SALES TAX

Press, Volume LXXI, Issue 21417, 8 March 1935, Page 10

SALES TAX

TWO SIDES OF CASE CHAMBER OF COMMERCE DISCUSSION . The sales tax was both attacked and defended at the meeting of the council of the Canterbury Chamber of Commerce last evening. Many members considered that the improved revenue of the country justified the immediate abolition of the sales tax, but others questioned whether it might not result in another worse form of taxation being imposed. The Associated Chambers of Commerce asked the council to reopen consideration of the sales tax. Its reasons for doing this were that there was now a distinct improvement in the revenues of the country, and the prospects as stated by the Minister for Finance were that there would be a budget surplus at the end of the year. It was considered that taxpayers were entitled to the benefit of any improvement in revenue by tax remissions. When the sales tax was introduced the unofficial estimate of its yield was £1,600,000 in a full 12 months. The actual yield for the financial year 1933-34 was £1,847,000. Official figures for the six months ended September 30, 1934, showed that the yield from sales tax was £1,020,000, as compared with £863,000 for the corresponding period of 1933. Additional reasons were that the tax was introduced as an emergency measure in a time of instability of national revenues, but now seemed likely to become permanent; that the tax was really not 5 per cent., but from 13 to 15 per cent., and that a reduction in the tax would be insufficient, as mere reduction would not lower the cost of collection which fell upon business houses. Improved Conditions Mr F. W. Hobbs, who presided, said that taxation needed serious consideration. The sales tax was the last to be imposed, and it was felt that it should be the first to come off. It hit people according to their buying capacity, amd it was often very unfair, because traders were often unable to pass it on. Now that the revenue of the country was increasing so rapidly, the people had the right to ask for a reduction in taxation. It was right for the chamber to give the Government an indication of the direction in which it might make a reduction.

Mr R. W. Midgley supported the president. The collection of the tax was a burden on firms. lie suggested that it be a recommendation of the council to the Government that when relief of taxation was being considered sales tax should receive first consideration. Mr W. Machin said he thought considerations on the other side of the question needed to be brought forward. All objected to being taxed. He took it that the irksomeness of collecting the sales tax was what many people disliked, and not Ihe tax itself. There were reasons for thinking that the sales tax was better than many other taxes. Nature of Incidence The sales tax was comparatively fair in its incidence, and none of the dire consequences originally prophesied of it had come about. The index price numbers of imported goods, which had been expected to rise because of the sales tax and exchange, had remained comparatively stable. Some sheltered services within the Dominion, not influenced by sales tax or exchange, showed some of the highest price index figures. From time to time the chamber had complained of the growing number of Government officials. One mitigation of the irksomeness of the sales tax was that the firms themselves became the unpaid army of tax collectors. They had been met with great consideration, and in the fairest possible manner by the officials concerned. If the chamber considered the weight of this tax, and its measure against other forms of taxation, it would not be found so burdensome. No argument could be found for a mere reduction of the tax, for it was just as irksome to collect a small tax as a large one. An Emergency Measure Mr S. L. Wright disagreed with Mr Machin. He thought that when the revenue of the country was sufficient to enable it to meet its obligations, this tax should come off. The tax was very onerous to the firms, particularly to those dealing with small articles, who could not pass it on. The chamber should take the view that this was a special tax to meet an emergency, and should come off when that emergency disappeared. Unless a protest was made it would become a permanency. He hoped the Associated Chambers would protest to the Government. Mr A. C. Bretherton said he wondered whether Mr Machin had not intended to be humorous. Since 1914 taxation revenue had increased from £IOO,OOO a week to £600,000 a week. It seemed to him that taxation was a cause of unemployment, in causing some firms and farmers to close down. Mr C. P. Agar said the question was whether the time had arrived when the Government could reduce taxation or not? If it had not arrived, the chamber should recall its attitude of some years go, when it considered that in an emergency the sales tax was preferable to other forms of taxation. The letter of the Associated Chambers was contradictory. He recognised the burden on some businesses of the tax. He thought, however, that the sooner t-.xation was spread over all the people instead of a few of them, the sooner a sound economic basis would be reached. The sales tax fell on people according to their earning power. Mr W. H. Nicholson supported Mr Agar's last remarks. There was need also for relief to land owners in land taxation. Few real objections could be made to the sales tax that could not be made to any form of taxation. Other Views Mr T. N. Gibbs suggested that this subject of taxation could be studied

by the economics committee, in cooperation with other committees of the chamber. A considered report was needed.

Mr Williams said that Mr Machin was the only retailer he had ever heard approve of the sales tax. It was so easy to collect that the Government would next be increasing it to 7A per cent. Mr John Mac Gibbon objected to Mr Machin's figures about price levels. The real explanation was that the exchange rate and the sales tax had prevented prices from falling. Taxation had been increasing because of the lavish expenditure of the Government. A strong protest now might check it. It was necessary to choose as an object of attack a tax which was most likely to be taken off. Mr P. L. Porter urged that the subject should be given more serious consideration. The question of incidence of the sales tax was highly technical, but he felt that a strong plea should be made for a reduction of taxation. The subject was referred to the economics committee in conjunction with the importers' and retailers' committees.