24 Jan 2012

Tax system not expected to change much this year

6:16 am on 24 January 2012

One tax practitioner is not expecting much change to the tax system this year, with the focus on Inland Revenue making itself more user friendly and simplifying the way it deals with taxpayers.

Nevertheless, PricewaterhouseCoopers chairman John Shewan says he expects further progress in reducing the cost of doing business with Australia, particularly the mutual recognition of imputation credits.

Imputation credits, which are called franking credits in Australia, apply to dividends paid to shareholders.

It recognises a company has already paid business tax so an investor does not have to pay tax on the income.

However, when a New Zealand investor invests in an Australian company, they don't get these credits and have to pay tax even though the company already has.

Mr Shewan says the big tax changes were made in 2010 and they are settling down well.

He says it's unlikely there will be any significant changes this year to things like tax rates, the tax base or the taxation of savings.

But Mr Shewan says IRD is going through a major transformation to make themselves more user friendly, to enable tax payers to self manage their tax liabilities.

He says IRD is keen on having less interaction with taxpayers, but that will require a lot of innovation, automation and streamlining of processes.

Tax collection on track

Mr Shewan says the tax system is coping well so far and the Government expects to collect $55 billion in tax this year, and up to the end of October it was on track, about 3% behind.

He says company tax take was up about 9% on projections and GST and personal tax was down a bit, but that was expected to turn around.

Mr Shewan says if that trend continues, it reflects very well on New Zealand's overall framework, because despite the economic times the tax system is delivering.