CUSTOMS DUTIES

Nelson Evening Mail, Volume LXIV, 24 July 1930, Page 11

CUSTOMS DUTIES

EXPLANATION BY. PRIME MINISTER

(By Telegraph—Prom "The Mail's" Parliamentary Eeportor)

WELLINGTON, 23rd July

Explaining why the' Customs resolutions had been introduced before the Budget, the Prime Minister said that the principal object of the alterations proposed in the tariff was to make provision for the collection of the revenue required for carrying on the Government of the country. If the proposals were longer delayed the result might be that further goods in excess of normal requirements might be cleared, and rims defeat the intentions of the resolutions. That might have the result of necessitating further increases in the Customs taxes.

It is proposed to ask Parliament to adopt the provisions of section 143 of the Customs Act, 1913, and with respect to goods already imported which had not been entered'for warehouse to allow them to be entered at the old rate- or the new rate, which ever was most favourable to the importer. Mr Forbes outlined the objects of the alterations as follows: (1) To provide for the collection of increased revenue. (2) To abolish primage duty and substitute a surtax on dutiable goods. (3) To grant a further measure of protection to the timber and to certain fanning and manufacturing industries. . (4) To take power by means ot increased duties on foreign goods to grant further preference on British Empire goods, and at the same time to place ourselves in a position to negotiate with countries which are willing to treat New Zealand products fairly in the matter of tariffs. (5) To abolish the duty on barley used for stock food. (6) To obtain increased revenue from petrol for the Main Highways Account.

£BOO,OOO EXTRA REVENUE

"As members are aware," said Mr Forbes, "owing to the low prices obtained recently for some of our staple products in the markets of the world and the exchange restrictions which have been imposed by the banking institutions, it is expected that there will, during the present financial year, be a considerable decrease in the importation of goods and consequently in the amount of revenue obtained through the Customs Department. It is not necessary to anticipate the Budget by setting out the financial position of the Dominion, but it is essential that a sum of £9 145,000 should be collected from Customs and Excise duties (including duty on New Zealand brewed beer, but not including petrol tax or tire tax). If no alterations were made in the legislation now on the Statute Book, it is considered that the revenue winch the Customs Department would collect by way of Customs and Excise duties during the present financial year would be as under: —

Customs and Excise duties other than beer duty <,i00,000 Beer duty 000,000

£8,350,000

"This means that an amount of about £BOO,OOO must be obtained by ■way of increased Customs and Excise duties. Even if this extra amount is collected, the total received will be approximately £370,000 less than that collected last year from the same sources.

"It is proposed that this increased revenue should be obtained:—

(1) From an increase in the dutry on foreign goods. (2) From a surtax to produce revenue in excess of primage duty. (3) From an increase of duty on cigarettes and cigarette tobacco both imported and locally made. (4) By taking steps to prevent the inroads upon the revenue caused by the present duties on imported

NUMEROUS INCREASES EFFORT TO RAISE £BOO,OOO EXTRA REVENUE

INCREASED DUTY ON CIGARETTES

CIGARETTES

leaf tobacco, and on locally manufactured tobacco and cigarettes. (5) By abolishing the allowance for underproof spirits, mid (li) By increasing the duly on New Zealand brewed beer. INCREASE ON FOREIGN GOODS "it is proposed to increase the preference granted on many lines of British goods by f> per cent, ad valorem and to make definite increases on certain other goods. In view of the Customs barriers which are being erected in many countries of the world against Empire products if is considered that New Zealand should so arrange its tariff policy as to be able to meet the altered conditions. I shall deal further with this aspect of the matter later. .

SURTAX INSTEAD OF PRIMAGE

"As I have indicated, it is proposed to abolish primage duty and to substitute a surtax on the *uty payable on goods. I shall shortly explain the reasons for the change. The rate of surtax has been fixed at nine-fortieths of the total duty otherwise payable on most classes of goods. In the case of spirits, tobacco, cigarettes, petrol, and timber the rate is fixed at onetwentieth., of the duty. It is obvious that if the higher rate of surtax had been added to the duties on spirits, tobacco, cigarettes, and petrol the total rate of duty payable would have been rather high. The surtax on timber has also been fixed at one-twentieth of the duty payable. I shall further on deal with the proposals of the Government with respect to timber, and the reason for fixing the surtax at the lower rate will then be clear.

"It is not proposed that surtax shall be charged on wheat or wheat-Hour.

