Labour finally answered the calls to show us some policy last week with an announcement on proposed changes to provisional tax:
The bad news for Labour was that it wasn’t its own fresh policy it was reheated National Party policy:
Acting Minister of Finance Steven Joyce has congratulated Labour Party Leader Andrew Little on finally announcing his first “new” policy after eight months in the job, although unfortunately for Labour it’s a cut and paste of a previous Government announcement.
“Labour announced today it was launching a discussion document on changes to provisional tax for businesses. However it seems to have overlooked that the Government launched its own discussion document containing almost identical proposals back in March,” says Mr Joyce. “These in turn were based on National Party policy at the last election.”
The Government has already consulted on proposed changes to provisional tax including a business PAYE, changes to use-of-money interest and penalties, increased use of tax pooling and the use of tax accounts. A Green Paper was launched on 31 March this year and submissions closed on 29 May.
“Feedback on the Green Paper’s suggestions has generally been supportive, and provisional tax was the part most commented on. As we’ve said previously, the changes will require new technology to be implemented, which will be developed as part of the IRD’s Business Transformation project,” says Mr Joyce.
“Quite why Labour has started its own consultation is beyond me.
“Submissions are now closed but the Government would be happy to accept a late submission from the Labour Party in support of the proposal,” Mr Joyce says. “We also appreciate its implied endorsement of the Business Transformation process that will make these policy changes possible.”
A link to the March announcement can be found HERE.
A link to the Government’s Green Paper, Making Tax Simpler, can be found HERE.
A link to the National Party’s 2014 election policy on this issue can be found HERE.
The good news for all of us is that this could mean there is consensus on provisional tax which is very unpopular with businesses for good reason.
They have to pay on expected income without the benefit of a crystal ball that can give them an accurate forecast of their futures costs and income.
A reasonably accurate estimate is difficult enough for any business, it is particularly taxing in farming where there are so many variables and a lot of income is lumpy.
Dairy farmers get monthly payments for their milk but last year the pay out was far higher than expected, this year it is much lower.
Cropping, sheep and beef farmers and many horticulturists get most of their income in a very few payments a very few times a year. Estimating what they are likely to produce, how much that will cost and what they’ll be paid for it months in advance with any deegree of accuracy is next to impossible.
The changes proposed by the IRD which now seem to have support across the political spectrum would simplify the tax system.
Simpler taxes are less expensive to comply with and administer. That reduces costs for businesses which is good for them and the people they employ, service and supply.