Taxation Bill to Carve Hours Off Provisional Tax Prep

Taxation Bill to Carve Hours Off Provisional Tax Prep for Businesses

- Xero leads the accounting software industry’s submission on the Government's Taxation Bill, calls it a “significant step forward”

WELLINGTON, 14th September, 2016 - Xero, the accounting software provider, today at Parliament made a submission on the Government’s Taxation (Business Tax, Exchange of Information, and Remedial Matters) Bill in front of the special Finance & Expenditure Committee considering the changes.

Xero fully supports the proposals in Part 2 of the Taxation Bill, which aims to simplify tax processes and reduce compliance costs for smaller businesses.

The proposal most likely to affect businesses throughout the country is the change to simplify the provisional tax rules, which will allow for a pay-as-you-go option for small businesses from 1 April 2018.

Xero’s Head of Government Relationships, Grant Anderson, says Xero, which has been leading the accounting software industry’s response to the Bill, fully supports this change.

“It is well known that many new businesses struggle with the current provisional tax regime. Currently new businesses are not required to pay any tax in their first year, and can end up paying two years tax in the second year.

“AIM (the proposed new method of calculating tax, which stands for Accounting Income Method) represents a significant step into matching the policy of tax calculation and collection with new technology. With the advent of cloud accounting solutions such as Xero, financial information is up-to-date and at your fingertips. AIM uses that power to enable the calculation of provisional tax liabilities from a business’s latest available financial information.

“It will make provisional taxes easier to administer, and it will remove the threats of interest and penalties when businesses get it wrong. Complex calculations can be handled “behind the scenes” in the accounting software, with the user only needing a few clicks to complete the process of filing an AIM return.

“For businesses that choose to adopt AIM, the compliance burden for provisional tax should be measured in minutes per year, rather than the hours it can currently take.

“Xero and other providers of tax and accounting software has worked closely with Inland Revenue and the Government to come up with this solution. This public-private partnership has resulted in a well-considered tax policy that should be well-received by both the tax community and by businesses throughout the country.”

About the submission
The software providers in the Inland Revenue AIM working group have provided considerable assistance and guidance to Inland Revenue during the design phases of AIM. The working group includes representatives of the major NZ-based providers of tax software and SME accounting software. These software providers have worked with Inland Revenue to provide a new tax policy that is effective and efficient for SME taxpayers. These software providers have all been consulted in the preparation of this submission.

ENDS

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