Tax reforms could make matters worse - Labour

  • 14/04/2016
Labour says the proposed changes could lead to tax avoidance (File)
Labour says the proposed changes could lead to tax avoidance (File)

The Government's overhaul of the provisional tax system doesn't go far enough, Labour says.

The proposed changes have been welcomed by the business sector but Labour says they won't simplify the process and could lead to tax avoidance.

Prime Minister John Key announced the new regime in a pre-Budget speech on Wednesday, saying more than 100,000 small businesses would benefit from the overhaul.

The May 26 budget will bring in a pay-as-you-go system for small businesses from April 1, 2018.


At the moment they estimate their likely tax bill for the coming year and pay that amount in three instalments - a system that's been unpopular for years.

Under the new system there won't be any estimates and tax will be paid throughout the year.

Labour's small business spokeswoman, Jacinda Ardern, says it won't simplify the system.

She says Labour's PAYE-type policy for small businesses linked with scrapping the penalty regime would be better.

Labour's revenue spokesman, Stuart Nash, says small businesses could end up over-paying because of the last-year-plus five per cent calculation that's going to be used.

"What's worse is these rules provide an opportunity for large companies with expert lawyers to avoid paying tax for two years by setting up a complicated web of trusts and companies," he said.

Business NZ says the changes will make compliance easier for most enterprises and help business planning.

"The changes will also boost businesses' ability to interact online with the IRD," said chief executive Kirk Hope.

"The adjustment towards more transparency in reporting and sharing information will be welcome as part of an overall focus on transparency."