Tax headache worst worry for companies

The challenge of staying onside with the Inland Revenue Department became the number one compliance headache for a growing number of businesses in the past year.

The Business New Zealand-KPMG Compliance Cost Survey released today has identified tax as the biggest compliance issue for 49 per cent of 1172 firms polled, consolidating the top position it has held since the survey began in 2003.

Tax was the biggest issue for 41 per cent of firms surveyed in 2004 and 36 per cent in 2003.

Behind tax this year was the cost of complying with the Employment Relations Act at 10.2 per cent and the Health and Safety in Employment Act at 8.9 per cent.

The survey measures compliance costs as the administrative and time requirements of complying with legislation.

"It is the costs of dealing with red tape, not about how much is paid in tax, fees or levies," KPMG partner Paul Dunne said.

Tax's leap this year was interesting, "given that there have been relatively few tax compliance changes over 2005 compared with recent years", Dunne said.

The survey said respondents may have focused on tax because of media coverage of tax issues or simply because there have been few major recent legislative changes in other fields.

Business New Zealand chief executive Phil O'Reilly said while discussion of tax had tended to focus on rates and the size of the tax take, "the survey shows tax compliance is just as important and needs the attention of policy-makers".

Today's data showed that in 2005 the average firm bore compliance costs of about $53,000, well up on the $36,000 recorded last year and $45,000 in 2003.

But those figures have fluctuated depending on the ratio of larger to smaller companies responding to the survey each year.

This year's survey found enterprises employing up to five fulltime employees had compliance costs of about $3600 for each employee, or 14.6 times the $247 an employee paid by firms with 100 or more workers.

Of total compliance costs, 40 per cent were tax costs, 26 per cent were employment, 15 per cent were environment and 19 per cent were other costs, such as Statistics New Zealand surveys, transport sector costs and companies and securities compliance costs.

Most firms said their compliance burden had either remained the same or worsened from last year.