Easier tax for small businesses – research results

  • David Cunliffe

Paying provisional tax and GST together, and basing provisional tax on GST turnover, is attractive to many small businesses according to market research released today by Associate Revenue Minister David Cunliffe.

“The research represents the most extensive consultation the government has undertaken on tax compliance costs facing small and medium-sized businesses,” Mr Cunliffe said.

“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."

“Businesses and tax agents also showed strong support for the idea of new small businesses paying provisional tax in their first year of business, rather than paying tax on first-year income afterwards.”

“These are some of the findings we have used to develop proposals in a discussion document aimed at making tax easier for small businesses, to be released next week.”

“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.”

“Likewise, improvements in Inland Revenue’s call centres over the last two years and increased on-line tax services go a long way towards addressing the problem of businesses having difficulty getting information or help,” Mr Cunliffe said.

The quantitative research undertaken late last year by Colmar Brunton surveyed 1611 small businesses and 400 tax agents, for which maximum margins of error were +/-2.4 per cent and +/-4.9 per cent respectively.

The executive summaries of the Qualitative and Quantitative reports are available at the IRD website, www.taxpolicy.ird.govt.nz .