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Tax pooling possible answer to IRD’s objectives

Tax pooling possible answer to IRD’s objectives

Earlier this year, the New Zealand Government signalled its intention to reduce compliance costs for small business, including revising the use of money interest and late payment penalties regime.

To date, Inland Revenue (IRD) has not yet released its Business Transformation recommendations for consultation in this area.

Meanwhile, the private sector may be answering the government’s call for change.

Ian Kuperus, founder of Tax Management New Zealand (TMNZ), is known as the father of tax pooling, a service which reduces exposure to late payment penalties and interest.

He devised the concept and helped IRD implement the framework in 2002 when the government sought ways to reduce compliance costs for businesses.

Tax pooling effectively drops the use of money interest rate to a market interest rate for borrowing and lending, and removes late payment penalties, so long as the IRD gets its money from taxpayers within 75 days after their terminal tax date.

It can also be used within 60 days of reassessment date if a taxpayer finds it has a bill as a result of an audit or voluntary disclosure.

“The recent entry of PricewaterhouseCoopers, who worked with Inland Revenue on its review of tax pooling, into the market will strengthen our position with regards to the IRD Business Transformation agenda,” says Ian.

However, PwC is not the first tax firm to support tax pooling.

Almost all accounting firms now recommend their clients to TMNZ or one of the other specialist tax pools in order to manage their income tax payments.

TMNZ has dealt with more than 26,000 clients of all sizes since it started, and saved taxpayers more than $160 million in compliance costs.

While many of the clients are New Zealand’s biggest taxpayers, TMNZ’s no-fee approach means the service is accessible to taxpayers of any size.

TMNZ has continued to innovate, believing the private sector can deliver faster, and with more flexibility, than IRD.

Last month, it launched Flexitax, which lets businesses pay income tax in flexible monthly instalments, where they can pay what they can, when they can.

It is the first time a low ‘floating’ interest rate facility has been available for taxpayers.

Once again, it seems that changes in the private sector may outpace the Government’s agenda.

ends

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