Simplifying Tax for Small Businesses
A government discussion paper, 'More Time for Business', aimed at simplifying the tax system and helping reduce stress on small business, was released recently. It sets out a wide range of proposals for reducing the stress, uncertainty and risks for small businesses in meeting their tax obligations. NZ is a country of small businesses. Over 95% of employers have fewer than 20 employees, while 84% have fewer than five employees.
The main proposals relating to small businesses are:
- provisional tax: small businesses could pay provisional tax as income is earned, rather than paying it in three equal payments throughout the year. For some businesses this would result in a better match of cash flow and tax payments. Other proposals would reduce interest costs associated with the current system for all businesses;
- employers and PAYE: employers could reduce their exposure to penalties and interest by using intermediaries such as payroll firms when collecting and paying PAYE;
- end-of-year tax adjustments: requirements associated with end-of-year income tax calculations for small businesses, such as trading stock valuations, could be reduced;
- simplifying requirements: other forms and processes could also be simplified. They include exemption certificates for non-resident contractors' withholding tax and the resident withholding tax certificates sent out by financial institutions;
- benefiting from information technology: Recent advances in information technology can help to reduce tax compliance costs by reducing the need for businesses to communicate with Inland Revenue, simplifying the calculation and payment of tax, simplifying the filing of returns, and improving the administration of the tax system.
Other proposals include helping people who receive family assistance by reducing the number of forms involved, removing complex end-of-year adjustments, and reducing the risk of their owing family support at the end of the year.
Contact for Enquiries
The Ministry of Agriculture and Forestry
Pastoral House
25 The Terrace
PO Box 2526, Wellington
Tel: 0800 00 83 33
Fax: +64 4 894 0720
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