Neutrality* Efficiency Certainty and simplicity Effectiveness and fairness* Fiscal impact Compliance costs Administration Option 1: allowing a deduction for capital raising Increased - GST recovery is less influenced by the source of capital. Decreased - the need to apportion deductions is reduced or the calculation of the deductions simplified. No change - IRD monitors taxpayers’ compliance with the rules (as with other tax rules). Increased – fully taxable businesses would not need to apportion costs. Tax obligations are therefore more transparent. Increased - ensures that consumption is taxed once. Decreased – estimated $10 million per annum fiscal cost. Meets objective Meets objective objective Meets objective Meets objective Option 2: status quo No change - incentive to obtain funding in ways that enable GST recovery, such as from overseas. No change - some relating to both capital raising and other activities of the business may need to be apportioned. No change - IRD monitors taxpayers’ compliance with the rules (as with other tax rules). No change – businesses would need to determine which costs relate to capital raising, and which costs relate to other activities. No change - denial of deductions leads to GST being imposed multiple times in supply chain. Tax cascade overtaxes the consumption. No change. Partially meets objective Meets objective Meets objective Meets objective Does not meet objective * = Key objective
Neutrality Efficiency* Certainty and simplicity Effectiveness and fairness* Fiscal impact Compliance costs* Administration costs Option 1: agreed methods No change - alternative methods are not expected to disturb the substantive amount of tax payable. Decreased - costs incurred in agreeing methods. Minimal cost of maintaining a method. Lower cost incurred in applying a method to calculate deductions. No change - incurred in agreeing methods. Minimal cost of maintaining a method. Expected lower costs of ensuring compliance. Increased - calculation of tax liability expected to be easier as the agreed method can be tailored to the specific difficulties. No change - methods required to have regard to the outcomes under the apportionment and adjustment rules, to ensure quantity and timing of tax is fair and reasonable. No change - agreed methods are not expected to alter the amount of deduction that can be claimed. objective Meets objective Meets objective objective Meets objective Option 2: agreed methods (including industry methods) No change - alternative methods are not expected to disturb the substantive amount of tax payable. Decreased - costs incurred in agreeing methods. Minimal cost of maintaining a method. Lower cost incurred in applying a method to calculate deductions. No change - incurred in agreeing methods. Minimal cost of maintaining a method. Expected lower costs of ensuring compliance. Increased - calculation of tax liability expected to be easier as the agreed method can be tailored to the specific difficulties, across a broader group. No change - methods required to have regard to the outcomes under the apportionment and adjustment rules, to ensure quantity and timing of tax is fair and reasonable. No change - agreed methods are not expected to alter the amount of deduction that can be claimed. Meets objective Meets objective Meets objective Meets objective Meets objective Option 3: Status quo No change - existing apportionment rules determine amount of deductions. No change - high compliance costs experienced in applying rules. No change - IRD will continue to monitor taxpayers’ compliance with the rules. No change - calculation of liability may be difficult and complex. No change - existing apportionment and adjustment ensure correct tax paid at the correct time. No change - existing rules would continue to apply to determine the deduction that can be claimed. objective Does not meet objective Meets objective Does not meet objective Meets objective * = Key objective
Neutrality* Efficiency Certainty and simplicity* Effectiveness and fairness* Fiscal impact Within sectors Between sectors Compliance Administration Option 1: Allowing secondhand goods deductions Increased - value added is taxed – GST is otherwise neutral between businesses and transaction types. Increased gold treated the same as most other secondhand goods. Decreased - compliance costs comparable to other secondhand goods. No change - IRD monitors taxpayers’ compliance with the rules (as with other tax rules). Increased - no special rule for gold. Rules consistent with the rest of the Act. Some uncertainty regarding past positions. Increased - results in taxation of consumption of gold. Reduced – revenue decrease estimated at $0.4 million per annum. objective Meets objective Meets objective objective Meets objective Meets objective Option 2: Allowing secondhand goods deductions – retrospective (officials’ preferred option) Increased - value added is taxed – GST is otherwise neutral between businesses and transaction types. Increased gold treated the same as most other secondhand goods. Decreased - compliance costs comparable to other secondhand goods. No change - IRD monitors taxpayers’ compliance with the rules (as with other tax rules). Some returns would need to be reopened. Increased - no special rule for gold. consistent with the rest of the Act. Past positions preserved. Increased - results in taxation of consumption of gold. Reduced – revenue decrease estimated at $0.4 million per One-off cost forecast at $1.6 million. Meets objective Meets objective Meets objective Meets objective Meets objective objective Option 3: Status quo No change - businesses disadvantaged compared to unregistered businesses. Non-compliance distorts competition. No change - secondhand gold treated less favourably than other secondhand goods. No change - compliance costs higher than other secondhand goods as purchaser must determine gold metal content. No change - IRD monitors taxpayers’ compliance with the rules (as with other tax rules). No change - rules more complex and less consistent, require greater understanding. Some uncertainty regarding past positions. No change - results in taxation upon supply of gold, rather that upon consumption. No change. Does not meet objective Does not meet objective Does not meet objective Meets objective Does not meet objective Does not meet objective