The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

Debate on the Value-Added Tax (VAT) Bill is expected to begin within the next two weeks, a Cabinet Minister said yesterday, added that business registration for the new tax is expected to start on September 1.

Speaking outside the House of Assembly after tabling the VAT Bill, minister of state for finance, Michael Halkitis, said the Government would be more “aggressive” in its education campaign once debate on the Bill is complete.

“A part for what held us back in terms of education was we had to make a lot of decisions. Those decisions have been made. The Bill is in the House. We hope to proceed to debate within the next two weeks, and then onward we can be more aggressive in our public education,” said Mr Halkitis.

He told Parliament yesterday that the Government has accepted the recommendations of the New Zealand tax experts to enlist the private sector in the public education campaign. He explained that a three-person Task Force will oversee this process.

Mr Halkitis said the members of that Task Force have not yet been identified. “We are going to have three members; might increase it to four. We have identified some of them. They are going to be people who are recognised as professionals in their field who will assist us in taking the information to the public,” he added

Mr Halkitis said the Government had budgeted $3.5 million for its overall tax education and reform campaign.

He added that the Government still believed theJanuary 1, 2015, VAT implementation date was “doable”.

“A big part of what we have done in putting it in the House is huge, because once we get it passed we can begin registration registration of businesses by September 1. Hopefully we get that process completed by the end of October and move towards implementation by January 1,” Mr Halkitis said.

There have been repeated calls in recent weeks from the private sector for the Government to table and pass the VAT Bill and ramp up its VAT education campaign.

The Government had initially planned to introduce VAT on July 1 at a rate of 15 per cent with the hotel industry subject to a 10 per cent rate, as stated in its White Paper.

It has since announced that there will be a single VAT rate of 7.5 per cent across the board (other than the zero rate for exports).

Mr Halkitis told Parliament: “We judge the lower rate to be desirable from both an economic and social perspective. Of course, a lower rate will yield somewhat less revenue than we had originally expected. As such, across-the-board reductions in tariffs and excises will not feasible. There will, however, be selective reductions in certain areas. “

Mr Halkitis said the major change in the VAT Bill was the number of exemptions. “Our advice is that being exempt is not an advantage because while you would not charge VAT on your product or your service, you also would not be able to get credits for VAT that you have paid.

“ I know there has been some concern in the area of food, and we have had extensive discussions on this, and we believe that the best way to do this is to make the items VATable.

“If you need to bring some relief to those at the low income levels, there is a way to do that. We are working along with the Department of Social Services to modernise their relief delivery in the form of a cash transfer so we can bring relief to those at the lower level.

“Our advice is if you were to be exempt it would not be as efficient as giving relief directly to lower income households, so that is way we decided to go and it make it less complex for the business people and less complex in terms of compliance for the Government, because in our discussions with the retailers a big part of their concern was the complexity in distinguishing between what is exempt and what is not exempt. We think that administratively this is a simpler process.”