27 September 2005
Compliance survey confirms business groundswell on tax
The importance tax assumed during the 2005 election campaign has been underlined by the findings of the third annual
KPMG-Business NZ Compliance Cost Survey. The survey released today shows that tax, as a priority for business, has
increased by almost 10 percent over the past year. Business NZ Chief Executive Phil O'Reilly says in the 2005 survey
almost 49 percent of respondents selected tax as their top priority for improvement, compared with 41 percent last year
and 35.5 percent in 2003.
"This points to a growing preoccupation with tax as a business issue," he said. "It is further proof, if any is needed,
that there is a groundswell of support for reducing tax.
"It has received almost unprecedented media coverage in recent months, generally relating to the issues of tax rates and
tax take by the Government. However, the survey shows tax compliance is just as important and needs the attention of
policy makers."
Compliance costs are the administrative and time costs of complying with legislation (e.g. the time and resources
involved in working out tax or holiday payments) as opposed to the substantive costs imposed by legislation (e.g. the
amount of tax to be paid or the amount of holiday pay to be paid).
This year's survey found compliance costs have increased in most areas, although differences continue by size of
enterprise.
In 2005 the average firm shouldered $53,011 in compliance costs, higher than the $36,075 recorded in 2004 and $45,179 in
2003.
Small enterprises (five or fewer employees) bear compliance costs of around $3,604 per employee per year, higher than
both the 2003 and 2004 values.
By contrast, an enterprise with over 100 employees faces compliance costs of around $247 per employee per year
In addition, most firms surveyed perceive their compliance problem either to have continued to worsen or to have
remained the same.
While these figures are higher than other recent compliance cost surveys, Mr O'Reilly says the difference is in the
survey sample, which includes all business sizes - not just small to medium sized enterprises, which skew the results
downward and hide the true compliance cost burden.
"It's also important to make the point that in measuring the impact of compliance cost on business, what is important is
the trends over time, not self-serving ad hoc measurements of compliance costs."
KPMG Partner Paul Dunne said while successive Governments have been committed to reducing compliance costs, the survey
results show that compliance costs, and tax compliance costs in particular, are not decreasing to any discernable
extent.
"This is of considerable concern to business and shows there is work still to be done in this area. "
Behind tax, the next highest priorities for change are all related to employment law: the Employment Relations Act,
health & safety legislation, accident compensation, and the Holidays Act.
Mr O'Reilly said business had borne the costs of changes to employment law over recent years, shouldering increases in
both substantive and compliance costs.
"Although the level of change in employment legislation was not as dramatic as in previous years, the perception remains
that employment related compliance costs are a major part of the overall costs of complying.
"Also, the results over the last three years reaffirm the view that the compliance costs associated with changes to
legislation and regulation often last well beyond the initial year they are introduced.
"Employers have had to adjust to a raft of changes over recent years, bringing a great deal of disruption to their
day-to-day operations. Continued changes that lead to resources being concentrated on compliance rather than growth will
not bring the kind of productivity needed to compete in a global setting."
Mr Dunne said the higher profile of education as an election issue was also mirrored in respondents' ranking of the
helpfulness of central and local government agencies.
As in 2003 and 2004, the agency perceived to be most helpful was the Companies Office. The Ministry of Agriculture & Fisheries was viewed as the second most helpful.
"The big mover down the list to become the least helpful agency was the Ministry of Education, which meant a drop in
rating from fair in 2004 to poor in 2005," he said. "It's not clear whether this was a reflection of the problems faced
by the education sector in the past year or something more deep-seated."
The Environmental Risk Management Authority (ERMA), which was 2003's 'least helpful' agency, was placed second from the
bottom.
About the survey The KPMG-Business NZ Compliance Cost Survey is New Zealand's most comprehensive and consistent survey
undertaken to measure costs and trends in key compliance cost areas. The survey covers all industries and regions and
all sized enterprises, from the small two-shareholder companies to large corporates. Almost 1200 companies, collectively
employing over 163,000 full time workers, took part in the 2005 survey.
Acknowledgements KPMG and Business NZ gratefully acknowledge the support of the following associations and industry
groups that distributed the survey amongst their members: Employers' & Manufacturers' Association Northern Employers' & Manufacturers' Association Central Canterbury Employers' Chamber of Commerce Otago Southland Employers' Association New
Zealand Institute of Chartered Accountants. Federated Farmers of New Zealand Meat Industry Association of New Zealand
New Zealand Retailers' Association Road Transport Forum New Zealand Business in the Community Ltd
ENDS