Tax payment boost for business confidence

Big Kiwi companies have paid more tax ahead of 2017 - and that’s good news for the health of our economy.

Some of New Zealand’s biggest companies are looking forward to a prosperous 2017 - if their tax payments are anything to go by. The first corporate tax take from firms has remained strong for another year, said New Zealand tax pooling intermediary, Tax Management NZ (TMNZ).

Provisional tax allows taxpayers to spread the financial burden throughout the year. Generally, the more businesses pay, the better they feel about their prospects.

The TMNZ organisation manages the income tax payments of most of the country’s significant taxpayers.

Many of them paid their first instalment of provisional tax for the 2017 tax year on November 28 this year, said TMNZ boss Chris Cunniffe (pictured).

TMNZ’s data showed that 54 per cent paid more this year compared to the same time 12 months ago - and 2015 had been another strong year.

It said there had been a gradual increase in payments over the last couple of years from a proportion of taxpayers, and the latest figures were an indication the trend was continuing.

In terms of their accounting, the country’s biggest taxpayers like to pay a little bit more tax ahead of time if they are forecasting healthy revenues, so they can avoid higher interest. As a result, the tax payments are seen as a bellweather of business confidence.

‘‘While strong economic performance is not being shared by all taxpayers, on balance we have observed the same TMNZ clients paying more provisional tax than they did last year,’’ said Cunniffe.

Companies pay provisional tax three times a year if they have an income tax liability of more than $2500. Payments are based on an estimation of total annual profit.

Cunniffe was not surprised that TMNZ had seen an increase in the amount of provisional tax being paid.

‘‘Reports of an increased corporate tax take from Inland Revenue are consistent with what we have observed in terms of the payments coming through our tax pool in the past 12 months.’’

TMNZ, which has been managing the income tax payments of New Zealand taxpayers since 2003, holds more than $5 billion of tax on behalf of its clients in its tax pool account at Inland Revenue.

Large companies are due to pay their second instalment of provisional tax for the 2017 tax year on March 28.

Firms who are provisional taxpayers often earn overseas income.