17 September 2003 Media Statement

Making tax easier for small businesses

Ideas to make tax easier for small businesses are the subject of a government discussion document released today by Revenue Minister Michael Cullen and Associate Revenue Minister David Cunliffe.

“Small businesses are a vital part of the New Zealand economy and are disproportionately affected by tax costs. Many owners do the associated paper work themselves, outside business hours,” the Ministers said. The main proposals are:

- Helping small businesses with PAYE. To encourage small businesses to take advantage of the help that payroll agents can give, the government would offer a subsidy to pay the associated agency fees for a certain number of employees – say, up to five.

- Aligning provisional tax and GST payments. Provisional tax would be paid with GST, which for many businesses would mean more frequent but smaller provisional tax payments.

- Basing provisional tax payments on GST turnover. If provisional tax and GST payments were aligned, businesses could then choose to base their provisional tax payments on a ratio of their GST turnover. This would help match provisional tax payments with income flow.

- A discount for self-employed people who pay provisional tax in their first year of business. Self-employed people who make voluntary payments of provisional tax in their first year of business would be offered a 6.7 per cent discount for each dollar of tax paid in the first year.

“The government has used the results of extensive consultation on the compliance costs facing small and medium-sized businesses to develop the proposals,” the Ministers said.

“Each of the proposals may have advantages for some and disadvantages for others, and what may suit small businesses may not suit larger business, so it is vital that small businesses and their advisers let us know how the ideas would work for them.”

The discussion document “Making tax easier for small businesses” is available at www.taxpolicy.ird.govt and www.treasury.govt.nz . Submissions close on 31 October.

ENDS

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