Stuart Nash: Tax re-vamp a Red Letter Day for businesses

Stuart Nash. Photo / Supplied

A veteran political reporter in Wellington unkindly suggested to my parliamentary office this week that he would be pleased to see the doors of Inland Revenue permanently closed.

He was joking of course, but he was referring to one of the most important government projects currently under way to help businesses, and ultimately the wider economy.

For four days last week, between Thursday, April 12 and Tuesday, April 17, most of the public-facing side of our Revenue network was temporarily closed to enable a changeover to a new IT system.

I'm pleased to report the transition went like clockwork and hopefully no taxpayers noticed any disruption. But very soon, they will notice a change for the better.

The ultimate objective of the Business Transformation project is to make tax simpler. The changes which went live this month improve the administration and collection of three main tax types.

A brand new option for provisional tax, known as the Accounting Income Method or AIM, will transform the way businesses pay provisional tax.

The tax will only be payable when businesses make a profit. They can get immediate refunds for overpayments throughout the year. The changes also enable fringe benefit tax and gaming machine duty to be filed, amended or paid online.

Changes will make compliance easier for businesses. The changes to provisional tax are particularly significant and remove a major headache for businesses who till now have had to base their calculations on the previous year's earnings.

We want to make it easier for customers in their dealings with IR. The certainty and freedom from penalties and interest offered by AIM are likely to make it a popular option. AIM is available for businesses with a turnover of $5 million or less, and the other provisional tax options remain available for those who choose not to take it up.

Businesses can put a circle around April 17 on their calendars: the go-live date for the new system.

It was a red letter day. It was also technically challenging and involved 200 IR staff with 18 external providers working for nearly 200 hours to transfer customer data including one million accounts and 13 million returns into the new system.

While we're talking about numbers, I understand the team also got through 26 pizzas and 18 packets of biscuits over the weekend!

The tax system is a valuable public asset, but we have to be careful how we manage it.

The Government is very conscious of the significant impact tax can have for business. So our focus is on making changes which streamline interactions with the IRD, and fit them around existing business processes.

The vision is for a tax system which is simple to use and makes it easy for everyone to get their taxes right and difficult to get them wrong.

There are other important changes coming too. Collecting income information more often will provide a basis for more accurate PAYE withholding and Working for Families entitlements. That in turn will help reduce the number of people getting into debt.

And it will give New Zealand families more certainty about what their payment obligations are and what support they're entitled to. Periods of assistance will better match periods of need.

Eventually many people – for example those with income from employment or investments – will not need to have any contact with the IRD, as the tax department will already have all the information it needs to calculate tax owing or refunds due without the need for returns to be filed.

The modernisation of the tax system is a multi-year programme, which started last year with GST reform.

By the time it's finished I'm confident that everyone who deals with Inland Revenue will find it simpler and less time-consuming. That will bring direct benefits for businesses, families and the economy.