SALES TAX BILL

Taranaki Daily News, 15 February 1933, Page 7

SALES TAX BILL

SECOND READING DEBATE *NO TAX’ PROMISE RECALLED labour attack continued MINISTERIAL EXPLANATION ADDITIONAL EXEMPTIONS By Telegraph.—Press Association. . Wellington, Last Night.. The second reading of the Sales Tax Bill was moved in the House of Representatives to-day by the Minister of Finance (the Rt. Hon. J. G. Coates). Mr. Coates said he would like to thank the commercial community for the way in which it had received , the bill. The Government recognised that such a measure would increase at least to some extent the work of merchants’ staffs, but notwithstanding that fact numerous offers had come to hand of assistance and co-operation in bringing the scheme into force. Mr. Coates gave an assurance that the Government would do its best to reduce to a minimum any inconvenience that might be caused to those carrying on the commercial business of the country. Although sales tax was new in New Zealand it had been in operation in other countries for some years, Mr. Coates said. It had been first introduced in Canada in 1920 and into Australia in 1935 and was now levied in 24 foreign countries. CONTRACTS PREVIOUS TO TAX. Mr. Coates said some question had arisen in dealing with goods concerning which contracts of sale had been entered into by wholesalers before February 9, the point being whether the goods were or were not sold before February 9. If they were so sold they were exempt from the sales tax; on the other hand if the sale took place after the data mentioned the tax was payable. His view was that the only satisfactory way of dealing with the question was to accept the distinction indicated in Section 111 of the Sale of Goods Act of 1908. That provided that where under contract of sale the property in the goods was transferred from the seller to the buyer the contract was called a sale, but where the transfer of the property in the goods was to take place at a future time or subject to some condition thereafter to be fulfilled the contract was an agreement to sell.

The Minister then explained the clauses of the Bill. Referring to the clause empowering the Minister to divide the Dominion into districts for convenient collection of the tax, Mr. Coates said the Collectors of Customs, who would be collectors of sales tax, were stationed at ports and as such had jurisdiction over an area within the limits of those ports. For the purpose of collecting sales tax it was necessary they should have juris-

diction over the area and district of which ; the port was the principal distributing centre. For example, a merchant at Masterton or Hamilton would have to account for sales tax payable by him to the collector at Wellington or Auckland as the case might be. GAZETTING WHOLESALERS. Explaining another clause, the Minister said that owing to the fact that sales by wholesalers to wholesalers were not liable to sales tax it was necessary that K wholesale vendors should be advised as to the names of wholesalers who were licensed or who ceased to carry on business as" such, and provision was made for gazetting the necessary infomation. Extracts from the Gazette containing those details would be made available to persons requiring them. Replying to an interjection by the Leader of the Opposition (Mr. H. E. Holland), who asked whether the tax would be. permanent, Mr. Coates said it would be permanent so far as the present crisis was concerned. He could say no more than that The Minister said the compilation of additional exemptions from sales tax had not yet been completed. Mr. A. J. Stallworthy (Ind., Eden): Have you a further list? Mr. Coates: A few. Mr, J. A. Lee, (Lab., Grey Lynn): Are exemptions being given away in return for votes? Mr. Speaker: Order!' Order! Mr. Coates said additional exemptions so far granted were books, box strappings, carbonettes and briquettes, dairy, vats, egg pulp, preserved eggs and eggs, haymaking implements, meat meal and bone meal, nails, cement, coated nails, malt, wrapping paper, meat wraps, parchment paper, yeast and fishing netting, twine. “UNREASONABLE OPPOSITION.” Concluding, Mr. Coates said the additional revenue that would be obtained from sales tax was urgently needed in view of the position of the country’s finances. It was admitted the new taxation was formidable, but he was convinced the people would respond to the call that was being made to them. The greatest difficulty the Government had to face was unreasonable opposition. The Leader of the Opposition said the Hduse shopld reject the Bill because it violated, a solemn promise made by the Prime Minister in his budget speech last October that there would be no increase in taxation this year. It was also in contradiction to a pronouncement made by the Hon. W. Downie Stewart in presenting the 1927 budget. Mr. Stewart then said a sales tax would not be as equitable as the existing tax on income and in his opinion such tax, being on both luxuries and necessities, must hit the poor(who had a smaller margin beyond necessary expenditure) more heavily than the rich.

