INEVITABLE TAX

Taranaki Daily News, 16 February 1933, Page 5

INEVITABLE TAX

ECHO OF EXCHANGE RISE RESERVES TOOK PAST STRAIN MR. W. D. STEWART SPEAKS APPROVAL OF EXEMPTIONS LABOUR ATTACK CONTINUES By Telegraph—Press Association. ' / Wellington, Last Night. The second reading debate Of the Sales Tax Bill was continued in the House of Representatives to-day, among the speakers being Mr. W. Downie Stewart, former Minister of Finance. Mr. W. Downie Stewart (Co., Dunedin West) said the Leader of the Opposition had referred to a statement in the 1927 Budget in. which Mr. Stewart expressed disinclination to adopt a sales tax in preference to further taxation on incomes. He had no wish to withdraw from the responsibility for that statement, but at the same time he would like to draw attention to a subsequent statement made by him last year on the same problem. Mr. Stewart outlined the course of the depression from 1930 onwards and the steps taken to cope with the situation, as it developed, including increases in income taxation, stamp duties and death duties. He had made the staterrient in reviewing the prospects for the financial year 1932-33 and had pointed out that the. remaining taxable capacity of the Dominion was becoming limited. • In the direction of direct taxation it would bepossible to raise revenue only by a series of minor impositions of an irritating nature, while in the direction of indirect taxation it’would be necessary to resort to sales tax. He had considered it wise to afford the community some breathing space and had been fortunate in being Able to avoid further taxation by drawing upon reserves. ' At the same time he had pointed out that any. further decline could be met only by economies in expenditure or an increase in taxation. The point Mr. Stewart wished to make was that he himself would have had to resort to sales tax last year had he not been able to utilise reserves. EFFECT OF EXEMPTIONS. The Leader of the Opposition: But you still agree that sales tax will hit the poor more heavily than the wealthy? Mr. Stewart: That depends on the exemptions, and, as far as I can see, the Minister of' Finance has made liberal exemptions. There is still a practically free breakfast table. The trouble about exemptions is that they reduce the prospective revenue from the tax. I consider the Minister has followed the right course, however,- in granting as many exemptions as possible; Mr. Stewart said in his opinion resentment at the imposition of sales tax was due to the people’s objection to being shot down with both barrels at the same time. He believed that had the exchange rate • not been raised the community would have been prepared to accept sales - tax without much protest. He was not prepared to agree with the double policy of raising the exchange rate and imposing sales tax, because even with the .assistance to revenue from the added taxation the prospective deficit would not be brought to a reasonable figure. He was bound to admit he did not think revenue could .have been derived from sources other than sales tax. He did not think it could have been obtained by imposing a very high scale of income taxation. TAX NOT'.JUSTIFIED.’ Mr. C. A. Wilkinson (Ind., Egmont), said that so far the House had not been given sufficient reasons to justify this form of taxation. The Prime Minister’s reply to the Leader of the Opposition was .unconvincing. “In fact,” said Mr. Wilkinson, “I do not remember in my experience in the House any other speech in defence of a Bill that was so unconvincing.” The business people of New Zealand would become tax-collectors for the Government, and Mr. Wilkinson predicted there would be stagnation in business and an increase in, unemployment. If the Bill had been essential to get New Zealand out of its. difficulties it would have been justified, but it had been made necessary by the Government’s folly in increasing the exchange rate. Mr. H. G. R. Mason (Lab., Auckland Suburbs) said it would be poor consolation for the relief workers to be told that the tax they had .to pay out of their 10s.’ a week was spread evenly over the whole community. Without solving the economic problem in any way the tax would make things harder for people. i ' Mr. M. J. Savage said some form of increased taxation had been rendered inevitable as a result of raising the exchange rate", which had had the effect of depreciating New Zealand currency without increasing the incomes of the people — a whole. / . . .■ LABOUR’S ALTERNATIVE. The Minister of Finance had stated that the higher rate of exchange would increase the exporters’ credits in London by £10,009,000 to £12,000,000. Taking that figure as a basis and applying it to Labour’s alternative policy of using public credit instead of increasing taxation, the Government should issue ten or twelve million pounds of credit for the purpose of putting willing workers into employment at reproductive work. To the extent that additional goods and services were the result there could be no -depreciation of currency, as was the case with the raising of the exchange rate. Labour’s alternative policy would remove the necessity for taxation in any form for the purpose of guaranteeing the hanks against loss and maintaining the huge army of men and women who were being forced into a state of being liabilities instead of assets to the State. Sales tax would place further restrictions on business, said Mr. C. H. Chapman (Lab., Wellington North). Every step taken by the Government to rehabilitate the country had proved a failure, and the best thing the Government could do would be to resign. ' Mr J. O’Brien (Lab., Westland) said the sales tax would kill the gold-mining and timber industries. He pleaded for the exemption of. the machinery required for these pursuits from its imposition. Mr. W. E. Barnard (Lab., Napier) supported this request. ? Mr. J. McCombs (Lab., Lyttelton) said the sales tax, Customs taxes, tobacco duty and increased petrol tax were all the direct result of the Governments high exchange policy. These additional taxes would bring in a total of £3,040,000, whereas the loss to the public revenues as a result of the increase in the exchange rate was £3,800,000. The new taxes would hardly bridge the gap in public revenues caused by the Government’s new exchange policy; it was therefore hardly correct for the Prime. Minister to say the Government had been driven to adopt sales tax out of necesS *Because the Government could not meet criticism of its policy in a reasoned wjr. Fm-bp-s had charged the critics

