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Tax Working Group

The report is wide-ranging and it would be impractical to comment on it all in this publication. You will receive a fair amount of material from elsewhere, so there is little point in repeating this. However, we are particularly interested in one clause, number 37: we reproduce it below:

37. examine the following options to reduce compliance costs:

For immediate action:

a) Increase the threshold for provisional tax from $2,500 to $5,000 of residual income tax.

b) Increase the closing stock adjustment from $10,000 to $20,000 - $30,000.

c) Increase the $10,000 automatic deduction for legal fees and potentially expand the automatic deduction to other types of professional fees.

d) Reduce the number of depreciation rates and simplify the process for using default rates.

Subject to fiscal constraints:

e) Simplify the fringe benefit tax and simplify (or even remove) the entertainment adjustment.

f) Remove resident withholding tax on close company-related party interest and dividend payments, subject to integrity concerns.

g) Remove the requirement for taxpayers to seek the approval of the Commissioner of Inland Revenue to issue GST Buyer Created Tax Invoices.

h) Allow special rate certificates and certificates of exemption to be granted retrospectively.

i) Increase the period of validity for a certificate of exemption or special rate certificate.

j) Remove the requirement to file a change of imputation ratio notice with Inland Revenue.

k) Extend the threshold of ‘cash basis person’ in the financial arrangement rules, which would better allow for the current levels of personal debt.

l) Increase the threshold for not requiring a GST change-of-use adjustment.

The Government should also review and explore the following opportunities:

m) Adjust the thresholds for unexpired expenditure and for the write off of low-value assets.

n) Help small businesses reduce compliance costs through the use of cloud-based accounting software.

o) Consider compensation for withholding agents if additional withholding tax obligations are imposed.

p) Review the taxation of non-resident employees. q) Review whether the rules for hybrid mismatches should apply to small businesses or simple business transactions.

We’ll wait with interest to see what gets enacted.