BUSINESS PROBLEMS

New Zealand Herald, Volume LXX, Issue 21414, 11 February 1933, Page 13

BUSINESS PROBLEMS

STOCKS NOW IN HAND WHOLESALE AND RETAIL DEFINITION DIFFICULTIES Further information concerning the operation of the sales tax was still awaited by the business community yesterday, and although the official resolutions were available it was felt they left a number of points in need of interpretation. The liability for sales tax as set out in the resolutions shows the following to obtain: — Wholesalers pay no sales tax when their goods are entered for home consumption. They pay only on their actual sales, when made to persons other than a licensed wholesaler. Their present stocks are liable to sales tax when sold. Importing retailers pay sales tax when the goods are imported and entered for homo consumption. Therefore existing stocks in the hands of importing retailers are free of ssiles tax. This freedom from tax does not apply to raw materials now in the hands of manufacturing retailers and later manufactured by them, for they will have »J.o pay tax on theso goods at the time of manufacture unless they are sold to a licensed wholesaler. Stocks already in the hands of retailers who are only retailers and do not import or manufacture, are free of tax. Bases of Assessment Another point which is viewed with concern by wholesalers is the phraseology governing the assessment for tax of importing retailers. The resolutions state that the sale value of goods imported by retailers is to be the value for duty, plus the duty, and in addition 20 per cent of the total. Wholesalers point out that the sale "value on which they are assessed includes such other charges as freight, insurance and exchange. If the intention of the resolution is such as it appears from the wording, wholesalers say they will be liable for a greater amount of tax than importing retailers will have to pay on goods of the same value. While it is believed that this situation is not intended, a full explanation of the position is considered imperative. Wholesalers contend that they will become the chief medium of tax collection and virtually Government servants. Whereas importers will pay their tax at the time of importation and entry for home consumption, and thus have done with the matter, wholesalers will have to pay upon sale even though they have not received payment from their client. There will then follow the possibility of bad debts, and no provision appears to have been made for recovery of tax paid on these transactions. They hold the view that the rebate of 5 per cent for prompt payment of the tax will barely cover their expenses for collection and losses. Licensing Forms Wanted No tax is payable on goods sold by one licensed wholesaler to another, and in this connection it is felt that the sooner licensing forms are available so that licensing can take place the easier it will be to do business. At present wholesalers have no definite knowledge of which firms are entitled to class themselves as "licensed" and which are not. Complications occur also in the case of some firms how they are to be defined for purposes of the tax. An importing retailer might also be a manufacturing retailer, and in addition might consider himself in some respects as a wholesaler. It is anticipated that light will be thrown on this matter by the wording of the licence forips, which it is considered probable, may contained questions to applicants that, when answered, will automatically settle any doubts. It is not expected that licence forms will be available until the Act is passed, and a period must elapse before that happens, as merchants are first to be given the opportunity of interviewing the Prime Minister and the Minister of Finance. Question of Second-hand Goods The resolutions do not state whether the tax is to be imposed on sales of second-hand goods, neither are these goods mentioned in the schedule of exemptions. No official advice has been received in Auckland concerning this matter. In Australia it was ruled that second-hand goods which underwent a process of manufacture became liable to the tax. Casks which, having been used, were broken up and rebuilt became taxable. A second-hand plank was not taxable, but if sawn in halves, it became a manufactured product and subject to tax. The opinion was expressed by mtvre than one merchant yesterday that, although no one liked taxation, it had to be that the New Zealand bill was a great improvement upon the measures which operated in Canada and Australia. With the exception of two or three points w'\ieh needed clarifying it could be considered as well thought out and well introduced legislation.