Budget 2012 tax changes “steady as she goes”

MEDIA RELEASE

24 May 2012

Budget 2012 tax changes “steady as she goes”

Most of the tax changes included in Budget 2012 were signalled last year, and are currently “work in progress” says the New Zealand Institute of Chartered Accountants (NZICA). This continues the theme already signalled by the Government that it is not going to undertake any more significant policy changes, but rather focus on base maintenance.

The new proposals released today are the removal of three tax credits – these are:

• The low income earners’ tax credit for people with income under $9,880;
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• The tax credit for childcare and housekeeper’s expenditure; and
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• Children’s tax credit for active income.
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People affected by the removal of these credits will understandably be disappointed but it’s very much ‘steady as she goes’ from a tax perspective; with minor revenue tinkering the order of the day says NZICA Tax Director Craig Macalister.

“The focus should now shift to encouraging growth and productivity. Given that New Zealand is a country built on small business it is our view that we need to think bigger and prioritise initiatives that enable small business to grow in size and productivity.

“A significant advancement for small business would be a tax system overhaul, hence our efforts to start a robust debate on the benefits of using the GST base as a basis for calculating and paying income tax,” says Mr Macalister

We believe there is value in decoupling the tax system for small businesses from the tax system that applies for New Zealand’s larger, more complex, businesses. A simplification of rules would create an environment that is more conducive to business growth and productivity.

The proposals released by NZICA in a paper called “Simplifying the taxation of small business in New Zealand” for are two-fold: a turnover tax model for micro businesses (not GST registered and no staff), and a system based on GST for small businesses (turnover less than $600,000).

“This paper is about presenting a constructive thought piece to government and business. We are very aware that the proposals in the paper cut across established income tax accounting – but we believe that this is necessary in order to deliver simplicity to small business owners,” says Mr Macalister.

New Zealanders can access a copy of the paper at www.nzica.com/smetax

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