Let's Put All Tax Review Recommendations On Table

Max Bowden's Business Sense - Let's Put All The Tax Review Recommendations On The Table

Is the Govt really committed to changing the tax system? It has set up a tax working group to look at ways in which the system might be improved – this is a positive step.

It is looking at what the Australian tax review is doing – another good step as NZ and Aust work towards a Single Economic market.

But what is not a good look for this Govt, is it continually shooting down the tax working group’s proposals, without a shred of evidence there’s been significant debate, either in Cabinet, or in public forums.

The latest case in point is the working group’s proposal for a flat tax, backed by Treasury which says it will help close the economic gap with Aust.

You’d think it would be manna from heaven for a Govt with an avowed intention of closing the gap with Aust, but apparently without the slightest idea of how to do it.

But it is rejected. The Main Report Business Letter www.themainreport.co.nz looks at the (1) tax issue and (2) highlights work being done on small business tax by the NZ Institute of Chartered Accountants.

1. “No Debate As Key Rejects Flat Tax

It’s tough going for the Govt’s working group on tax. Every time a good idea is floated, it is knocked down for political reasons. The latest is a flat tax. Treasury says it would be good way to help NZ catch up with Aust, one of the Key Govt’s avowed policy aims.

So what happens? Instead of the Govt saying wonderful, a straightforward way of closing the income gap with Aust, raising living standards in NZ, helping keep our brightest and best here, incentivising workers – we could go on – it says NO. What we want to know is what will happen to NZ’s creaking tax system. A series of politically motivated NOs is not helping.

John Key says the Govt will not introduce a flat tax system despite Treasury advocating it. Treasury papers obtained by Radio NZ under the Official Information Act suggest a flat tax rate or cuts to taxes on dividends, interest and profit are ways of closing the income gap with Aust.

A capital gains tax and increases to GST and land tax would be increased to fund the changes.

But Key has rejected it immediately, with his Finance Minister Bill English joining in, saying the tax working group and Treasury are looking at "all sorts of models" but the Govt is "certainly not considering a flat tax"

Labour deputy leader Annette King has a point – asking why the Govt has Treasury officers working away on policies it doesn't intend to implement and rules out every time they are announced? Treasury is basically saying this is a once in a lifetime opportunity for the Govt to take the bull by the horns on tax and do something positive.

The Govt’s response is underwhelming to say the least.”

- - - NOT A SUBSCRIBER? - - - - - - - - - - - - - - - - - - -

PROFIT AND PROSPER IN THE TOUGH TIMES AHEAD...

THE MAIN REPORT BUSINESS
Fresh thinking, trends and ideas for everyone in business. Covers the full spectrum of business matters with special emphasis on major trends, solutions, the economy, and political and legislative action which may affect you. Also strategic planning, leadership, management, marketing, customer satisfaction, employee relations. It's where you find your inspiration! Published each Monday 46 times per year.

http://www.themainreport.co.nz/home/special-introductory-offer

- - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - -

2. “Accountants Fly Tax Flag For Small Businesses

The NZ Institute of Chartered Accountants says the Govt’s tax review is ignoring small businesses, so it has come up with its own scheme to reduce compliance costs for SMEs, while increasing productivity through the tax base.

In the first instance the Institute wants a special rate for very small businesses – those which have no employees, a turnover under $60,000, which are not registered for GST and are earning less than $60,000. It calls these “micro businesses.”

It says these businesses should pay income tax at a final rate of 15% on business turnover. The proposal suggests payments made monthly or at any time, no filing of returns and a transitional rule for people who earn cash “under the table" giving a 12 month window for people to enter the tax system - this would stop the cash under the table trade.

The next step is a tax plan for businesses with turnover less than $1.2m. This is designed for more established businesses but could also be used for start-ups if desired.

In this scheme income tax will be calculated on a cash basis on the GST return, as an adjustment to the GST result. Like GST, income tax will be paid every two months: there will be no year-end adjustments, no provisional tax and no fringe benefit tax.

To see the full details of these proposals go to www.smetax.co.nz. The Institute is seeking feedback and will take final proposals to the Govt next year.”

On the back of the Govt’s current performance on tax reform we can predict what the response to the Institute’s well thought out and thoroughly researched proposal will be – a resounding NO.

This is not the leadership on economic matters we expected when we voted for National. There is danger ahead for a Govt which lets its coalition partners wag the dog, and when decisions are made for political rather than economic reasons. They have learnt very little from their Labour predecessors.

ENDS

© Scoop Media