Government tries to ease burden for small businesses

By ELLEN READ

Government plans to simplify tax compliance for small businesses have received a cautious welcome from those affected.

The Government yesterday released a discussion paper, "Making tax easier for small businesses", outlining plans to help the sector it acknowledges is disproportionately affected by tax costs.

The main proposals are:

* Basing provisional tax payments on GST turnover to align tax payments with income flow.

* Aligning provisional tax payment date with GST. This would probably mean more frequent but smaller payments for most businesses.

* Subsidising the fees of payroll agents for businesses with fewer than five employees.

* A 6.7 per cent discount for each dollar of tax paid by self-employed people in their first year of business.

* The Inland Revenue will allow employers to check employment and resident status of workers online.

Associate Revenue Minister David Cunliffe said: "Each of the proposals may have advantages for some and disadvantages for others ... so it is vital that small businesses and their advisers let us know how the ideas would work for them."

Firms with the equivalent of 19 or fewer full-time employees account for 97 per cent of New Zealand firms, with 87 per cent employing five or fewer full-time equivalent staff.

Cunliffe said there were no figures on how much those businesses might save from the moves if implemented, or how much they might cost the Government.

One small business owner, Caroline Smith, of Mete Construction, said her biggest gripe with the current tax system was the time it took to file GST returns.

"We hand ours in every month and it just takes me so long. It's doing a job for the Government for free."

John Ellegard, owner of public relations and marketing company Stanford James, was especially interested in the proposal to base provisional tax on GST turnover.

"The way it is at the moment, basically you're being asked to forecast what your income's going to be and that's very hard. Especially when you're just starting up."

Submissions close on October 31 and any legislative changes agreed to could be brought in as part of next year's tax bill early in the new year.