Tax cost-cutting doubted by web critics

By RICHARD WOOD

The Government says allowing businesses to manage their tax affairs over the internet will cut costs, but not everyone is convinced.

Inland Revenue has launched a five-year "e-enablement" strategy, with 52 projects, including filing returns and paying tax online, and a password access system for individual taxpayers.

Associate Revenue Minister and Small Business Minister Paul Swain said he was pleased that the strategy would reduce the tax compliance burden on small business owners.

"This will give taxpayers greater flexibility, save them time and provide them with a more personalised tax service," said Swain.

But Auckland Chamber of Commerce chief executive Michael Barnett disputed Swain's claims, saying handling tax online would not in itself reduce compliance costs.

"Unless there is a reduction in either the information that's being required, or some integration achieved by the various Government departments of the ways in which they capture the information, I can't see any savings at all."

Barnett is enthusiastic about the idea of e-enabling small businesses, and the fact that this will encourage people to use the internet as a business platform, but "to say that moving it from a pen and pad on the desk on to a screen will reduce compliance costs is confusing".

Jeff Owens, tax director for the Institute of Chartered Accountants, would not comment on the cost of compliance. He said the institute's members were generally positive about being able to use the internet more.

Swain said he was mystified that anyone would think that more electronic government, particularly e-filing, would not lower compliance costs.

"Why would you bother with an e-government programme, then? Why would you do e-commerce?"

"The e-government programme is ultimately designed to not only help business but to reduce the cost of business doing business with Government.

"Filing and paying online will mean taxpayers don't have to handle paper, keep the envelopes, post the returns and so on.

"It will mean access to more co-ordinated information electronically. Online calculator tools will make it easier and faster to calculate tax and lower the risk of getting calculations wrong. Reminder systems flag if there is a mistake being made."

Inland Revenue's general manager, business development and systems, Colin MacDonald said he could not comment on Government policy in regard to the cost of compliance. He said the strategy was about removing the barriers to paying tax efficiently. For example, if you have left your tax to the last day then an e-service will allow you to pay that immediately.

Ram Aiyar, tax manager at accounting firm Gosling Chapman, said there would be cost savings, but also time wasted in dealing with online systems.

He said savings would come from the immediacy of getting things done, cashflow improvement because of better information on refunds, savings from avoiding penalties, and doing more of the routine filing in-house.

However, Aiyar said doing more tax work internally could be a trap for small business. He said this would expose people to greater risk because of the self-assessment approach to taxation.

"They are going to have to be increasingly aware of their obligations. Online access also carries with it a sort of underlying inference that the more you know, the more you are expected to know when it comes to penalising you."

Owens said getting advice when self-assessing is important and he did not agree that there was more risk. "The message has to be ... from department and agents, that some things it is extremely important to get advice on," he said.

"The act of physically making a payment and the act of physically filing a return are not things I think one needs advice on, but the process of calculating one's tax obligations and of calculating one's return are things where in many cases it is appropriate to seek advice."

Aiyar is also concerned that valuable time will be shifted from creating wealth to dealing with taxation.

"There will be costs for the taxpayer in as much as having to devote greater amounts of time in dealing with these systems.

"The more that the reporting burden is shifted over to the taxpayer and wealth creator, the less time is available to go out and get the goodies."

Owens said the reverse of that argument was that if you make things more complex so businesses had to go through agents, then it would boost the economy. This, he said, was clearly nonsense.

Aiyar said compliance costs were going up and "any of these changes are just cosmetic". He said the focus should be on making tax agents more efficient and cheaper.