SALES TAX

Wairarapa Times-Age, 9 April 1938, Page 5

SALES TAX

REAL PERCENTAGE HIGH. MANUFACTURER’S VIEWS. Holding that the 5 per cent, sales tax was a misnomer, the head of a big drapery firm in Christchurch told the Press that there were a number of causes of rising costs of which the public was not aware. The tax is one that the Labour party condemned at the last election and promised to remove.

In support of his contention about the sales tax he showed that 5 per cent, on the sale value of an article in New Zealand was considerably more than 5 per cent, on the import price. The 5 per cent, tax reached as high as 13J per cent, on the f.o.b. price in some cases, he said, and this fact had a big bearing on the cost to the public.-

An increase of £l7 9s 7d per cent, in taxation on imports of drapery lines from Australia was quoted by the manufacturer to show the effect of the new tariff on prices in New Zealand. He said that taxation on these goods amounted to £53 2s lid per cent, so that by the time landing charges were added the goods had increased by more than 75 per cent, on their original domestic value in Australia.

The manufacturer had also some comment to make on the regulation which put Australian goods on the same basis as those imported from foreign countries if more than half the works cost was not Australian. This, he said, meant that they were classed as foreign even if this larger part came from England or any other dominion.

To show the effect of the new tariff introduced at the beginning of the month, the manufacturer said that taxation, exclusive of landing charges such, as insurance, freight, packing, and general handling costs, on a line of a current domestic value of £lOO from Australia had risen from £35 13s, 4d to £53 2s lid, an increase of £l7 9s 7d.. Under the old rates, the taxation was made up of 25 per cent, duty on £llO (being with 10 per cent, added as required by the Customs Department), amounting to £27 10s, and 5 per cent, sales tax on £l7l 17s 6d, ■ amounting to £8 3s 4d. The sum on which the sales tax was computed was the original value and duty added £137 10s, together with 25 per cent, on this sum to bring the value up to sale value, £34 7s 6d. The sales tax of £8 Ils lid was reduced by 5 per cent, for cash. The method of -determining the sum on .which the sales tax. was. payable was the same under the new tariff, but the duty had increased from 25 per cent, to 40 per cent.

IMPORTS FROM UNITED KINGDOM.

Speaking of importing costs, the manufacturer said that articles of apparel from the United Kingdom cost the importer 76 per cent, to land in New Zealand. Apart from freight the main charges were 25 per cent, exchange, 27J per cent, duty, and 91- per cent, sales tax. These .were items which the manufacturer . pointed, out were outside . his control altogether, and constituted a heavy burden on any importer. Goods to the value of £lOO had increased to £176 before the importer added his own costs and a small margin for profit, if he could make any.

Figures for a line of apparel from one of the central European States, which for certain lines was under a special trade agreement with New Zealand, showed, he said, that actual landing charges to bring the goods to the Dominion reached a total of £142 10s per cent. The chief items apart from freight were 25 per cent, exchange, 88 per cent, duty, and 13| per cent, sales tax. A so-called 5 per cent, sales tax on a foreign-made article worked out at 13J per cent, on the f.o.b. price. Agreeing that the object of this taxation was first to protect New Zealand industries and second those of the Empire, the manufacturer said that while his fim bought heavily within the Empire, particularly from the United Kingdom, there were certain lines for which orders were placed on the Continent. Imports were so heavy that the firm was in touch with all countries and price and style were the chief factors in determining where orders were placed. He added however that the designed protection was defeated by the regulation regarding Australian goods not totally the product of the Commonwealth. SUBJECT TO FOREIGN RATE. The regulation made Australian articles subject to the foreign rate of duty if more than half the works cost made up of material factory labour and factory charges, was not Australian and was shown by the manufacturer to place articles, in which English material comprised 51 per cent, of the works cost on the same basis as, for example, Japanese articles, entering under the general tariff. In the case cited, there would be no foreign labour, material, or handling, yet the article would be treated as if from a foreign country. Rates of duty on finished articles were 25 per cent, on those from the United Kingdom, 40 per cent, on those from Australia, and 65 per cent, and a surtax, totalling about 871 per cent., on those from foreign countries. He could thus import the complete article from England at a lower rate of duty than from Australia, or from a foreign country-at the same rate, he said, if more than half the works cost was English.