There could be good news for small businesses on the tax front with the release of a Government discussion document on tax simplification.
Paying provisional tax and GST together, and basing provisional tax on GST turnover, is attractive to many small businesses, according to market research released this week by Associate
Revenue Minister David Cunliffe.
Next week the Government will publish a tax discussion document with proposals based on the findings.
Cunliffe said the Colmar Brunton research was the most extensive consultation the Government had undertaken on tax compliance costs facing small and medium-sized businesses.
"Small businesses say paying provisional tax three times a year does not necessarily match their cash flow.
"For this reason, many of those surveyed saw advantages in paying provisional tax and GST together, and basing provisional tax on a percentage of GST sales," he said.
Businesses and tax agents also strongly supported the idea of new small businesses paying provisional tax in their first year, rather than paying tax on first-year income afterwards.
"Recent legislative changes have dealt with other findings such as the reported need for a more flexible system that takes account of taxpayers' changing circumstances and good compliance history, and for less severe penalties and interest," Cunliffe said.
The research undertaken late last year by Colmar Brunton surveyed 1611 small businesses and 400 tax agents.
An executive summary can be found at www.taxpolicy.ird.govt.nz.
A survey released last month showed small businesses faced much higher costs in complying with tax, employment and environment regulations than big business.
The Business NZ-KPMG Compliance Cost Survey found small enterprises - employing five or fewer employees - bore compliance costs of $3400 an employee a year. Enterprises with more than 100 employees faced annual compliance costs of $538 an employee.
KPMG national chairman Alan Isaac said then that Government initiatives had both reduced and increased costs in different areas, and the survey would help the Government and officials identify priorities for action.
"There is some good news in the survey's findings - recent tax simplification initiatives could, for example, be having a positive influence on perceptions on tax," he said.
The survey is intended to be conducted annually. This year's survey was carried out in July, and 760 valid responses were received.
