Source: JENNY KEOWN via Stuff
The New Zealand Institute of Chartered Accountants has released a ”radical” paper on how to tax small businesses that potentially takes business away from accountants.
Launching the plan in Auckland today, NZICA chief executive Terry McLaughlin said the changes were in the public interest because they were simplified and offered more opportunity for small business owners to file their own returns.
”I have a statutory obligation to act in the public interest and that differentiates us from other bodies,” he said.
”Now and again you have to make some bold calls and influence the policy agenda. We are very aware that the proposal cuts across established income tax accounting, but we believe this is necessary in order to deliver simplicity to small business owners.”
It’s proposing a ”rule of one” for small business; one return and one payment each month
for income tax and GST compliance.
Currently, businesses regardless of size have all the same complex compliance issues as to how they pay GST and tax.
This often means some micro business can’t be bothered filling in forms and don’t bother to pay tax on income.
Under the proposed tax rules, a business can pay a flat income tax, which covers ACC liabilities, and other obligations.
The proposed plan would differentiate business with no employees, a turnover of less than $60,000, and unregistered for GST. They would pay a tax rate of 14 per cent if they are not traders and 7 per cent if they trade in goods.
What NZICA calls the ”centrepiece” of its proposal is a system based on GST for small businesses with turnover less than $600,000.
Income tax will be calculated on a cash basis on the GST return and will be essentially a final tax. Income tax and GST will be calculated and paid twice monthly.
The Institute began consulting with small business groups, and tax policy officials in October 2009, sparked by members complaints about the complexity of the current system.
On the question of how this affects accountants, McLaughlin said it looked at ways to preserve the value of chartered accountants and came up with a ”health check” system; which essentially means a business will be periodically reviewed by a chartered accountant.
McLaughlin concedes that its proposal wasn’t popular among some of its members, but said many saw this as an opportunity to be freed up to offer better value for money advice on business strategy, sales plan or other business costings.
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