales tax are called manufacturing retailers) or imported by them, the tax is payable at the time of- manufacture or of importation. “ (4) No sales tax is payable by wholesalers to other wholesalers or to manufacturers who are not retailers. Similarly, no tax is payable when goods are sold by manufacturers to other manufacturers (not being retailers) or' to wholesalers. “ (5) It is not proposed to make the tax payable on goods imported by private persons for their own use and not for resale. In any case it is considered that the cost of collection and the harassment that would be caused to persons receiving small parcels from abroad would more than outweigh any revenue which might he obtained. LARGE LIST OF EXEMPTIONS.

“ (6) Provision will be made in the Bill for the exemption from the tax of a large number of classes of goods including, inter alia:—Bread, flour, rice, sago and tapioca, oatmeal, meals served in restaurants, hotels, etc.; fresh meat, milk, cream, butter and cheese, fresh vegetables and fruit, grain seeds, sugar, fresh fish, live animals, hay, straw and chaff, coal, coke, firewood, wooden fencing posts and rails, newsprint, fruit, wrapping paper, newspapers and periodical magazines, school, college and university books and books for public libraries and similar institutions, electric power and light, coal gas, binder twine, -woolpacks and bags and sacks of textile, cigarettes, rennet, disinfectants, insecticides, sheep dip, surgeons’ and dentists instruments, scientific apparatus, agricultural, horticultural, dairying and most industrial machinery, electric motors, oil engines other than those for motor vehicles, tractors and traction engines, artificers’ tools, iron wire (plain or barbed), cinematograph films, motor spirits, fertilisers, and, generally speaking, cases and empty containers for goods. RATE OF 5 PER CENT.

“The rate of the tax to be charged depends, of course, upon the amount of revenue required by the Government. From this source in Australia the rate is, I understand, now fixed at 6 per cent. This also is the rate in Canada. “The Government has to adopt 5 per cent, as the rate in New Zealand with a reduction of 5 per cent, of the amount due when prompt) payunent is made. It is expected that in a full year the amount which will be collected from the tax at the rate fixed is £1,500,000.

“It is, of course, evident that the introduction of a new sy'stem of taxation such as a sales tax will cause some inconvenience to the commercial community, but, as I have indicated, every effort has been made to reduce this to a minimum, and I feel sure that commercial men will do their best to assist the Government in this matter.” COLLECTING THE TAX. Among the more important provisions necessary' for the collection of the tax are the following:— (1) Every wholesaler and manufacturer (including retailers who manufacture goods for sale) will require to be licensed before March 31. A small fee, not exceeding £l, will be payable on the issue of the license, but it is not proposed to have annual licenses or annual fees. If a licensee carries on business at more places than one in the Dominion one license only will be payable. It is proposed that the places at which the licensee carries on. business should be shown in the license or subsequently endorsed there-

on. (2) All wholesalers (including manufacturers other than retail manufacturers) are required to deliver to the Collector of Customs for the district, not later than the 28th day of each month, a return showing (inter alia) the sale value of goods sold by them during the preceding rnpnth and at the same time pay' the sales tax due on those goods. The first return required will be for the period commencing on February 9 and ending on March 31. Hence this return will be due not later than April 28 next. i (3) All manufacturing retailers are j required to deliver to the Collector of Customs for the district not later thanthe 28th day of each month, a return '■ showing (inter alia) the sales value of goods manufactured by them during the preceding month and at the same time pay the amount of sales tax due on those goods. In determining the amount of sales tax due the manufacturmg retailer will be allowed to deduct the amount of sales tax shown to have been paid on materials used bv him m manufacture whether imported by him or purchased from wholesalers. As m the case of wholesalers, tho first return will be for the period ending on March 31. 1 a ena (4) All retailers (including manufacturmg retaileis) ,„ U & , the n Thr e off; r rn rtod , bv tho Customs f„

