Sales tax change will hurt some

Press, 28 October 1982, Page 25

Sales tax change will hurt some

A survey by the Canterbury Chamber of Commerce has indicated the proportion of firms that will be affected by new penalty provisions for the late payment of sales tax.

Before this year's Budget sales tax was due on the twenty-eighth day of the month after that of the transaction. If not paid by that date a further 28 days was allowed before a 10 per cent penalty was levied.

Now sales tax is still due on the twenty-eighth day of the month following. Blit if the tax is not paid by that date a 10 per cent penalty is imposed from the day after the due date. For each additional month the tax is outstanding an additional 2 per cent a month is levied (compounding).

In a report on its survey the chamber says that some companies have been using the extension period to stabilise cash flows. These firms will now have to pay tax earlier or pay the 10 per

cent penalty and pay the tax in the normal manner. Either way they would have to extend their working capital, which would be difficult in the present economic climate. especially for small businesses.

The survey, for which 45 firms-furnished replies, indicated that 71 per cent paid a form of sales tax.

Of manufacturers, 80 per cent paid their sales tax bill on time, more than 38 per cent of this group using overdraft facilities for the payment. Comparative figures for other types of businesses included: ’ wholesalers. 70 per cent and 28 per cent; and service sector 75 per cent and 33 per cent. Retailers paying sales tax did so by the twenty eighth day of the month following, from either cash flow or overdraft. Export firms paying sales tax did so from overdraft facilities after the twenty-eighth day and before the fifty-sixth day after the date of transaction. Details of the value owed

to the firms after 28 days of invoicing were indicated by the survey to be (as a percentage of total invoices): Total. 36.4; Manufacturers. 39.1: Wholesalers. 31.1; Exporters. 54.4; Sendee sector, 52.9: Retailers, 8.4. The survey also sought information on how a broadly based indirect tax would affect businesses. Respondents were asked to “consider the possible introduction of a wholesale sales tax being imposed on all your sales transactions (assuming a 15 per cent levy on net sales),” and to indicate how their company would most probably meet this tax liability if required to pay by the twenty-eighth of the month after the transaction.

Fifty-six per cent of firms said they would pay from extended overdraft facilities, 18 per cent from present overdraft facilities, 24 per cent from normal cash flows, and 2 per cent would adopt other means (mainly bv extending their accounts payable).