GST postponement a probability: Mr Beetham

Press, 13 February 1986, Page 8

GST postponement a probability: Mr Beetham

PA Wellington The expected deficit of more than $2 billion for the financial year would block the introduction of GST in October, said the Democratic Party leader, Mr Beetham, yesterday. “The grave economic dangers and the high political risks involved in an October introduction date are now very clear," Mr Beetham said. “Piling the $1 billion shortfall in Government revenue involved in the promised October tax package on top of an internal deficit in excess of $2 billion is a recipe for astronomical interest rates which would col-

lapse the economy and the Government's political

support,” he said. Adding the 5 to 7 percentage points involved with a 10 per cent GST on an annual inflation rate of at least 13 per cent by October would push inflation to 20 per cent and possibly beyond by the end of 1986. “This is equally a recipe for economic disaster and political suicide,” Mr Beetham said. The Government had limited options, he said. It could: ® Drastically reduce promised income tax cuts and retain the 10 per cent GST rate “which will add hugely to the over-all tax burden.”

• Slash Government expenditure in all the

areas in which Labour had already spent up large and promised even more spending. ® Lift the GST rate to 15 per cent which would add “an intolerable 9 to 11 percentage points to the inflation rate.” © Postpone implementation of GST. The economic dangers and political risks associated with the first three options made the last option, postponement, an increasing probability, Mr Beetham said. “That probability will be greatly enhanced if the business community and the electorate generally go solidly behind transfer tax as a superior alternative to GST,” he said.