(5) The sale value of goods sold by wholesalers and manufacturers (other than manufacturing retailers) is to be the value at which the goods are sola when sales are made by wholesalers to the general pubi.c. Provision is made for payment of sales tax on an assessed wholesale value. (6) The sale value of goods made by manufacturing retailers is to be the fair market value of the goods it they were sold to a retailer, _ (7) The sale value of goods imported by retailers (including manufacturing retailers) is to be the value for duty plus the duty and in addition 20 per cent, of the total. The object of this procedure is to bring the sale value as nearly as practicable to what would be the selling price to a re(8) If the collector is satisfied as to the correctness of the returns, furnished by licensees, he is authorised to accept the same and assess the sales tax accordingly. , (9) If the .collector is not satisfied as to the correctness of the returns, he is authorised to assess the sales tax at such amount as he thinks proper. (10) From any assessment of sales tax made by the Collector, there is a right of appeal to the Minister or to the Court. The Minister may himselr hear the appeal or may for this purpose appoint a delegate who need not be a Government official. (11) Provision is made for dealing with various special circumstances or conditions wihch may arise, e.g., persons leaving New Zealand without paying the tax, the collection of sales tax due by defaulting taxpayers from moneys owing to them ; the cases of companies in liquidation or being wound up, and tax owing by deceased persons’ estates. (12) Provision is made for refunding sales tax overpaid and for drawback of the sales tax paid on goods which are afterwards exported. It is proposed that when the tax is not paid within two months after the due date of payment, a surtax of 10 per cent, should be imposed. “I may say that in some countries when a licensed wholesaler orders goods from another licensed wholesaler, he quotes his license number on the order for the goods and gives a certificate that they are for resale by him,” said Mr Coates. “Such goods are then exempt from the sales tax in respect of the transaction between the two wholeaalers, the tax being collected when the goods are sold to a retailer. _ In the circumstances of this Dominion, this provision is regarded as being somewhat cumbrous, and to assist the mercantile community it is proposed to gazette and issue to licensees lists of persons who are licensed under the Act. The sales tax will not be payable when sales are made by wholesalers to other wholesalers mentioned In these lists.

“It is hoped to place the Bill before members during the next day or two. With respect to the resolution, it will be observed that it contains only sufficient details to enable the tax to be collected or to notify taxpayers of their liability.”

TOTAL OF £2,540,000. EXPECTED FROM ALL SOURCES.

“Summarising the expected increase of revenue from the Government proposals now placed before the House, the position is as under,” added the Minister. £ From Customs and Excise

duties and gold duty ... 1,040,000 From sales tax 1,500,000

Total £2,540,000 "With respect to the resolutions themselves the first resolution makes provision for the increase in duty on imported sugar, tobacco and motor spirits. The next resolution contains the usual provision for safeguarding the existing tariff agreement with Australia. The third resolution makes the usual provision for bringing the new duties into force in the Cook Islands if it is later decided to take this course. The following resolution provides for duty on the sugar made at the refinery at Auckland. The next resolution provides for the increased excise duty of 8d per lb on tobacco of the classes mentioned manufactured in New Zealand. The succeeding resolution imposes the additional export duty of (L2s 6d ner ounce on all gold exported from New Zealand. The final resolution makes provision for the sales tax. HESOLUTIONSBEFORE HOUSE STORM OF CRITICISM. Per Press Association. WELLINGTON, Feb. 8. The Customs and Excise resolutions, for which urgency was accorded, were introduced when the House of Representatives resumed at 7.30.

The Leader of the Opposition (Mr H. E. Holland) said the resolutions clearly demonstrated that the Government was determined to go from bad to worse. It proposed to levy additional Customs duties even on goods which could not be produced in New Zealand, and consequently the cost of living of the rank and file of the people would be forced up. It was imposing an export duty on gold and had apparently made no provision for exemption in the case of producers in a email way. It was making provision in the Customs resolutions for the imposition of a sales tax. Surely a departure of this nature should be the subject of a special Bill. He ventured to eay the sales tax in New Zealand would be the highest in the world. The whole effect of the Government’s proposals would be to place on the working people the responsibility for finding an immense part of the money required to recoup the Consolidated Fund for losses involved in increasing the exchange rate. It proposed to do this instead of adopting the fairer method of imposing a graduated income tax. He was satisfied there was only one decent thing the Government could do under such circumstances and that was to get out of office. Mr J. A. Lee: Hurrah! Put them ° Labour members generally vigorously applauded Mr Holland’s declaration until they were called to order by the Chairman of Committees (Mr S. G. Smith). , , Mr Holland submitted that members were entitled to express orderly apJVIrMLee: No Hitlerism in New ZeaContinuing, Mr Holland said even on tobacco produced in New Zealand, the dutv was to be increased by Sd a pound. One would be entitled rather to .expect a reduction of duty. Inverting to the sales .tax, Mr Holland said there was no justification for instituting it by resolution. The Prime Minister, Mr F-oi bes. [There is a Bill .vet to come down. Air Holland: But when will it come SAnd tht SbA™

the Government should resign and allow somebody else to take over the administration of the countrv. He asserted that the people would never think of endorsing the astounding proposals contained in the resolutions before the House.

