Small businesses losing paper war

Press, 26 October 1989, Page 27

Small businesses losing paper war

By

NEILL BIRSS

Entrepreneurs are choking on the paper work imposed on them by the Government, says a Christchurch smallbusiness owner, Mr Alan Roberts;. Mr Roberts has been, in business for about 25 years. He ran a service-station in Cranford Street ‘with 12 employees until recently.,' "•' ; Now/,he manages four small invest-ment-property companies, and feels a quadruple weight of the papeL work imposed on business by the Government. Much of the paper work is for the Inland Revenue Department and arises from a Government policy, of pushing the collection of tax on to ; businesses. It also follows.the Government's commendable and successful drive to -seal tax loopholes, co-opting some of the country’s best tax accountants and tax lawyers on to advisory groups to help. Unfortunately some of the holes have been blocked with reams of paper forms. The result is a tide of forms to fill under deadlines, and late-compliance penalties that seem harsh to many honest citizens. How are the plumbers, electricians, and other small-business operators meeting the pressure and still carrying out their business? Most are probably so busy they haven’t time to complain. But Mr Roberts has told the Minister of Finance, Mr Caygill in a letter that he has sold his business and will not be involved again in any business which requires many staff. “The situation seems quite general. Many business people will not expand their operations because of all the extra hassles,” he said. When Mr Roberts began work — in the Lands and Survey Department at Hokitika — employers had only to pay weekly or fortnightly wages and annual leave, and make an annual return to the Inland Revenue Department for the year. The employees settled their own tax once a year. Now, he says, employers have to cope with: • Collecting and paying PAYE on wages (monthly, and in large businesses, fortnightly). • Making annual returns on wages. • Collecting union fees and other wage deductions. • Keeping holiday records.

• Keeping Accident Compensation Corporation records, paying ACC levies, and dealing with ACC claims.

• Keeping GST records; paying GST (monthly for some firms, six-monthly for others); coping with GST audits, corresponding with the Inland Revenue Department about GST.

• Keeping fringe-benefit tax records; paying FBT; corresponding ‘With the departmentonFßT..,; ' • Keeping records on withholding tax on interest; paying, this to the department; supplying details on clients* 1 withholding.tax, to the departibenU * • •Making/returns tothe Department . of Labour, the Statistics Department, and meeting • bodies *< and.,the;Health Departrrteitt. .4 . • Making land’tax: returns.''.. • Coping with claWrb^i!kiTax ; returns. • Meeting inspectors on goods, factories, electrical work; etc.

.The small business owner had to spend extra time with accountants and pay them more because of the sea of Government requirements, Mr Roberts said.

“On top of all this we are supposed to take the risks, borrow money, probably work 14-hour days, and we make more than the dole, if we are lucky.” Mr Roberts in his present field, invest-

ment, has found what he believes are serious anomalies in the withholding tax on interest payments. If a company has $lOO,OOO from 100 depositors it has to keep 100 tax records. But if it has $lOO,OOO from one depositor it has only one tax record. Thus companies servicing small depositors are harder hit. If a company pays 16% interest on deposits of $lOO,OOO invested .half-yearly there is $1920 in tax. If the payment is late there is a penalty of $192. “My company only makes 2% margin on its borrowing, and income margin (or a profit) of $2OOO, and in this case has had to pay a penalty of $192 out of this, or 10% of its profit.

“Added to this there will be the administration costs involved.” The activity became not worth the risks or the hassles.

Mr Roberts said he had many ideas and time to follow them through. But it was not worth nursing a new company through the typical two years or so to profitability when all the “bureaucratic rubbish” had to be endured.

Computers can help small business owners cope with the Government paper work, Mr Roberts concedes. But he says small start-up firms don’t have the $lO,OOO to $30,000 it takes for a good computer system and the correct software.

Mr Roberts is at pains not to blame the Inland Revenue Department, which he said was being driven “around the bend” coping with the flood of returns and correspondence with small businesses.

For many small business owners hardly a day goes by without contact with the Inland Revenue Department, he asserts.