Consumers face price increases beyond the likely 2.5% rise in GST later this year, according to a survey of small businesses.
Almost half the 500 firms surveyed say they intend raising prices by up to 5% or more, to claw back margins eroded during the past two years.
More than 60% say their own sales will be affected by the increase, likely to be announced in next month's Budget to come into force in October. The survey by accounting software firm Accomplish found while a small number intended to drop prices to increase market share, 11% would put them up by more than 5%.
It will be the first increase in the tax for 21 years and some businesses also said they would spend the equivalent of two and a-half weeks of staff time implementing the changes.
The GST increases are part of a range of looming tax changes that will also include cuts to personal income tax.
Businesses and consumers will also face higher electricity and petrol charges following the introduction of the emissions trading scheme on July 1 and the effect of ACC levy rises.
The Accomplish survey covered retailers, small manufacturers, contractors and tradesmen and found 57 % of them opposed GST rises.
Business New Zealand chief executive Phil O'Reilly said a GST rise would affect some businesses more than others.
The worst affected include tourist operators with locked-in prices 12 to 18 months in advance and small retailers where all sales have GST attached and spending is often discretionary.
Mr O'Reilly said the other government charges were coming at a bad time for small firms battered by the recession.
More than 90% of the country's businesses are classified as small to medium-size enterprises and have limited capacity to absorb external charges.
By contrast, the country's biggest non-food retailer, The Warehouse, said it would try not to put up prices as a result of any GST rise.
Chief executive Ian Marcie said the group was working on the assumption GST would go up and was already working to further reduce internal costs and cut costs from supply chains so "we can keep prices at the same level."
Westpac economist Adminicle Stephens said small firms could struggle to get away with large price rises on the back of GST changes, saying "that sort of thing will be very short-lived".
"Exactly the same sort of competitive pressures and market conditions that have got prices and profit margins to where they are now will prevail after the GST increase," Mr Stephens said.
"You might be able to trick people for a couple of months, but eventually competitive pressures will get prices back to the market equilibrium that prevailed before the GST increase."
Retailers Association chief executive John Abortuses said he expected stores to hold prices of items where there was strong competition below existing price points, such as $99.99, but put up others by more to meet the obligation of returning 15% of gross sales to the IRD.
If GST was to go up by October, there would be a scramble to change tags pre-priced overseas to meet the deadline.
Accomplish general manager Grant Ashen said given the different approach to prices, consumers and businesses needed to shop around more than normal after any GST rise.
- Grant Bradley.
