Particularly complex would be when entities such as local authorities or insurance companies decided to increase the GST for people who made regularly payments, such as weekly instalments.
"One such payment is the Dunedin City Council rates. Taxpayers will have an increase from the October 2010 quarter due to the increase in GST on rates, but they will need to understand when this increase will change the weekly payments being made."
Taxpayers would not necessarily know when the extra GST would be added to those payments and would have to have faith in those entities that the timing was correct, he said.
If people had agreed to an annual insurance premium, questions could be asked whether GST should be added to it or should it remain the same until the next policy review?
"We are already talking to clients about how to manage [GST]."
"Care should be taken in relation to businesses issuing invoices to ensure that they are not paying more GST than they are receiving from their customers due to poor controls or invoicing," Mr Chisholm said.
There would also be issues where a taxpayer had a commercial rental agreed at a GST inclusive amount, as the landlord would be worse off while the tenant was better off.
However, Finance Minister Bill English said personal tax cuts, plus compensation for GST, meant the vast bulk of people were better off, even if they spent all their income.
GST did not tax savings and an across-the-board reduction in personal income taxes, together with an increase in GST, encouraged people to save or pay off their mortgage, rather than consume.
"New Zealand relies heavily on personal income and corporate taxes, which are harmful for economic growth. Shifting the tax mix away from these taxes and on to GST is less distorting and better for the economy."
GST was a difficult tax to avoid, no matter how people arranged their financial affairs, he said.
On October 1, the Government would increase payments by 2.02% for all those receiving New Zealand Superannuation or veteran's pension; all main benefits; the maximum rates of the disability allowance, child disability allowance and child care subsidies paid through Work and Income; the family tax credit and minimum family tax credit, which are part of the Working for Families scheme; and student allowances and CPI-adjusted payments from the Government Superannuation Fund or National Provident Fund.
GST CHANGES
- Rate of GST will increase to 15% from October 1.
- Potential to create complex problems.
- Compensation for superannuitants, pensioners and beneficiaries.