with being irresponsible. The Government’s case must be surely desperate when the Prime Minister had to resort to tactics of that sort. Mr. McCombs paid Mr. Forbes’ speech last night had been unworthy of a Prime Minister of New Zealand. Mr. A. Harris (Co., Waitemata) considered that as an alternative to sales tax the Government might have imposed a 2J per cent, primage duty on. all imports and a 21 per cent, excise duty on all locally manufactured goods except foodstuffs. These imposts on last year’s figures would have realised £1,650,000, or £150,000 more than it was anticipated would be realised by sales tax; furthermore, such a course would have been less cumbersome and less costly. Mr. W. Nash (Lab., Hutt) said that during the past three or four years the Government had gradually placed a flat tax on the whole people and to a cex*tain extent relieved the wealthy classes. The larger proportion of the money expended for the relief of unemployment was paid by the working classes, and he contended the Government ought to obtain the money it required from those who had. it to spend. Mr. A. E. Jull (Co., Waipawa) suggested the whole of the money required might be obtained by the imposition of an increased tax on sugar and tea. His objection to sales tax was that it was costly to administer and a reduction in the amount of taxation could not be brought about without any reduction in the administration cost. WHAT OF £4,500,000 DEFICIT. The Government had confessed that sales tax was the last ditch, said Mr. R. Semple (Lab., Wellington East), yet there was still a prospective deficit ,of £4,500-, 000. It seemed the end was in sight. Mr. H. S. Kyle (Co., Riccarton) expressed the opinion that ’ the diminishing public revenue would necessitate a further reduction in Government expenditure. Mr. F. W. Schramm (Lab., Auckland East) contended that the powers given the Minister under the Bill were too dictatorial.

Mr. A. Stuart (Co., Rangitikei) regretted sales tax was to be imposed, but it was a necessity. The tax was suicidal, said Mr. C. Carr (Lab., Timaru). The effect of the Government’s policy was cumulative in a downward and disastrous way. Mr. A. J. Stallworthy (Ind., Eden) opposed the measure. Mr. W. P. Endean (Co., Parnell): What is the alternative?

Mr. Stallworthy said one alternative would be for members to represent their constituencies. If members exercised their votes along the lines of the declared wishes of their constituents it would be impossible for the ’Government to pass measures that were not acceptable to the majority of the people. The debate was adjourned when the House rose at midnight. „