"It is proposed tojncrcase the duty on cigarettes by about Id per packet of 10 cigarettes.'Tlie increase represents a duty of about 8s 3d per 1000 cigarettes, or 3s 3d per lb. The new rates proposed on imported cigarettes are 33s !)fi per 1000 for cigarettes not exceeding 2Jlb per 1000 (which form the bulk of the importations), and 13s 9d per lb for those which exceed that weight. An equivalent increase is also" proposed in the rate on cigarette tobacco and in the excise duties payable on the foregoing articles. "As there have recently been considerable reductions in the retail sell-

ing prices of some'of the leading lines it is not considered that the increase will bear hardly on any section of the community. Even with the new duty, the public will be able to purchase these lines of cigarettes at least as cheaply as they could, say, two years ago. "A corresponding increase is made in the duty on cigars.

LOCALLY MADE TOBACCO AND

"It has for some time been evident that some steps will have to be taken to prevent the inroads which the present scale of excise duties on tobacco is making upon the revenue. The quantities of tobacco and cigarettes made in New Zealand during the last five years have been as under:

"From these figures it will be seen that between 1925 and 1929 the quantity of tobacco and cigarettes manufactured in the Dominion has increased by over 275 per cent. The loss of revenue on these articles during 1929 was over £150,000, which represented about 10 per cent, of the total duty collected on tobacco during that year. Further, the duty on raw tobacco is supposed to operate so that the local farmer may receive a protection of 2s per lb. According to the information in my possession, it appears that some years ago he actually received less for his product than the amount of the protection, although I understand that the average price now obtained by the grower is about 2s 2d per lb. There is evidence to show that ill certain important lines at least the percentage of New Zealand leaf used has decreased from about 70 per cent, to about 50 per cent. "The only inference which can be drawn from the facts in my possession is that the concession which has been obtained by the manufacturer has not had the effect of inducing him to increase the quantity of New Zealand

leaf used, which in turn has adversely affected the tobacco farmer.

REDUCTION OX RAW LEAF

"When il is realised thai the average price at the port of export from the United Slates of leaf tobacco imported info New Zealand is about, 2s 2d per lb, it will lie recognised that something must be done to place the matter on a more satisfactory footing. In an endeavour to remedy this slate of affairs, it is proposed to reduce the duly on imported raw leaf tobacco by Is per lb, uml to increase the excise duties by this amount. The effect of these alterations Will lie best seen by considering the duly on locally-manufactured cut to baceo ■under the old rale and the new. If a manufacturer who now uses half Ideal and half imported leaf were to so increase the quantity of New Zealand lea:' thai he used only the local product he would pay practically the same duty as lie does iiow. If on (he other hand such a manufacturer desired to continue the use of the same percentage of imported leaf, the total duty payable would lie increased from 2s Sd to 3s 2d per lb. "It is believed that this will result in the use of a greater quantity of New Zealand leaf.

"It is considered that the concession nt present granted on locally-manufac-tured cigarettes and cigarette tobacco is too great, and it is proposed that about one-half of the concession thereon should be withdrawn.

ABOLITION OF ALLOWANCE FOR UNDER-PROOF SPIRITS

"For many years," the Prime Minister continued, "an allowance has been made for underproof spirit as far as 10.5 under proof. It is proposed to abolish this. The ordinary bottled spirits are imported with a strength of less than 16.5 under proof, whereas bulk spirits arc as a rule about proof. The inquiries which have been made show that the cased lines are as a general rule dearer per gallon than the bulk lines. The effect of the present system of levying duty, therefore, is that the lower-priced lines pay a higher duty per liquid gallon than the higherpriced ones. The new system will also reduce the amount of work at the ports connected with the entry and clearance of spirits. In Australia no allowance is made if spirits are below the strength of proof.

DUTY ON NEW ZEALAND BEER

"It is proposed to increase the basic duty on New Zealand brewed beer from lUd per gallon to Is per gallon.

SURTAX INSTEAD OF PRIMAGE

"Primage duty was imposed in 1915, but it has not proved as satisfactory in its operation as the Government desires. Some of the objections to a primage duty are as follows:—(a) It increases the cost of administration and slows up the clearance of goods at the Customs; (b) In retailing the goods to the consumer the amount is either too small to be passed on to the public or has to be passed on with a considerable advance; (c) it is levied on goods otherwise free such as manures, cotton, and silk piece ooods, dyes, tanning materials, paper, agricultural and dairying machinery, electric and other industrial machinery. These and many others are used in the industries of the country and it is, I think, desirable that they should if of British origin be admitted without any dutv - , , j- i * "As stated above, the rate fixed ,ioi surtax for the great majority of goods is 9/40ths of the total duty payable. ?\s showing the combined effect of this surtax and of the increased duty of 5 per cent, on foreign goods on the ordinary ad valorem rates of duty payable on imported goods, I have had a table prepared, and the result is as follows: When the present rates (including Hie new Primage) are rates are 22% under the British Tariff 24}% 42% under the General Tariff 55&% 27% under the British Tariff 301% 47% under the General Tariff 61 i%

