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Declining tax compliance costs gratify

An Inland Revenue 2009 Survey of Small and Medium Enterprises (SMEs) has found that tax compliance costs have declined since the previous (2004) study.

Our research showed that the number of hours spent by SMEs declined by 16.3 hours to reach 77 hours on annual basis. Stress levels associated with meeting tax requirements were down to 3.2 points (from 3.4 points) on a 7-point scale. The amount spent on tax calculation and returns fell by $71 to reach $5557.

For SMEs, such reduction would be priceless.

Revenue Minister Peter Dunne said these findings were particularly significant in a tough business environment.

“These positive changes are the result of Government’s focus on minimising compliance costs over the past five years. We want businesses focused on doing business and succeeding for themselves and the economy,” he said, launching the Report on September 10, 2010.

According to the Survey, The average internal costs for SMEs were $3995 in 2009, down from $4075 in 2004. External costs (such as the amount paid to tax advisors) remained unchanged at $1639. Overall, the combined tax compliance cost for SMEs was $5557, down from $5628 in 2004.

The reduced costs are inflation-adjusted and include the extra cost on KiwiSaver, introduction of which saw an additional tax compliance cost of $705 annually.

These businesses also spent an extra 14.5 hours annually complying with KiwiSaver requirements.

Compliance costs went down for businesses dealing with GST and income tax but increased for those doing PAYE and FBT.

Advice was received from the business community (NZICA, Business New Zealand, the Small Business Advisory Group), academia (the NZ Centre for SME Research), the Economic Development Ministry and policy experts from Inland Revenue.

The full report is available at www.ird.govt.nz

For more information, please contact Evaluation@ird.govt.nz.

Abdul Rafik is Inland Revenue’s Community Relationships Advisor based in Auckland. He is happy to answer readers’ queries, which should be sent to venkat@indiannewslink.co.nz

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