Big compliance costs for tax, KiwiSaver, four weeks’ holiday

Small companies have a compliance burden three times higher than large ones, according to this year’s Compliance Cost Survey run by KPMG and Business NZ. The burden for small companies (fewer than 10 staff) equates to $2,400 per employee per year, while for companies with more than 50 staff, the figure is $780 per employee per year.



This is lower than in previous years, but still too high in the eyes of New Zealand companies, said KPMG Tax Partner Paul Dunne and Business NZ Chief Executive Phil O’Reilly.



KiwiSaver, Holidays Act

The survey shows negative trends around KiwiSaver and Holidays Act compliance.



Mr O’Reilly said the compulsory employer contributions to KiwiSaver had been imposed without any consultation, and the parts of the Holidays Act that weren’t working had been introduced in opposition to employer views.



“If there’s no consultation or if the consultation is ignored, that’s where compliance problems are likely to occur,” he said.



Tax still the big concern

As in previous years, the top concern overall was tax. Businesses surveyed said tax structures were too complicated and too much time was taken calculating GST and PAYE and preparing provisional tax payments and accounts for tax returns.



KPMG Tax Partner Paul Dunne said there had been a considerable volume of tax changes either announced or implemented in the last year, so tax compliance was set to become more, not less onerous.



“There is a significant compliance cost burden imposed by KiwiSaver and this compliance cost spike can be expected to continue as employers make KiwiSaver-related changes to their employment terms,” Mr Dunne said.



“Fringe benefit tax again features as a compliance problem despite last year’s amendments to the FBT rules. This highlights the need for FBT to be limited to real and substantial benefits in place of salary and wages, like motor vehicles and low interest loans.



“One action which is now on the Government’s radar screen is recognising that government departments need to talk to each other as well as to business. Government departments specialise in and focus on one area of compliance while businesses have to deal with a raft of different government departments. We look forward to the upcoming Government discussion document on tax compliance cost saving initiatives for small to medium businesses and hope it will deliver some real benefits for the businesses in that sector, which bear the brunt of compliance costs,” he said.



Employment law heavy on compliance

The next most pressing compliance concerns after tax were employment-related, with the Holidays Act, ACC, and the Employment Relations Act scoring high concerns. Larger companies were significantly more concerned about the Employment Relations Act and the Health & Safety in Employment Act. Given their greater ability to hire expert assistance to cope with compliance with these Acts, this raises the question whether the lesser concern shown by smaller companies indicates that some may not be compliant with the law.



‘Ease of doing business’ and the Quality Regulation Review

The results of the KPMG-Business NZ Compliance Cost Survey are at variance with New Zealand’s high ranking in the international ‘Ease of Doing Business’ survey. This is because the ‘Ease of Doing Business’ survey does not cover compliance with tax, resource management or environment law, which are key issues for New Zealand companies. New Zealand’s high ranking in the ‘Ease of Doing Business’ survey is heavily influenced by its ranking on ‘ease of getting credit’, while its ranking on employment issues is far from the top.



The results of the KPMG-Business NZ Compliance Cost Survey also differ from the conclusions of the Government’s Quality Regulation Review, again because employment and other key issues were not covered by this Review. Mr O’Reilly said that while the Quality Regulation Review was useful in part, it would have been more relevant had it focused on tax, KiwiSaver and employment relations issues that are creating compliance problems for New Zealand firms.



Helpfulness of government agencies

As in previous years, the survey surveyed companies’ views on the helpfulness or otherwise of government agencies. The Companies Office was again in first place (for the fifth straight year), followed by the NZ Customs Service in second place and the Department of Labour in third place. The NZ Immigration Service was considered the least helpful government department. The Ministry of Agriculture & Forestry moved down four places in the rankings this year, while ERMA moved up an unprecedented six places.



About the survey: Compliance costs are the administrative and time costs of complying with legislation (e.g. the time and resources involved in working out tax or holiday payments) as opposed to the substantive costs imposed by legislation (e.g. the amount of tax to be paid or the amount of holiday pay to be paid). The KPMG-Business NZ Compliance Cost Survey is New Zealand’s most comprehensive and consistent survey undertaken to measure costs and trends in key compliance areas.