Help For Small Business – Paying Tax As You Earn

The Labour Party, and leader Andrew Little, recently announced that they want a more flexible tax system for businesses, which would allow companies to pay as they earn instead of predicting their annual income.

It was raised as a potential way to ease cash flow for small business in New Zealand.  Instead of paying provisional tax in 3 large chunks during the year, you could spread it evenly through the year, similar to PAYE.

What do you think of this proposal?  Would this provide help for small business? We are keen to know your thoughts, so send them through.

Double Whammy Tax Payments

We have another suggestion – perhaps the Labour party could look at ways to help new business who frequently get hit by a double tax whammy at the start of their second year in business.

What often happens is that a new businesses don’t pay any tax in the first year (as they don’t know what tax to pay before they file their first return) and then suddenly have to pay the first and second year’s tax in one brief and painful period. Whether this actually knocks some early stage businesses off their perch is unknown, but taking such a large hit in a new business is very difficult for small business.

Exempt Small Business From First-Year Tax?

One radical solution would be to exempt small business from tax in the first year.  Whilst this may knock a hole in the tax base, it might be quite small given that many businesses don’t make a lot of money in the first year. This kind of creative thinking would really help our competitiveness and show some genuine support for small business people who are usually over-looked when it comes to policy.

Help For Small Businesses

We feel as though it’s about time some help was offered to the small business community. It’s tough out there, and most small businesses struggle with profitability and cash flow. Also, there’s a lot of them.

Labour MP’s, such as Jacinda Ardern and Dr David Clark, are already out on the trail, testing this idea with small business.

Out of the 470,000 businesses, 460,000 are small businesses and between them, they employ 50% of the total New Zealand workforce.  They also provide some insulation from the effects of primary product price falls so even when major industries are in trouble small businesses are naturally diverse and help the economy keep bobbing along.

We are big fans and advocates for the small business sector and any kind of tax break to improve productivity and profitability is a welcome debate to be having.

What do you think of the proposed changes? What do you think about our suggestions? Contact us and send them through.