Government to remove imputation barrier to tax pooling
The government is to change the imputation tax rules to make it easier for companies to take advantage of a new law allowing businesses to pool their provisional tax payments, Associate Revenue Minister Paul Swain announced today.
"A recently-enacted tax simplification measure makes it possible for businesses to pool their provisional tax payments with those of other businesses by using pools set up and run by commercial intermediaries," said Mr Swain.
"There is lot of interest in the new tax pooling scheme, and the government wants to make it accessible to as wide a range of businesses as possible. To that end, we intend to amend the imputation tax rules to remove a recently identified barrier to companies paying their tax through a pool.
"The government will amend the rules to ensure that businesses will receive imputation credits when they deposit money into a pooling account. The amendment will be included in the next taxation bill to be introduced into Parliament, and will take effect from 1 April 2003, the date of effect of the new pooling provisions.
"Tax pools will benefit all participants. Since provisional tax must often be paid before the income is earned, businesses base their payments on an estimate of expected income over the next year. Naturally enough, these estimates sometimes prove to be wrong. The result is that businesses that underpay provisional tax must pay use-of-money interest on the difference, and businesses that overpay receive use-of-money interest.
"In a tax pool, underpayments by participating businesses can be offset by overpayments by those in the same pool, reducing the under-payers' exposure to use-of-money interest. Overpayments will attract a higher rate of interest than a business would receive in dealing directly with Inland Revenue.
"The new tax pooling scheme is complemented by another simplification measure, also enacted last week, which makes it easier for employers to transfer most of their PAYE obligations to accredited intermediaries. The intermediaries will be legally responsible for calculating and paying PAYE deductions to Inland Revenue, meeting return filing requirements and paying employees.
"The PAYE measure has been designed to reduce the obstacles to payroll firms acting as intermediaries between employers and Inland Revenue, thus freeing up employers' resources to be used more productively elsewhere in their businesses. It also came into force on 1 April.
"Both measures are part of the government's continuing programme of tax simplification for business, which seeks to reduce the stress, hassle and risk that businesses encounter in meeting their tax obligations," said Mr Swain.
Andrew Janes - Press Sec for Paul Swain - 04 4719889/021 270 9106 or [email protected]
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