Require Partially met Partially met Partially met No impact companies to pay tax as The reservation The reservation immediately This option is both fair and reduces Subject to the condition for immediately above applies. above applies. the compliance cost impact of described employees. Some may also consider it provisional tax. unfair that taxpayers in this The compulsory nature of situation are required to this option also means that However, there may be objections pay tax through an agency some taxpayers who may be to the compulsory nature of this relationship, whereas happy with the status quo option. situations where income is will be required to use it and received from an unrelated will identify themselves as party do not require an incurring additional agency relationship. compliance costs. However, there will be no compliance costs incurred in choosing whether or not to implement this option, and administration will be simplified. Exclude Not met Met Not met Revenue cost shareholder salaries from who fall under this There would be a significant While the timing advantage this Introduction of this option would provisional tax rule would have a timing reduction in compliance option would create would not delay the receipt of revenue entirely and advantage and removal of cost as a result of removing threaten the broad base, low rate compared with the status quo. It allow tax to be interest benefit over those those associated with small philosophy which underpins the could also encourage greater paid at terminal who derive non-source business from provisional New Zealand tax system, this kind amounts to be paid out to tax date. deducted income from tax. of difference would still create a shareholders and so taxed at – non-associated sources, risk that other provisional taxpayers lower rates instead of being – and those who derive would seek similar concessions and retained in the company. income subject to source undermine the key concept of deduction, as both groups paying tax on income as it is pay tax as income is earned.. earned.
Require companies to pay tax as for Partially met The reservation immediately above applies. Some may also consider it unfair that taxpayers in this situation are required to pay tax through an agency relationship, whereas situations where income is received from an unrelated party do not require an agency relationship. Partially met The reservation immediately above applies. The compulsory nature of this option also means that some taxpayers who may be happy with the status quo will be required to use it and will identify themselves as incurring additional compliance costs. However, there will be no compliance costs incurred in choosing whether or not to implement this option, and administration will be simplified. Partially met This option is both fair and reduces the compliance cost impact of provisional tax. However, there may be objections to the compulsory nature of this option. No impact Subject to the condition described Exclude shareholder salaries from provisional tax entirely and allow tax to be paid at terminal tax date. Not met who fall under this rule would have a timing advantage and removal of interest benefit over those who derive non-source deducted income from non-associated sources, and those who derive income subject to source deduction, as both groups pay tax as income is earned. Met There would be a significant reduction in compliance cost as a result of removing those associated with small business from provisional tax. Not met While the timing advantage this option would create would not threaten the broad base, low rate philosophy which underpins the New Zealand tax system, this kind of difference would still create a risk that other provisional taxpayers would seek similar concessions and undermine the key concept of paying tax on income as it is earned.. Revenue cost Introduction of this option would delay the receipt of revenue compared with the status quo. It could also encourage greater amounts to be paid out to shareholders – and so taxed at lower rates – instead of being retained in the company. employees.
2016-ris-bteirm-bill-4.docx