A tax overhaul could make a big difference for small business
A tax overhaul could make a big difference for small business
A proposed overhaul for the tax system could make a big difference to the way lots of small businesses work.
The Government has laid out some changes that could kick in once the IRD completes its Business Transformation programme.
It wants to use digital services to modernise and simplify thetax system, possibly using software systems such as Xero and MYOB to connect to the IRD, rather than relying on taxpayers to key this information into forms for filing.
It is proposing a simpler PAYE type of tax system for businesses.
Company tax could be collected through the year, with the calculation based on a percentage of monthly revenue or a simplified assessment of their accounting profits. This would replace the provisional tax system currently in place.
For those new to business this will make things easier, as the dates for the current provisional tax system can be easily forgotten. Businesses generally rely on their accountant or tax agent to let them know dates for payment -- sometimes it can come as an unplanned surprise.
For those who know how to leverage their money there is a drawback because it will mean that the government will be getting their share more often. Some are able to squirrel money away on personal debt to save interest costs -- drawing these funds back as needed.
Businesses would also be encouraged to send their PAYE and GST details straight from their accounting systems rather than filing separate returns. This is the next evolution of accounting systems. Reducing steps means reduction of error and efficiency; this will reduce barriers to business and encourage others to enter.
The IRD says it wants to help cut the cost of compliance for small to medium businesses. Of course, it also means that businesses effectively take on some of the administration work that the IRD would usually do, cutting its bill too.
Using technology and digital processes well offers big benefits to businesses, so anything that encourages that should be applauded.
A requirement to check in regularly on tax obligations could help keep more businesses in tune with their numbers.
It would be nice to see the Government come up with a flexible system that meets the needs of the different businesses and business structures operating in New Zealand today.
