Tax red tape too tangled for smaller businesses

The Government should work to ease small and medium-sized businesses' tax-compliance burden, says the accounting firm KPMG.

KPMG and Business New Zealand's Compliance Cost Survey shows tax remains the biggest headache for businesses.

Over 41 per cent of total compliance costs were for tax-related issues, said KPMG tax partner Paul Dunne.

"Respondents are telling us that tax is too complicated for the average person to deal with. This is not helpful for starting or growing small businesses."

Dunne said the Government "should put more focus on whether the tax regime is appropriate for everybody or should we cut and dice it a bit more to make life easier for small to medium-sized businesses".

Business NZ chief executive Phil O'Reilly said 60 per cent of the survey's 1400 respondents were in that category, the highest ratio since the survey began four years ago.

The higher proportion of small businesses meant this year's sample was the most representative so far, and had confirmed findings that compliance costs fell more heavily on smaller enterprises.

O'Reilly noted that the Government was conducting a review of business compliance.

"I hope the findings of this survey will be of great value to that process."

After tax, businesses said the most demanding areas of compliance were employment and environment issues.

When divided into six groups according to the size of the company measured by the number of fulltime employees, total compliance cost for each fulltime employee rose for four out of six groups.

However, the average compliance cost per business fell to $38,232 from $53,011 last year and $36,075 in 2004.

Nevertheless, most respondents perceived that compliance costs had increased, with the largest rises in the areas of the Holidays Act, the Employment Relations Act, the Resource Management Act and the Health and Safety in Employment Act.