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Inland Revenue

Tax Policy

PUBLISHED 19 July 2005

Tax compliance cost research

The government has welcomed the findings of research showing tax compliance costs have decreased for small and medium-sized businesses over the last 13 years. The research compares the compliance costs reported in a recent Inland Revenue survey of businesses with those of the 1992 Sandford and Hasseldine survey of business compliance costs. For more information see the government's media statement and the report (DOC 3.06MB, PDF 1.6MB) on the findings of the Inland Revenue survey.

Hon David Cunliffe
Minister of Communications
Minister for Information Technology
Associate Minister of Finance, Revenue and State-Owned Enterprises


Red tape radically reduced

Associate Revenue Minister, David Cunliffe, has welcomed research showing a large drop in tax compliance costs.

Tax compliance costs have fallen by a massive 40 percent for small firms since 1992, dropping from $5000 to an average of just $3000 per year in 2004.

Medium-sized firms have saved over 50 percent on their tax compliance, spending an average of $9000 per year in 1992, falling to $4000 in 2004.

"There is a lot of rhetoric and myth when it comes to compliance costs and frankly it's baloney. This research shows clearly that the cost of complying with tax obligations has dropped radically," said Mr Cunliffe.

About 2300 businesses responded to an Inland Revenue survey conducted late last year on the costs of tax compliance. The survey sets a benchmark so that the effects of further moves to cut compliance costs can be measured. The reductions were found when survey findings were compared with earlier, similar work.

"The government sees this as an area for continuous improvement, we are working hard to further reduce costs. We have a package of measures to reduce compliance costs, more is to come," said David Cunliffe.

Further changes coming include:

  • Aligning provisional tax payments with GST due dates. This will reduce the number of payment dates that businesses have to meet.
  • Small businesses will be able to pay provisional tax in six smaller payments a year, rather than the current three large payments.
  • Businesses will be able to base their provisional tax payments on a percentage of their GST turnover. Firms with seasonal income will benefit because their tax payments will be more aligned with their income flow.
  • The government will subsidise the use of payroll agencies for small businesses. This will help employers deduct tax, child support and student loan payments from staff wages.
  • Changes to fringe benefit tax means that work tools like cell phones and laptops will be exempt from tax if they cost less than $5000 and are used primarily for business.

"Making tax easier for small and medium-sized businesses is a high priority on the government’s tax policy agenda" said Mr Cunliffe.

The table below compares 1992 compliance costs with 2004, while the full report on the survey findings is available at

Contact Julian Kersey 04 471 9116, 021 811 999 or [email protected]

Compliance Cost Comparison: Sandford and Hasseldine (1992) vs IRD Compliance Costs (1994) NB: where change column is blank a direct comparison could not be made

size of business turnover Sandford and Hasseldine 1992 Sandford and Hasseldine (indexed to 2004) Inland Revenue (2004) change
less than $20k     $2,311  
less than $30k $3,345 $4,114    
between $20k and $40k     $2,195  
between $30k and $100k $4,203 $5,170    
between $40k and $100k     $3,048 -41%
between $100k and $250k $7,365 $9,059 $4,207 -54%
between $250k and $500k $8,997 $11,066 $5,655 -49%
between $500k and $1m $11,321 $13,925    
between $500k and $1.3m     $6,936 -50%
greater than $1.3m     $7,296  
between $1m and $2m $17,875 $21,986    
between $2m and $10m $23,305 $28,665