Survey: Tax & KiwiSaver compliance

Friday 10th October

Survey: Tax & KiwiSaver compliance big issues for business

Tax still the biggest problem for NZ business

The Business NZ-KPMG Compliance Cost Survey 2008 shows tax is still the dominant cost priority with 70% of respondents seeing it as a priority for change. After six years of this survey there is now enough data to draw a line in the sand about the actual money costs of tax compliance for businesses.

KiwiSaver doesn't get a 'pass' mark with most NZ businesses

"Businesses have told us they have found the process of implementing KiwiSaver legislation highly complex," says KPMG Partner Paul Dunne. "This is why it has steadily risen up the ranks of compliance concerns over recent surveys." In this year's survey nearly half (48.5%) of all respondents rated the government's performance in minimising compliance required by KiwiSaver as 'fair' or 'poor'.

Respondents were generally dissatisfied with the government's handling of the introduction of the scheme stating they didn't have enough detail regarding the effect on businesses and what they were specifically required to do. The purpose behind the scheme is clear but the consultation process was not.

Employers had not been aware that they would ultimately bear the burden of compliance with the KiwiSaver legislation and what they would be required to do in order to conform.

Asked for their views on what should be done about KiwiSaver, respondents suggested abolishing it, making it compulsory in order to reduce compliance by business, or having a settling in period with no further changes.

"We have a general election only weeks away with the potential for even more tinkering with KiwiSaver on the horizon; the one thing that remains constant is continual change and adaptation. The more the rules change, the more that compliance costs impact on business," Mr Dunne said.

Smaller firms are still hit hardest

This year's surveys showed smaller firms continuing to be harder hit by compliance costs than larger ones. Companies with fewer than ten employees face compliance costs per employee per year of more than $3,000. For companies with more than fifty employees the figure is less than $1,000. "We think it's time government shouldered some of the burden it places on others," says Phil O'Reilly, Chief Executive Business NZ.

Helpfulness of government agencies

The survey includes questions on the helpfulness or otherwise of government agencies that businesses are required to interact with. For the sixth year in a row the Companies Office was judged the 'most helpful government agency' and remains the only government agency to be categorised as 'excellent'. The Customs Service and MAF remained in second spot. It was disappointing to see the Environment Risk Management Authority (ERMA) slipped to last place compared with a strong 10th in 2007.

Employment and environmental compliance expensive

The average cost of a company of complying with ACC, ERA, KiwiSaver, OSH and the Holidays Act in 2008 was $7,000. Environment related compliance costs averaged more than $4,000 per company.

Mr O'Reilly said the employment and environment compliance areas were getting more complex. "The Holidays Act, for example, contains a formula for calculating holiday pay that is time consuming for companies to use, requiring a new set of calculations for each employee's leave allocation. This is a direct cost arising from poorly thought out legislation." He said there was a clear need to slow down the pace of regulation coming out of government and to ensure regulation was better thought through.

Face-to-face meetings with government agencies

The survey found that just over a quarter of respondents had had a face-to-face meeting with a government agency over the last 12 months. Asked about the helpfulness of such meetings, more than half the respondents (54.6%) said they were helpful or very helpful.

About the survey:

Compliance costs are the administrative and time costs of complying with legislation (e.g. the time and resources involved in working out tax or holiday payments) as opposed to the substantive costs imposed by legislation (e.g. the amount of tax to be paid or the amount of holiday pay to be paid). The KPMG-Business NZ Compliance Cost Survey is New Zealand's most comprehensive and consistent survey undertaken to measure costs and trends in key compliance areas. In 2008, 906 respondents from businesses of all sizes and all geographic regions of NZ were surveyed.

ENDS

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