Mr Holland was applauded by his colleagues as he resumed his seat.

MR COATES’S DEFENCE

Mr Coates said the people had elected the Government to undertake the difficult task of restoring the Dominion’s financial position, and he believed that, unpalatable though the projiosals might be, the people would stand to them.

Air D. G. Sullivan : They will resent a vendetta against the workers. Mr Coates read his statement explaining the effect of the alterations proposed In the resolutions.Mr J. McCombs said the intention of the resolutions was to recoup some of th? loss lesulting from the artificial raising of the exchange. The proceeds would indirectly be transferred to the more fortunate section of the community. He believed a no more vicious piece of class legislation had ever been introduced in New Zeajand. The sales tax would amount to 5 per cent, imposed on an inflated currency. It was really 5 per cent, on £125, representing 6i per cent, on the original £IOO. He insisted that circumstances had definitely arisen which a.mphaticnlly demanded the resignation of the Government. It was making a verv serious departure from the established principles of taxation, and the people as a whole ought to be consulted. I was bleeding the poor for the enncfiment of the rich. .. , , Continuing, Mr McCombs said that every time trade and industry began to adapt themselves to conditions the Government came down with further burdens which made their task almost hopeless. The sales tax, for instance, was a positive hindrance to trade. Air Forbes said Mr McCombs should remember there had been prospective deficit of over £6,000,000, apart from any question of exchange. Mr McCombs had attributed the origin of the proposals to raising the exchange, but it was nothing of the kind. Ihe sales tax had been under consideration for some time. Ihe Government realised it was an obnoxious form of taxation, but it was necessary. It had also realised the Labour Party would make political capital out of such a proposal. If the Government had regarded the matter from the point of view of its own popularity, it would not have introduced such a proposal, but the responsibility of the Government was the solvency of the country. It realised it had to take certain steps to enable it to meet its obligations. Mr P. Fraser said the mere tact that unless the sales tax came into operation immediately there would be a rush by wholesalers to transfer goods to retailers was not a sufficient reason for the manner in which the Government was imposing this form of taxation. The whole principle should be freely debated bv Parliament before it came into operation. Mr Fraser said there was a touch of kindness in the Minister’s explanation of its operation. He had said the people would be invited to suggest certain details connected with the manner m which it applied. In other words, the people who were to be skinned were to be invited to say how they would like to be skinned. BILL DUE SOON.

The discussion on the resolutions continued until 11.30 p.m., when Mr Coates replied to a number of question. He said he hoped the Customs Amendment Bill would be introduced to-morrow. If not- then, it certainly would be introduced the next day. He might endeavour to take thesecond reading this week, but the committee stages would not be commenced until manufacturers and others interested had had an opportunity to- make representations on the subject. The sales tax resolutions were adopted in committee by. 42 votes to 28. Messrs Atmore, Stallworthy, Rushworth, Tirikatene, Veitch and Wright joined the Labour members in voting against them. The Customs resolutions were passed by 43 votes to 28, and the House rose at 0.10 a.m.

SMALL FARMS BILL. CONTINUATION OF DEBATE. Per Press Association. WELLINGTON, Feb. 8. In the House of Representatives the debate on the second reading of the Small Farms (Relief of Unemployment) Bill was continued. Mr J. O’Brien said he objected to such a large sum being taken from the Unemployment Fund for a land settlement sclieme. He asked whether the Act, when passed, would be administered sympathetically so far as the unempolyed were concerned. Mr D. G. Sullivan suggested that the unemployed should be engaged, with the assistance of the fund, at their own trades in making articles for other unemployed. He was sure, for instance that • cabinet-makers could be usefully employed in this direction. Mr A. J. Murdoch said there were features of the Bill with which he was not in complete agreement. He did not see the necessity for setting up an additional board, and multiplication of control would not improve the administration.

Mr W. E. Barnard said that if the purpose of the Bill was to assist men with small capital, it was not going to help relief workers. There was no doubt men with small capital were worthy of assistance, but not at the expense of the Unemployment Fund. Men without capital were those about whom Parliament was most deeply concerned at the moment. Mr W. A. Bodkin said the Bill would bring a ray of hope to many unemployed. It would do more to rehabilitate hundreds of people than any other Act.