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NZ money - Source: ONE News -
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A set of proposals to make tax compliance easier for small businesses has been put forward by the New Zealand Institute of Chartered Accountants (NZICA) and Tax Management New Zealand.
The organisations say a long string of amendments to what was originally a straight forward tax framework means small businesses now have to be very tax literate.
Consequently, the burden of tax compliance falls disproportionately on small businesses, leading to an increased risk of non-compliance, mistakes, and more time spent on tax paperwork when businesses could be making money.
Included in the proposals are suggestions for micro businesses - those with annual turnover under $60k and not registered for GST - and larger small businesses with turnover of up to $1.2 million.
NZICA tax director Craig MacAlister says microbusinesses could pay a turnover tax of 15 cents in every dollar, including ACC levies, with no tax returns needed.
"There's a lot of anecdotal evidence from around the world that turnover type tax can in many cases increase tax revenue as you remove the barriers to people actually paying tax, bar the actual moral decision of paying tax itself," he says.
MacAlister says there could be an amnesty for those who have previously been doing cash jobs to declare their tax without being stung retrospectively.
For bigger firms, proposals include putting them on a cash accounting system, combining GST and income tax obligations, eliminating fringe benefit and entertainment taxes, and simplifying some deductions such as depreciation.
One idea is merging the income tax and GST forms.
'When you file your two-monthly GST form, for income tax you'll make some adjustments at the bottom of the GST return for things that are not GST-able, such as depreciation, wages and interest, and you'll pay on a two-monthly basis, and that will be the end of your tax liability at that point," says MacAlister.
He says this approach removes year-end compliance obligations.
He also says company tax would be simplified whereby shareholders are merged with the company entity, removing dividends, imputation, shareholder salaries and fringe benefit tax.
The organistations are currently seeking feedback on the
proposals.