POORER PEOPLE MOST AFFECTED.

Mr. Holland insisted that the real weight of sales tax fell in the main on the poorer people while wealthy people escaped much more lightly than would be the case if a graduated system of income taxation were to operate. Furthermore sales tax would be paid in a way that was calculated to blind people in the mass to the fact that they were being taxed. They would be prone to regard the matter as one of higher-priced goods. Mr. Holland read quotations to Show the sales tax experiment had been tried in ancient Egypt, Rome and in Europe in the Middle Ages but had always met great resistance. Coming to modern times Mr. Holland said Germany enacted a sales tax in the first half of 1918. : Russia appeared to have first applied it in 1919. He asked, therefore, . whether it was not possible that the Government was treading in the footsteps of Germany and Russia rather than in those of Canada and Australia. Canada among other countries adopted sales tax in 1920 but it was not until 1930 that Australia had been “misled in the same direction." After reviewing the manner in which the tax had been applied in various countries Mr. Holland said the rate in

Australia originally was fixed at 2| per cent, but in July, 1931, it was raised to six per cent. There was a danger of this history being repeated in New Zealand. The Bill before the House proposed a tax that was 100 per cent, higher than the sales tax first introduced in the Commonwealth Parliament. Within a year’s time the Australian rate had been increased by more than 100 per cent What guarantee was there that the rate in New Zealand would not be similarly increased? GREAT VARIATION. Mr. Holland said the scope of sales and turnover taxes in different countries had varied greatly. Some had extended to all transactions both wholesale and retail, and others to wholesale transactions only. Certain taxes included both goods and services, while others included only goods. The Bill before the House- allowed services to go free. Lawyers, doctors, insurance people, commission agents and such would not be taxed. He was not in favour of the tax being applied at all, but it was manifestly unfair to apply it so that it would fall most heavily on the poorer sections of the community. Mr. Holland said Mr. Forbes had contended the tax would mean no material increase in the cost of living, but in other countries the assumption. usually had been that prices rose with the amount of tax—no more and no less. The tax was the equivalent of yet another Substantial decrease in wages that were already below subsistence level. If rbe Bill passed into law it would stand as yet another milestone on the unhappy road along which New Zealand was being goaded towards insurrection. LABOUR’S “AIRY DOCTRINE.” The Prime Minister (the Rt. Hon. G. W. Forbes) said the country’s finances were in a parlous condition, yet the Labour Party resisted all proposals to assist them. Labour demanded that expendi-, ture should be continued in every direction; it declared there should be no economies. Surely that was an airy doctrine to hold. It was one that could be held only by an irresponsible Opposition. It was obvious the money had to be produced, Mr. Forbes said, if the country was to be kept on a solid foundation. It was part of the Labour Party’s programme to endeavour to embarrass the Government politically and financially, and the criticisms of its members could be put aside as the criticisms of men whose only consideration was how much party capital they could make out of the Government’s attempts to meet a difficult situation.

Mr., Forbes said the Leader of the Opposition had referred to the sales tax in ancient Egypt, but it was difficult to understand what bearing that could have on the present measure. The question to-day was whether the tax was necessary to supplement the national income, and he believed any man with a sense of responsibility must come to the conclusion that it was. It was one of the last remaining sources of taxation available. He felt sure that, distasteful though the tax was, it was being accepted by the people in a spirit of realisation that self-sacrifice was required from every section of the community. No one wanted to see New Zealand default with respect to its obligations, and default would be inevitable unless the people were prepared to accept the necessity for self-sacrifice. “DREARY, PITIFUL APOLOGY.” Mr. Lee said the House had just listened to an apology that was dreary, pitiful and characteristic. If there was one way to do a job wrongly, the Prime Minister would find it. Sales tax was tantamount to wages tax, and was even more vicious. Mr. W. J. Polson (Co., Stratford) said he was prepared to face his share of responsibility for having the Bill made law. All taxation led to increased costs. The disadvantages of sales tax were not so great as the disadvantages of direct collection from the consumer himself. The Bill was to make good the damage done by high exchange, said Mr. F. Langstone (Lab., Waimarino). Undoubtedly it meant an increase in prices without an increase in purchasing power.

The debate was adjourned when the House rose at 11.15 p.m.