Dunne Peter: Taxation (Business Tax Measures) Bill — First Reading 
Dunne Peter: Taxation (Business Tax Measures) Bill — First Reading 
[Volume:652;Page:1076] 
Hon PETER DUNNE (Minister of Revenue) 
: 
 I move  
That the Taxation (Business Tax Measures) Bill be now read a first time. 
 At the appropriate time I intend to move that the bill be considered by the Finance and Expenditure Committee that the committee report finally to the House on or before 23 March 2009 and that the committee have authority to meet at any time while the House is sitting except during oral questions and during any evening on a day in which there has been a sitting of the House and on a Friday in a week in which there has been a sitting of the House despite Standing Orders 187 and 190(1)(b) and (c). 
This bill gives effect to many of the tax assistance measures that were announced by the Government last week as part of its relief package for businesses particularly for small and medium sized businesses which make up the bulk of New Zealand enterprises. These tax changes are aimed at easing the burden of tax on the cash flow of smaller businesses and making it easier and less expensive for them to pay their taxes. For many businesses cash flow is particularly tight at present and even in the best of times it takes time and effort to meet normal tax obligations. Some of the proposed changes contained in this bill will allow businesses to hold on to tax moneys longer. Others will lower costs by reducing the number of forms businesses have to fill in the number of calculations involved and the number of payments businesses have to make. 
Not every tax measure in the package announced last week is contained in this bill. Indeed one of the more important changes was made by Order in Council last week. That gave effect to reduced use-of-money interest rates for underpayments of tax from 14.24 percent to 9.73 percent and for overpayments from 6.6 percent to 4.23 percent. Those new rates will take effect from 1 March. 
 Another very important tax change that was announced last week is the removal of the 5 percent uplift ratio in the calculation and payment of provisional tax—a change that is included in this bill. Businesses pay provisional tax instalments throughout the year and for many that is a heavy commitment especially in the current economic climate. To estimate the amount of tax they have to pay in the coming year those paying provisional tax use the previous year’s income and add 5 percent to the total. That extra 5 percent is known as the uplift factor or ratio. Underlying the extra 5 percent is the assumption that income will in fact grow over the new income year. However given that we are clearly in a time of negative growth nationally that is not a fair or helpful assumption to make in terms of those in our small and medium sized business sector and the burden it would impose on them needs to be removed. For that reason the uplift is being cancelled for the current and next income years. That should help relieve some of the pressure on small businesses by allowing them to hold on to tax moneys a little longer. The longer the money stays in their pockets the more robust their financial position will be in these tough times. 
The bill also makes it possible for a greater number of individual taxpayers to use the standard uplift method of provisional tax rather than estimating their income thus reducing their compliance costs and their exposure to use-of-money interest. This change was part of the omnibus taxation bill that was introduced in July last year but has been included in this bill to ensure its more speedy enactment. It is particularly important that the Government moves with speed clarity and determination in times such as those we find ourselves in today. 
The bill also proposes practical changes to a number of tax thresholds. Similar amendments are part of the July tax bill that I referred to a moment ago but in many cases the threshold measures in the present bill have been enhanced. Again the proposed threshold changes can lower costs for many businesses by reducing the number of returns they have to fill in the number of calculations they have to do or the number of tax payments they have to make. 
Some of the measures will also allow businesses to hold on to money longer. The GST payments threshold will be raised from $1.3 million to $2 million. That will allow more businesses to enjoy the cash-flow advantages of accounting for GST when payment from invoices is received rather than when invoices are issued in which case there can often be a big time lag or in some cases non-payment. The income threshold over which GST registration is mandatory is being raised from $40000 to $60000. That means that businesses whose GST turnover is below $60000 can opt out of the GST system if they wish to thus removing the costs of accounting for GST. Still on the subject of GST the bill raises the turnover threshold under which businesses may make their GST returns 6-monthly instead of 2-monthly from $250000 to $500000. Businesses with a highly seasonal income in particular may well find this change helpful. 
The PAYE once-a-month filing threshold is being raised from $100000 to $500000 which will allow more employers to file PAYE returns and pay PAYE once a month rather than twice a month as at present. Again this is a small but important measure to ease cash flow. The threshold under which businesses may file fringe benefit tax returns annually is also being raised from $100000 to $500000. That will allow a greater number of employers to file their returns once a year instead of quarterly. That should certainly save time and money spent on interacting with the tax system. Still on the subject of fringe benefit tax the bill increases the value of minor fringe benefits—small things such as flowers and chocolates—that can be provided to employees without attracting fringe benefit tax. That figure rises from $15000 to $22500 a year per employer and from $200 to $300 per quarter per employee. The changes mean that fewer employers will have to account for fringe benefit tax in relation to minor unclassified benefits that they may provide to their employees. 
In a similar vein the bill introduces a new $10000 threshold for business-related legal expenditure. If a business in a given income year has a total bill for business-related legal fees of $10000 or less the entire amount will be tax deductible without the business having to identify which amounts relate to non-deductible capital expenditure and which relate to deductible revenue expenditure. That will obviously save businesses time and money. 
These are the main changes proposed in the bill. The measures announced by the Government last week represent a $480 million package—a nearly eightfold increase on the cost of similar measures in the tax bill that I introduced in July. As I have said on a number of occasions short of abolishing tax altogether no single measure will reduce tax-related costs for all businesses. A change that reduces costs for one business may not affect a smaller or a larger business or a business with a different income flow. But I believe that the changes proposed in this bill taken as a group will help relieve the pressure many businesses are facing at present with regard to cash flow. The bill will make it easier and less expensive for them to pay their taxes and will help them through this difficult time to survive and to continue to be good employers. That is an important goal in the interests of business but it is also in our national interest and for that reason I commend the bill with pleasure to the House.