A more customer-friendly system to collect PAYE information from employers is one of the proposed changes to New Zealand's tax system as the Government seeks to future proof Inland Revenue.
Deloitte Dunedin tax partner Peter Truman said any changes making it easier to deal with Inland Revenue, and which reduced compliance costs, would be viewed favourably by business.
Change needed to be focused on those outcomes.
''Change for change sake will invariably increase compliance costs as business needs to get up to speed and understand new systems,'' he said.
It was an opportune time for a broad review to be undertaken, in light of the technology available, to see if change which was beneficial could be achieved.
When most of the tax collection mechanisms and tax compliance systems now in place were developed, the world was a much simpler place, Mr Truman said.
Revenue Minister Todd McLay said a new PAYE system would reduce compliance costs for employers.
The improved information collection would benefit their workers because Inland Revenue would have more accurate information, making their tax return process much simpler.
PAYE information and deductions were ''massively important'' to the Government.
''We should be able to offer New Zealand a better option than the current process for receiving that information, the employer monthly schedule or EMS.''
The purpose of the EMS was good but it was a time-consuming, labour-intensive way for Inland Revenue to collect the payroll information it needed, Mr McClay said.
Mr Truman said a review of the PAYE system was welcome. Technological improvements allowed a greater interaction between employers and Inland Revenue to ensure tax deductions from salary and wages were as accurate as possible.
A more dynamic approach would reduce the need for year-end tax returns to correct situations where the PAYE system did not currently deduct the correct tax for, say, people retiring or moving overseas part-way through the tax year.
Proposals to increase the situations where withholding tax was deducted from self-employed income sources was worth further consideration, he said.
To the extent expected tax liabilities could easily be accounted for by deductions from income, taking some business people out of the provisional tax system would be an advantage.
''We would welcome Inland Revenue streamlining simple administrative tasks and ironing out some quirks in the rules. Getting an overpayment refunded or transfers made between tax types requires manual intervention by Inland Revenue, when it would be easier to do it yourself, with the system providing the appropriate checks and balances.''
The proposal for individuals to be required to check a pre-populated return each year might be step backwards, Mr Truman said.
Many people would need help to check the details or would just agree the numbers without checking.
The current ''hands-off'' system for salary and wage earners worked well, if the correct tax was deducted at source.
The success of the tax refund industry showed tax was often incorrectly deducted at source.
Efforts by Inland Revenue should be concentrated on reducing the situations where the incorrect tax was deducted at source rather than adding additional compliance obligations, he said.
From a business point of view, the provisional tax system was not ''particularly broken''. Large businesses were continually revising forecast profits throughout the year and had a good feel of their likely tax liability.
Small businesses appreciated the certainty and cashflow could be managed through setting money aside each month to cover the three-times-a-year provisional tax payments.
In situations where income was expected to reduce from previous years, there was the ability to estimate a lower provisional tax liability rather than simply basing provisional tax on the last filed tax return, Mr Truman said.
At a glance
• Tax modernisation programme launched.
• Investigating options for simplifying the calculation of provisional tax.
• Integrating employers' tax obligations into business processes.
• Providing individuals with an online return which lists PAYE income information received from their employer.
• Consultation on the Better Digital Services paper close on May 29.
