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Tax simplification measures introduced

14 May, 2002

Associate Revenue Minister Paul Swain has welcomed the business tax simplification measures contained in a bill introduced today.

"The Government is seeking ways to involve the private sector in helping businesses to meet their tax obligations with less stress and hassle," Mr Swain said. "Two of the proposed changes in today's bill have a lot of potential for doing that, by allowing businesses to use intermediaries to meet their tax obligations."

Pooling provisional tax payments

The bill introduces new rules allowing businesses to pool their provisional tax payments with those of other businesses. Tax underpayments will be offset by overpayments within the same pool, thus reducing the participating businesses' exposure to use-of-money interest.

Commercial intermediaries will be able to set up pools and will arrange for participants to be charged or compensated for the offset.

"Small and medium-sized businesses often find it difficult to estimate with accuracy how much income they will earn during the year," Mr Swain said. "If they underestimate it, they will have to pay use-of-money interest on the difference. The pooling proposal should reduce the amount of interest they have to pay and help remove some of the uncertainty and worry to do with estimating provisional tax."

Using PAYE intermediaries

Another simplification measure in the bill makes it easier for employers to transfer the bulk of their PAYE obligations to accredited intermediaries, who will be legally responsible for calculating and paying PAYE deductions to Inland Revenue, meeting return filing requirements and paying employees.

"The proposal was developed in response to employers' concerns about the time they spend keeping up to date with the PAYE tax rules and calculating and paying deductions," Mr Swain said. "And if they get it wrong they risk penalties and interest."

"The measure is intended to help make it easier for small businesses to employ staff. By making the intermediaries legally responsible for meeting the employer's obligations, the measure also reduces barriers that may prevent employers from using intermediaries as well as supporting those who already use them but at present bear the risk themselves," he said.

These two measures are part of the government’s continuing programme of tax simplification.

Detailed information on these and other matters in the Taxation (Annual Rates, Maori Organisations, Taxpayer Compliance and Miscellaneous Provisions) Bill is available in the commentary published on the website of the Policy Advice Division of Inland Revenue (


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