New Zealand's SMEs May Benefit From Research Conclusions

by Mary Swire, Tax-News.com, Hong Kong

15 September 2003

The New Zealand government is to publish a tax discussion document this week thought to contain several new proposals designed to benefit small business by simplifying the rules surrounding payment of GST and provisional tax.

The discussion document is based on the findings of recent market research released last week by Associate Revenue Minister David Cunliffe, which revealed that a large number of small firms would prefer to pay provisional tax and GST at the same time, basing provisional tax on GST revenues.

"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," Mr Cunliffe observed.

“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,” he added.

According to the revenue minister, the study undertaken by market research firm Colmar Brunton "represents the most extensive consultation the government has undertaken on tax compliance costs facing small and medium-sized businesses.”

The findings are as follows:

• 82% of the research participants in this research use a tax agent. Businesses most commonly use the services of tax agents for filing end of year income returns (80%), ahead of filing GST returns (19%), filing FBT returns (17%), advice only (15%) and filing employer monthly schedules (8%).
• Reasons why businesses use a tax agent for filing employer monthly schedules and GST returns most commonly relate to issues of convenience (e.g. saving time) as well as the expertise and/or perceived lack of expertise of the business.
• Among quarterly FBT filers, 44% are aware that they use the flat rate calculation, 18% know that they use the full multi-rate calculation and 3% know that they use the short form multi-rate calculation; 13% know that they use the multi-rate but are not sure which form and 22% don’t know what calculation they use.

The research was undertaken late last year and 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.

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