Comments on Government Business Package

Media Release

4 February 2009

Business advisory and chartered accountancy firm Grant Thornton comments on Government’s package for business

Key discussion points

* Dis-establish IRD priority

* Govt departments should pay bills promptly

* Enhanced hotline



The Government’s business relief package announced today provides a solid platform and some useful initiatives for many Kiwi businesses facing tough times but there is scope to extend this thinking into additional areas, said Trevor Thornton, Chairman of Grant Thornton New Zealand.

One example that Grant Thornton would like considered is whether to dis-establish the “IRD priority” that applies when businesses fail.

“Effectively the IRD is paid ahead of other creditors. This does not apply in Australia and would help focus the IRD’s attention on better processes. Whilst this would be challenging, systems could be developed to track trends and contact the business in potential difficulty. It could be an early indicator for the enhanced Government helplines to kick in.

“Another example would be to extend the encouragement of government departments to pay their bills promptly to the wider state sector, national and local.

“Smart businesses will always look for advice. The Government’s enhanced helpline will play a role. However, in our experience of day-to-day dealings in helping rehabilitate businesses, what we are finding is that business people need some help in actually putting advice into practice. The trick is to get to businesses with the right advice as early as possible”, he said.

Tax incentive discussion points

• Cashflow relieff

* Provisional tax reduction

* Instalment date review needed

* Use of money interest rates





The Government’s tax initiatives will provide some welcome relief for the small and medium sized businesses that are so important to our economy, commented Geordie Hooft, tax partner at Grant Thornton.

“Most of the initiatives involve the movement of thresholds that will provide relief in terms of cashflow and administrative costs,” said Mr Hooft. Many of the changes are increases in the amounts that were already signalled when the tax bill, still before Parliament, was introduced last year”.

The provisional tax reduction is one area where cashflow will be eased. “That makes sense from the perspective that the economic slowdown will see many businesses experience lower profits in the current year but it will still be important for businesses to monitor their performance to ensure that the right amount is being paid,” said Mr Hooft.

Based on feedback from Grant Thornton clients, Mr Hooft added that a review of the instalment dates, which were recently changed, would also be welcome “Having to pay provisional tax, together with GST, on 15 January, which comes at the same time as bills for pre-Christmas stock purchases and just after the non-productive close down, was difficult,” he said.

The use of money interest rates charged by Inland Revenue were overdue for review, said Mr Hooft. “The same arguments recently raised in respect of credit card interest rates appear to have been recognised by IRD, which is sensible” said Mr Hooft.

Other measures, including the increase in thresholds for filing PAYE and FBT returns will reduce compliance costs for many businesses, and are a welcome move.

ENDS

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