"To afford an opportunity of comparing the effect of the old primage duty and the surtax now proposed, it may be stated that if we take only the goods liable to surtax at the higher rate the amount of primage duty that would be collected on of British origin imported into New Zealand is just about the same as

the surtax. "The fact that the industries of the country will now for the most part obtain their appliances and materials free of any duty whatever must be of considerable assistance to them.

ASSISTANCE TO TIMBER

INDUSTRY

"The state of the timber industry has for some time been engaging the attention of the Government. As members will remember, the duties on tunby were increased in 1927, but from the following figures of importations of timber (other than Australian hardwood) during the last six years it will be seen that the increased protection h£S not had the desired effect of limiting the importation of timber and increasing the use of the local product:—

Quantity Imported: Year ended Rough * Sawn Total 31st March, sawn. dressed. Imports.

"The following table showing for 1925 and 1929 the quantity of timber produced in New Zealand, the number of employees engaged in the industry, the number of mills in operation and the amount of "salaries and wages paid will show that something must be done to safeguard the industry': —

aries and wages 2,319,072 1,013,585

"It is therefore proposed to increase the present duty on rough sawn timber in ordinary sizes from 5s to 7s tid per ]OO super feet, and to fix the rates on timber in long lengths and large cross sectional area and on sawn dressed timber at 2s less and 4s greater respectively than this rate. In view of those alterations, section 13 of the Customs Amendment Act, 1927, which authorised the Minister of Customs to increase the measurement for duty purposes of sawn dressed timber by 20 per cent, will no longer be necessary. OTHER PRIMARY INDUSTRIES "It is also proposed to grant further protection to the fruit and onion grow c . r 9. The duty on small fruits, such a 9 apricots, cherries, grapes, passion

fruit, peaches, plums, and fi few others, lias been increased l),v Id per 11). An increase, has also been made in the duly on foreign-grown onions. . , . "It will, I think, bo agreed that some steps should be taken to protect the local onion growers.

PROTECTION POP MANU FAOTUItERS

''The Government lias also decided in grant further assistance to the clothing manufacturing and motor-body building industries. These industries employ a considerable number of hands. The total importations of apparel and hosiery during the last five years are •is under : £ 1825 2,801,167 1926 2,709,456 1927 2,458,105 1928 2,675,728 1929 2,743,724 These show the extent to which the New Zealand-manufactured article is displaced by the imported product. The increased rate on apparel is 2£ per cent. on British goods and 5 per cent, on foreign articles. It is, however, necessary to consider the effect of the surtax before the full effect of the Government's proposals can he appreciated. "The result of the combined surtax and increased rates of duty is to grant a further protection to the clothing and hosiery manufacturing industries of over 6| per cent, on British-made clothing, etc., and of 14| per cent, on the foreign article.

"With respect to the motor-building industry, the increase ni body duty is set down at 1£ per cent. It must be remembered that the body duty is payable on the whole motor-car, and according to the generally-accepted view the increased duty represents an additional 5 per cent, on the value of the body. "The effects of the alteration now proposed on motor-vehicles will be clear from the following table : Old Rate New Rate (including (including Primage). .Surtax).

Per Cent. Per Cent. Motor vehicle chassis, including trucksBritish Preferential

Motor passenger cars not exceeding £2OO in value— British Preferential

EMPIRE PREFERENCE

"As has been indicated, it is part of the Government's policy to increase the preference 'granted to goods manufactured or produced in the British Empire. During recent years there has been a decrease in the proportion of British-made goods imported into the Dominion, and it is proposed to make increases in the preference on 158 items of the tariff.

"The total number of items is 449, and the number of items upon which preference is granted is 295. Hence the Government proposes to increase the .rate on about one-half of the items on which preference is now accorded.

"The advantage which should accrue to British Empire trade through the action now taken will be better appreciated when it is remembered that no increase in the preference has as a rule been made in the items where the great bulk of trade is supplied from Empire sources.

