ン
meet.
First, it should produce a stable and worthwhile revenue
yield at a low tax rate; secondly, it should cause minimal distortion to the economy; and thirdly, it should be simple and
cheap to administer.
50.
Whilst our researches are far from complete, they
have tended to confirm my belief that a measure of tax
S diversification, together with some rationalization of existing
indirect taxes, is a practical proposition. What we have done
so far suggests that a form of sales tax, though probably not at
the retail level, best meets the criteria I have described. But
this is a complex area and many factors remain to be
considered. There is, therefore, much more to be done before I am able to present any proposals for public debate.
Love
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The Government's reserves
51.
The impact of the strategy I have outlined on the level of the government's consolidated reserves results in the
forecast balances of $40.5 billion at the end of 1987-88 rising
to about $460 billion by the end of 1988-89 after allowing for the taxation proposals that I shall be making this afternoon.
The Medium Range Forecast shows that maintenance of these
reserves in real terms will be achieved over the forecast period
up to 1991-92. However, over this period the reserve balances
per cent will fall as a percentage of annual spending from about 77% to
For anx 65 (20). In this respect, our reserves have been higher only briefly in the early years of this decade when we experienced
Sir, substantial windfall receipts from land sales. There can be no
absolute guideline as to a satisfactory level of reserves. Nevertheless, the present position not only provides essential cover for our contingent liabilities and for fluctuations in our short-term cash flow but also assists us in maintaining fiscal
stability over the longer term (21).
(20) Appendix A, paragraph 15.
(21) Contingent liabilities as at 31 March 1987 are listed in Appendix C.
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