List MP based in Auckland Central
Small Business Spokesperson
MP for Napier
13 April 2016
Provisional tax reforms don’t go far enough
The Government’s provisional tax regime fails to go far enough in reducing the burden of provisional tax, and provides a
potential tax avoidance opportunity for large businesses, say Labour’s Small Business spokesperson Jacinda Ardern and
Revenue spokesman Stuart Nash.
“In 2015, Labour released a policy that allowed businesses to treat their tax more like an employee and undertake a
PAYE-type arrangement at a rate that they set. We also proposed dumping the penalty regime,” says Jacinda Ardern.
“On first blush it looks like the Government has done the same – the reality is that the Government’s regime could
require SMEs to lodge a two-monthly tax return from 1 April 2018.
Labour’s Revenue spokesman Stuart Nash said the proposed changes to provisional tax did not simplify the process at all,
but rather requires companies to pay at a rate of last-year-plus 5%, and so in effect ‘overpay’ their tax. If they do
underpay, then they will still be required to pay Use-of-Money-Interest (UOMI).
“What is worse, is these rules provide an opportunity for large companies with expert lawyers to avoid paying tax for
two years by setting up a complicated web of trusts and companies. The Government recognises this by stating they will
need to implement an anti-avoidance response but have given no details.
“It is rather odd to announce a new tax scheme that the Minister acknowledges can be rorted, but even worse when he does
not provide a solution to such an issue.
“We would encourage the Government to opt for the plan we announced last year – it’s simple, effective, and has been
welcomed by those who will use the regime,” said Stuart Nash.