WEDNESDAY, FEBRUARY 29, 1984
22
NEED FOR PROPER TAX BALANCE STRESSED
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HAVING LAST YEAR RESTORED THE PROPER BALANCE BETWEEN INDIRECT AND DIRECT TAXATION, IT IS CLEARLY NECESSARY TO BEAR THIS RELATIONSHIP IN MIND WHEN CONSIDERING HOW TO RAISE ADDITIONAL REVENUE, THE FINANCIAL SECRETARY, THE HON. SIR JOHN BREMRIDGE, TOLD THE LEGISLATIVE COUNCIL TODAY.
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SIR JOHN SAID THE POTENTIAL DEFICIT WAS $3.6 BILLION, AND THE MEANS AVAILABLE TO REDUCE THIS WERE LIMITED.
*AS A GENERALISATION, DIRECT TAXATION DOES NOT ADVERSELY AFFECT INFLATION TO THE EXTENT THAT INDIRECT TAXATION DOES. WHILE, THEREFORE, BOTH MUST BE INVOLVED IN THE NEED TO INCREASE RECURRENT GOVERNMENT REVENUES, INSOFAR AS INDIRECT TAXATION IS CONCERNED, I MUST ALSO SEEK TO ENSURE THAT ANY ADDITIONAL BURDEN IS SKEWED AWAY FROM THE LESS WELL OFF, HE SAID.
HE SAID HIS GENERAL INTENTION WITH REGARD TO THE POTENTIAL DEFICIT OF $3.6 BILLION WAS TO INCREASE RECURRENT REVENUE BY $1.5 BILLION (ONLY HALF OF WHAT WAS NECESSARY LAST YEAR), TO RAISE $1 BILLION BY SELLING GOVERNMENT BONDS AND TO MAKE UP THE BALANCE OF $1.1 BILLION BY REDUCING THE FREE FISCAL RESERVES TO ABOUT $7.1 BILLION BY THE END OF MARCH 1985.
+CONSEQUENTLY I AM BUDGETING FOR A TRUE DEFICIT OF $2.1 BILLION. THIS WILL REPRESENT UNDER 0.9 PER CENT OF ESTIMATED CURRENT PRICE GDP. ASSUMING $1 BILLION FROM THE BOND ISSUE THE SHORTFALL WILL BE $1.1 BILLION.
+ THE TREND FROM $3.5 BILLION IN 1982-83 AND $3.3 BILLION IN 1983-84 TO $2.1 BILLION NEXT YEAR IS CLEAR AND WILL BE REASSURING. I HOPE IT WILL CONTINUE IN 1985-86, THUS AGAIN
BUT THE TREND IS HITTING MY TARGET OF BELOW 1 PER CENT OF GDP. MORE IMPORTANT THAN THE IMPACT OF PARTICULAR YEARS.+
SIR JOHN SAID THAT FACED WITH THE +HIGHLY UNPOPULAR NEED TO RAISE $1.5 BILLION+, HE HAD DECIDED TO SEEK $900 MILLION FROM DIRECT TAXATION AND $600 MILLION FROM INDIRECT TAXATION.
FURTHERMORE, HE INTENDED THAT THE INDIRECT TAX MEASURES WOULD HAVE THE MINIMUM EFFECT ON CONSUMER PRICES AND IN PARTICULAR ON THE LESS WELL OFF.
HE WENT ON : +1 AM AWARE OF THE UNPLEASANT SHOCK THAT RESULTED FROM MY EFFORTS TO INCREASE REVENUE LAST YEAR BY $3 BILLION THROUGH INDIRECT TAXES. THE MOVE WAS ESSENTIAL BECAUSE OF THE NEED FOR BUDGETARY STRINGENCY AND BALANCE. I SHALL NEED NEXT YEAR, FOR THE 1985-86 BUDGET AT LEAST, TO RESTORE THE YIELDS IN REAL TERMS IN MOST AREAS, THOUGH WE MUST NOT UNDERESTIMATE CONSUMER RESISTANCE.+
/SIR JOHN