NEW MARKETS

"There is another aspect of this matter which deserves consideration. It has frequently been urged that owing to the high tariffs which are being imposed by certain foreign countries on New Zealand products, wo should go in for a policy of retaliation. "The Government is greatly concerned regarding the tariff and other barriers which are being erected against our products. Ido not think that as a general rule retaliation is a satisfactory method to adopt in dealing with such matters, although I recognise that there may be instances in which retaliation is the only satisfactory way left. I think that it is far better to proceed by way of negotiation. "In pursuance of this policy the Government does not regard all" the increased duties which have been imposed on foreign goods as necessarily permanent. It is noticed that during recent years there has been a tendency on the part of some foreign countries to provide in their tariffs for minimum and maximum rates of duty, and the Government is quite willing to enter into negotiations with any foreign country which treats or is prepared to treat New Zealand goods fairly in tariff matters. If agreements of the kind indicated could be made, the Government would be willing to consider a reduction of certain of these foreign duties. It is believed that such a course would result in an extension of the markets for our products, which is so important for the welfare of the Dominion.

DUTY: ON BARLEY

"Attention has recently been directed to the question of the exemption of stock foods, and the Government has for some time past been investigating the matter. It has been decided to make a concession on barley, which is an important food in the raising of pigs. I am advised that barley is the best cereal to supply the carbo-hydrates which are necessary to the protein in diets of skim milk or whey. This is the experience of all pig-raisers and bacon manufacturers. Barley appears to impart to pork and bacon that degree of firmness and of quality which places it ahead of all other cereals. Hitherto the greater proportions of barley produced in New Zealand has been used in the manufacture of beer, and it is not proposed to extend the concession to such barley. As certain legislative provision will be required in the Customs Bill, which is necessary to give statutory effect to the proposals in the resolutions, the date of operation of the exemption of barley for purposes other than the manufacture of beer .has been postponed until after the 31st proximo. PETROL TAX "The Government has given careful consideration to the question as to the duty on petrol ,and it has been decided to increase the present rate to 7d per gallon. The reasons why this increase is made will bo fully explained in the Budget. "It is proposed to ask Parliament to include in the Customs Bill a clause to grant authority to reduce duties if producers or manufacturers as a result of increased protection raise their prices without proper justification.

AUSTRALIAN GOODS

"lii accordance with the tariff agree- ' ment between Australia and New Zea--1 land, none of the increased duties will ■ apply to Commonwealth products except by agreement with the Australian Govs eminent, or after six months' notice. ; It will be observed also that it is necesl sary to retain primage duty on Aus- . tralian goods, but that wheat and wheat , Hour have been exempted. ,1 "I should perhaps mention that quite i recently my colleague, the Hon. Mr de \la Perrelle had preliminary conversations with the Hon. Mr Fenton, Aus- : tralian Minister for Trade and Customs, , while he was at Auckland, and I believe that as a result of the discussion more satisfactory trade arrangements 1 will shortly exist between the two Do'l

minions. The Government will do all it can to achieve this result. When it is remembered 'that the two countries have so much in common nationally, economically, and commercially, it seems undesirable that our tariff 'relations should be so unsatisfactory. Members will be interested to know that none of the increased duties or restrictions recently imposed by the Australian Government have, so far, been applied to New Zealand products. "... The necessary resolutions must in the ordinary course be followed by a Customs Amendment Bill, when an opportunity will be afforded to members to fully discuss: the alterations which are proposed.

"In conclusion I have to state that the proposals now made have received long and very careful consideration and that the question of providing further employment for our own people lias been a very important factor in influencing tli© Government in its decision.

"I am satisfied that if the objects in view are attained the result achieved will be to confer, in the circumstances, a maximum benefit with a minimum amount of hardship upon the people of New Zealand."

Tobacco Cigarettes Total lb. lb. lb. I$)2i5 130,038 275,208 405,300 1920 195,235 233,203 428,438 1927 522,083 284,107 800,250 1928 743,554 370,044 1,113,598 1929 907,033 583,924 1,550,957

Thou si mds of Super feet. 19.25 .. .. 19,544 .... 4,017 .. .. 23,501 1920 .. .. 28,200 .... 12,721 .. .. 40.927 1927 .. .. 32,750 .... 10,247 .. .. 42,997 1928 .. .. 24,859 .... 8,108 .. .. 32,907 1929 .. .. 20,907 .... 10,107 .. .. 37,074 1930 .. .. 31,078 .... 10,209 .. .. 41,347

1925. million ft. 1929. million ft. Production timber ot 353 No. 270 No. Total number ol' Number of mills 9,043 482 £ 0,220 380 £ Amount of sat-

Tariff General Tariff ... ... 12 ... 37 12 49

Tariff Genera] Tariff .... .. 22 .. 52 24.8 68.9