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Making tax simpler - Better administration of PAYE and GST Summary of feedback

Chapter 7 - GST - Modernising how information is provided

Using integrated software to prvode GST information
Direct crediting of GST refunds
Electronic submission of GST information for some registered persons

Using integrated software to provide GST information

The discussion document proposed that taxpayers would be able to provide GST information to Inland Revenue directly from their integrated accounting software used as part of their business processes. This would replace the manual filing of GST returns.

Summary of comments

The majority of written submitters supported this, however some took the view that because of the large amount of manual adjustments that are required for GST returns, integrated software may not be all that useful. The lack of time for error correction was also raised as a concern.

Small business registered for GST generally opposed using integrated software for the following reasons:

  • Current system works fine/have no need for software;
  • Cost;
  • Inability to correct errors.

A significant proportion of SMEs were still in favour of it provided it was voluntary.

Also concerns were expressed about the ability to correct errors or make adjustments.

Comments were made that these proposals rely on the correct information being inputted into the accounting software in the first place. One submitter recommended that the proposal needs to be further explored with an emphasis on how incorrect information provided by the GST registered person is handled.

“Given the bespoke nature of most large employer’s accounting systems, it would be difficult to produce a GST return directly from the firm’s accounting system given the number of manual adjustments required. In addition, some employers do not use their accounting software to calculate their GST obligations.”

“As a chartered accountant I see the mistakes people make using accounting software. Software should prevent people from filing until certain checks have been made such as:

1. All transactions from the bank feeds have been allocated, coded, processed, leaving none un-coded for the period in review.

2. The Bank reconciliation has been completed and all outstanding items on the bank rec are brought to the clients attention before the return is processed.

3. The accounting system ensures that the debtors ledger reconciles with the balance in the general ledger.

4. The accounting system ensures that the creditors ledger reconciles with the balance in the general ledger.”

“We support the proposal to allow the submission of GST returns online via accounting software as an additional option…in order for the proposal to work efficiently, Officials should develop a process to allow subsequent error correction for GST returns.”

“…although the future state looks to simplify the lines of required communication and data transfer, success is still predicated on the notion of the right information being inputted to provide the correct result. Therefore, the future state could lessen, but not eliminate, the age-old technological problem of “garbage-in-garbage-out.”

“I would not be happy if the accounting software was directly linked - small adjustments have to be made, etc- I rely on our accountant and my own checks and not "blindly" on accounting software. Definitively a "no" from us - not good for small businesses!”

“I do not think this should be made compulsory as a lot of people (such as myself) are registered for GST (although the present size of business is smaller than the minimum threshold for GST) and do not have accounting software as the business cannot afford it. Electronic submission of GST returns is fine but should be optional, not compulsory.”

“If you are going to do this, it must be optional. A lot of small businesses and independent contractors in NZ run their business without accounting software. To impose the cost of having to use accounting software on all organisations in NZ could pose a substantial net cost to the economy; and provide a barrier for new start-ups. Other options: Let small businesses file once a year - that'd halve my compliance costs. For me the current categories of costs required by IRD are meaningless and not how I prepare my accounts for any other purpose. Having to recode for tax/GST purposes adds compliance costs. Tax returns may be made on cash or accrual basis - that flexibility/choice should definitely be retained. As a CA I also have some concerns about the practicality of feeding the information for medium-larger businesses given the need for month/year end adjustments and adjustments to GL coding made for tax reasons.”

“I would welcome the ability to have my accounting software send information directly to IR, with suitable controls. This would reduce my effort. I am only a one-man band, but anything which reduces effort and cuts down chance of error would be good. Support others comments that this should only be optional, but not those that say 'make no changes' - don’t hold back those who are willing and able to improve their efficiency.”

Direct crediting of GST refunds

The discussion document proposed GST refunds should only be made by direct credit into a customer’s nominated bank account, unless it would cause undue hardship to a customer or is not practicable.

Summary of comments

The majority of submitters (written & online) that responded on this issue were in support. Some submitters indicated that it should be the default option, but not compulsory.

“Making it compulsory won’t be an improvement and won’t benefit anyone – will place hardship on those that currently choose to receive a cheque for whatever reason.”

“Given the prevalence of electronic payment methods, it is reasonable that GST refunds should be paid by Inland Revenue electronically (either to the taxpayer’s account or its authorised agent). The benefits of such payments are identified in the discussion document. However, as acknowledged in the document, it is important Inland Revenue continues to ensure that “an exemption to this rule would be available if the taxpayer expresses hardship or direct crediting is not practical”. It would be helpful for Inland Revenue to publish guidelines on when the exemption may apply and how taxpayers can utilise it.”

“We do not support the proposal that GST refunds should only be made by direct credit into a taxpayer’s nominated bank account. We consider the proposal is open to abuse and would require a greater degree of accurate record-keeping than is presently happening. If the measure was to be made compulsory we believe additional security checks would be necessary.”

Electronic submission of GST information for some registered persons

The discussion document asked whether GST-registered persons over a certain threshold should be required to submit their GST information to Inland Revenue in an electronic format.

Summary of comments

The majority of online submitters were of the view that electronic filing of GST information should be voluntary and there is no compulsion to use accountancy software to submit digitally.

The response among the written submitters was mixed:

“We do not support a compulsory electronic filing threshold for GST. We expect over time, with the development of technology, that the number of electronic filing will increase naturally. Compulsion is therefore not required.”

“The majority of [our] members support this proposal. We note that if submitting the GST return electronically, there should also be the ability for the taxpayer to attach further information to assist with the processing of the return and to pre-empt the IRD information requests for information (rather than having to post this information separately).”

“While [we are] not averse to the idea of having to file GST information electronically over a certain threshold, it is difficult to make a call as to what that threshold should be given need for further information. For instance, since two-thirds of all GST-registered persons already file in this way, a threshold of say $50,000 or $75,000 might in reality make little difference to the numbers filing electronically, as at that level, the vast majority do so anyway.”

“Yes.” “Turnover of 300k per year.”