Business wary of red tape claims

19 Jul 2005

The business community will be wary of claims of a large drop in tax compliance costs, according to BusinessNZ.

The Associate Revenue Minister David Cunliffe today claimed tax compliance costs for small businesses had fallen by 40 per cent for small businesses and by 50 per cent for medium-sized businesses since 1992, as shown in an IRD survey.

BusinessNZ Chief Executive Phil O’Reilly said these results were counter to the annual BusinessNZ-KPMG Compliance Cost Survey, which show fairly stable average tax compliance costs around $15,000 per firm per year.

“Perhaps the different findings result from the different groups covered by the two surveys. The IRD’s study covered only small and medium-sized business, and these are the businesses most likely to be non-compliant with tax legislation. Non-compliant firms are unlikely to report their behaviour to an IRD survey, so the IRD survey pool may therefore be an unrepresentative sample.

“By contrast, the BusinessNZ-KPMG Compliance Cost Survey covers the complete range of business sizes, including the larger companies who have no ability to avoid compliance responsibilities.

“The BusinessNZ-KPMG study also uses exactly the same questions from year to year, to ensure comparability. The IRD study, by contrast, is the second in 13 years, and is only “similar” to the previous survey, making comparability claims somewhat less robust.

“BusinessNZ absolutely supports the IRD’s actions in seeking more information on compliance costs, but is wary of the Associate Revenue Minister’s claim that red tape has been “radically reduced”.”