SALES TAXATION

Rotorua Morning Post, Volume 2, Issue 456, 14 February 1933, Page 7

SALES TAXATION

| its operation f DIGEST PREPARfcD FROM I VAROUS OVERSEAS | LEGISLATlON I h ■ CMMERCOIAL BULLETIN j The Assoeiated Chambers oi Coml merce of New Zealand has prepared | the f ollowing digest of saies tax legis- | lation eompiled from material seeur- ] ed from Canada and Australia: — j The saies tax, or consumption tax, j as it is also called is an ancient de- | vice. It is in operation to-day in Canj ada, Australia, and certain Contin- | ental Countries. | Canada was the first British coun- | try to adopt it, passing legislation | under the special War Revenue Act. t In 1927 the general rate of saies tax | was reduced from 5 per cent. to 4 • per cent., and was further reduced •; eaeh suecessive year until in 1930 1 it was 1 per cent. In 1931 it was ini creased to 4 per cent. To-day the j rate is 6 per cent. on the sale priee | of manufactured and imported goods j the tax being paid by the manuf actur8 er on delivery of goods and by the j importer when taking goods out of I bond. The -wholesaler also pays tax | at time of delivery of goods. "Sale | price," for the purpose of ealeulat- | ing the tax includes the amount of | any other excise dnties, and in the | case of imported goods "sale price" | is the duty paid yalue. "Duty paid 1 value" is based on the ad valorem j duty and includes Customs duty. £ Licences. — Every mannfacturer is 3 required to take out an annual licI ence, while a bona fide wholesaler J may be granted a licence upon provid1 ing security. The Minister may | nevertheless direct that any class of small manufacturer or producer sellI ing his product exclusively by retail shall be exempt from payment of I saies tax on goods manufactured or S produced by him, and persons so exempt shall not be given a licence, Everyone subject to a licence must j make a monthly return showing tax- | able saies and the tax payable.

s Exemptions. — Saies tax is not payable on goods (a) exported (except spiritons or fermented liquors). (b) sold by a licensed manufacturer if the goods are partly manufactured goods, (c) imported by a licenced manufacturer if the goods are partly manufactured goods or (d) imported by a licensed manufacturer to a licensed wholesaler, (f) sold by a licensed wholesaler to a licensed manufacturer if the goods are partly manufactured goods,- or (g) sold by a licensed wholesaler to another licensed wholesaler. When any other person acquires from or against the persons mentioned the right to sell any goods the sale of such goods is taxable. The Minister may determine the value for tax in difficult circumstances also the value if manufactured goods are not sold. Many articles are wholly exempt from the tax and others exempted for 50 per cent. of the. tax. Provision is also made for deductions refunds and drawbacks in certain cases. Invoices. — When goods are sold by a licensed manufacturer, or by a licensed wholesaler to a wholesaler not licensed, the purchaser must be furnished with an invoice of the goods sold, showing separately the amount of the saies tax. This is also required of the unlicensed wholesaler selling to a licensed manufacturer. Tax in Australia The saies tax has been in operation in Australia since August 1930. The rate of tax was "21 per cent. by value. but in July 1931, it was increased to 6 per cent., when certain additions were made to the existing list of exemptions. The Australian legislation is similar to that of Canada, with certain important variations. There are nine principal Acts, with amendments and additions spread over 48 other Acts. They are greatly complieated, being far more intrieate than the Canadian Acts, and it is difficult to make a concise analysis of them. The tax is paid once only by the manufacturer, importer, or wholesaler, and in this eountry all such persons must be registered, subject to certain exemptions. In making a purchase a wholesaler quotes his registered number, and this exempts the transaction from saies tax. The same'thing applies to a manufacturer purchasing materials for the manuf acture of goods. A retailer is not a registered person under the Act. Thus, generally speaking, the sale of goods liable to taxa- ( tion is the last sale prior to the disposal of the goods by retail. The tax on imported goods is collected by the Customs Department at the time of entry of the goods into the eountry, as in the case of Canada.

At first, the collection of the amount of tax by the vendor from the purchaser was frequently difficult, as the vendor eould not eharge for the item "saies tax." It was neeessary to include the amount of the tax in the price of the goods and this was a matter for agreement with the purchaser. In 1931 the Act was amended to make the purchaser definitely liable for the amount of the. tax, which it is not now necessary to state as a separate item on the invoice. Returns must be made before the 21 of each month on the saies of the preceding month, accompanied by the amount of tax due.~ The greater part of the tax is thus paid by the taxpayer before he receives payment for the goods. He ha^ also to deposit security. Exemptions — The exemption of persons is not left to the Minister to determine, as in Canada, but exemptions are defined as follows: — (a) Goods sold exclusively by retail by a person (not being a mannfacturer of articles for human wear) whose principal business consists of the manufacturers of goods to the order of individual customers and the total value of whose average yearly saies of goods so manufactured is not, or would not be, in the opinion of the Commissioner, in axcess of £500. (b) Goods sold exclusively jby retail by a person who manufactures some or all of those goods and the total value of whose average yearly saies is not in excess of of £1000. (c) Goods manufactured by a person exclusively in his own home for sale, the total value of whose average yearly saies is not in excess of £500. (d) Goods, being primary products, from operations in

mining, the cultivation of land, etc., and which have not been subject to any progress or treatment resulting in an alteration in the form, nature, or condition of the goods. Further, the tax is not payable on goods sold to the Government for official use, on goods sold for export or for sale after export, on goods retailed by a dispensing ehemist, or on medicines sold by friendly societies. There are other exemptions. Comments and Opinions. The Assoeiated Chambers of Commerce of Australia has condemned the legislation on the ground that it is too complieated in operation; it requires a huge army of inspectors to check books, and there is a heavy surcharge on industry. The business community is relying on the undertaking given by the Government that the saies tax will be the first to be removed. The Melbourne Chamber of Commerce considers the legislation to be "hastily conceived, hurrigdly drafted, and rushed through Parliament without reasonable time being allowed for consideration . . It would be difficult to recall any other piece of legislation in the history of the. Commonwealth that has caused sueh trouble and confusion in business circles." The Sydney Chamber of Commerce states that the saies tax aroused strong opposition on the part of the commercial community when first introduced. This was not only because of the amount payable in taxation, which in most cases was passed on, but also because of the disorganisation of office systems, which had to be adjusted to the requirement of the Taxation Department, involving increased labour. . Tax on Retail Saies. It is pointed out the saies tax Acts in Australia, in effect, impose on the business community the task of collecting the taxation and meeting the cost of the clerical labour entailed. In the early stages of saies taxation in Australia, the Sydney chamber pressed strongly for the substitution of a tax on retail saies by means of a stamp duty for the present system of taxing saies by wholesale. It was contended that this method would not increase prices to the consumer to the extent that they would he increased by taxing wholesale saies. The retailers opposed the taxation of retail saies for the obvious reason that they did not wish to act as eolleeting agents for the Government.