Businesses question value of flagship tax reform

The Inland Revenue Department is open for business after migrating more of its tax-gathering systems onto new software.

However, there are claims one big change brought about the new technology may prove a bit of a fizzer.

The tax department closed its contact centres, shut down its online services and closed its offices to the public for four days while it managed the switch – which was a key stage in its $1.5 billion to $1.8b Business Transformation programme.

Spokesman Baden Campbell said the switch-over went well and all its services had reopened as planned yesterday morning.

One of the key goals of this stage in the transformation project has been to provide a new way for businesses to pay tax, called the Accounting Income Method (AIM).

AIM will let businesses that turn over less than $5 million a year, and which use approved accounting software from MYOB, Reckon or Xero, pay tax on their profits on a ‘‘PAYE’’ basis throughout the year if they choose – either monthly or every two months.

That is as an alternative to having to forecast up to a year in advance how much tax they should pay through provisional tax.

Inland Revenue said it wouldn’t know until later this month or May how many businesses would take up the AIM option.

However, some tax and accounting companies are forecasting the take-up will be low – partly because of separate rule changes to the previously-hated provisional tax system that have made it less onerous.

Matthew Shallcrass, a business director at accounting firm Staples Rodway in Christchurch, said that of more than 4000 customers, only one had asked for advice about using AIM, and had decided not to use it.

Another company, Tax Management NZ, said in a blog post that AIM would involve more red tape for most small businesses than paying provisional.

That was despite Inland Revenue and accounting software firms promoting AIM as ‘‘the best thing since the invention of refrigeration’’, it said.

Tax Management NZ chief executive Chris Cunniffe said changes to the provisional tax system meant 67,000 small and medium-sized taxpayers no longer risked paying penalty interest on profits that they hadn’t forecast under the provisional tax system, so long as they paid the tax that was due on time.

Inland Revenue promoted AIM as "the best thing since the invention of refrigeration".

Tax Management NZ