Duty on imported content

Press, 25 June 1983, Page 21

Duty on imported content

• Tariff and indirect tax concessions: Remission of sales taxes, excise and customs duties related to capital goods, components, energy or all taxable inputs were proposed. The paper said that a full duty rebate on the imported content of exports would not replace the export performance tax incentive, because the domestic component would not receive assistance. (Under the incentive, tax concessions are based on domestic value added.) Anything more than complete remission of duty was unacceptable to GATT. It was also difficult to identify duties built into goods used in export production before the exporter bought them, and difficult to establish whether a taxable item would be exported or consumed domestically. Although the introduction of value-added tax, which would be fully remitted to exporters, would allow very precise assessment of rebates at the point of export,

"many other considerations” came into introduction of VAT in New Zealand. VAT rebated on exports would provide no additional assistance to exporters to offset the loss of the export performance tax incentive. Exporters objected to "double taxation” in that New Zealand’s high ratio of personal income tax (compared with other countries) could not be rebated under GATT, and in addition New Zealand faced consumption taxes in the country of destination. But the paper said that the consumption tax in the importing country was borne equally by imports and domestic products of that country, so that New Zealand exporters were not discriminated against. Looking at excessive internal costs as a ground for export incentives, the paper examined the following proposals put up by exporters. • Subsidised finance: Exporters asked for more

readily available finance at lower rates of interest. But subsidised interest rates were coming under increasing international pressure, and would be questionable under GATT and CER, the paper said. Also, disparities would be created, particularly towards capital goods. Solutions lay in making the financial sector market more competitive. ’© Foreign exchange dealing: A sought shift of exchange rates away from exporters to the Government would not give uniform assistance. But measures to improve running of foreign exchange markets, such as the recent decision to increase numbers of licensed foreign exchange dealers would reduce costs to traders. ® Export insurance: Proposals for the Government to subsidise premiums on export insurance or to guarantee risks might lead to excessive use of insurance facilities. Assistance would be uneven because risks

would vary widely. The level of assistance would be well below the export performance tax incentive. Insurance services should be made more efficient. ® Transport subsidies: These worked against competition and lowering of costs. Legislation making land and air transport more competitive, and the present review of shipping policy were better approaches. Internal transport subsidies were also limited by GATT. Exporters also sought help in promotion and research and development. The paper conceded there was room for more Government help where market research or research on a product could lapse because an exporter felt his research was giving him too few returns and other exporters a “free ride.” Aid could lead to wasteful promotion. Research and development deserving of Government support was not limited to the export sector. Transport and new technology were examples.