MANUFACTURERS SEEK WIDE TAX CHANGES

Press, Volume CV, Issue 31005, 10 March 1966, Page 3

MANUFACTURERS SEEK WIDE TAX CHANGES

(New Zealand Press Association)

WELLINGTON, March 9

The New Zealand Manufacturers’ Federation wants the Government to adjust the taxation scale on individual earnings so that the tax rates at various salary levels are nearer to those' in force in “more sophisticated economies.”

In submissions to the Minister of Finance (Mr Lake) the federation says that because of inflationary effects on income over the last 25 years the federation considered that the Government should make such a readjustment to stimulate production and encourage growth.

The Government’s continuing policy should be to reduce the present high rate of company tax and dividend tax, the federation said. Since the dividend tax was introduced in 1958 the federation had strongly disagreed with the basis adopted. The federation recommends that the first £250 of dividend income in the hands of a shareholder should be exempt from dividend tax. This should be done in addition to a reduction of the company rate. “It would assist in achiev-

ing a more equitable relation between the amount of tax on dividends and on other forms of personal income, as well as encouraging small investors to put their savings into industry.

“If any tax relief is to be given, it must result from savings in expenditure. This is essential. If Government expenditure is held, rising incomes would make it possible for tax rates to be reduced and when this is being done special consideration should be given to the high incidence of the combined company and dividend taxation,” the federation said. MAXIMUM RATES The federation said that the Commissioner of Inland Revenue had said in an article that the income level at which maximum rates of individual tax applied was much lower in New Zealand than in other countries. In New Zealand the maximum rate, which was even lower today than previously,

was reached at a taxable income of £3600.

In the United States the 67 A per cent (equivalent to New Zealand’s top rate of 13s 6d) was reached at a taxable income of about £42,000. The maximum rate of 70 per cent applied to income in excess of £64,000. In Britain the 671 per cent rate was reached at a taxable income of £9500 (earned) or £6OOO (unearned) and the maximum rate of 88.75 per cent at £lB,OOO and' £15,000 respectively. The maximum rate of 13s 6d in £1 was reached in Australia at a taxable income of £12,800. MIDDLE GROUP In New Zealand the incidence of direct taxation fell particularly heavily in the middle income group. Under present tax rates it was very difficult to provide added financial incentive or reward to these people, a situation which was recognised when salaries of senior civil

servants were adjusted recently. Industry was being asked to increase productivity, but, because inflation and heavy tax, no incentive could be offered to those who had a large share of the responsibility for achieving the increase. The federation believed that direct taxation should be reduced in favour of a higher proportion of indirect taxation.

This must not be interpreted as advocating higher indirect taxes in addition to the present level of direct taxation, but as advocating substitution for direct tax in an area where it was already too high, the federation said.