SMEs get ready for return to usual tax deals

ALAN WOOD
Last updated 05:00 01/02/2013

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Small to medium enterprises have been hard hit by the Canterbury earthquakes, with more than 20 per cent still in survival mode.

That's the view of Inland Revenue, which has surveyed 1600 businesses in Canterbury to find out at what stage of earthquake recovery they are, and why tax payments due have fallen behind, significantly in some cases.

The survey findings show that more Canterbury SMEs became tax debtors during the time of the earthquakes.

They grew from 10.6 per cent of the total national tax debt in 2010 to 12.3 per cent in 2011 - a 16 per cent increase, which equated to approximately 1800 new debtors, the Inland Revenue Department said.

The percentage of tax payments made on or before due dates by SMEs had been dramatically affected by the earthquakes.

Commissioner of Inland Revenue Naomi Ferguson said that from March, the department would return to treating Canterbury in a manner more on a par with the rest of New Zealand. "We're now just coming to the point where we're using our normal powers, that still allows us to talk with businesses about things like instalment arrangements . . . to get back on an even keel."

Canterbury Employers' Chamber of Commerce chief executive Peter Townsend said that Inland Revenue had provided significant support to businesses during the quakes period, but now they wanted to get people back into the habit of paying taxes, which was important.

"The IRD's behaviour was one of the reasons why business survival in the post-quake environment was so strong, because they were flexible, they were accommodating," he said.

Ferguson said there were significant concessions in the post-quake period to those with cashflow difficulties.

"In the days and months immediately after February 11 we did a lot of things to bring in special provisions for Christchurch, to work with the chamber of commerce, with Cera to actually help people through what had to be done," Ferguson said.

"[For example] lots of businesses couldn't get back into their premises to get their books - how did they file a tax return?"

The special provisions would lapse in March. However, the department would still give leeway to some tax-paying businesses.

Research showed that among SMEs still operating in Christchurch there were several stages of recovery - and 21 per cent were just focused on surviving.

A further 23 per cent were recovering or recovered (17 per cent). A total of 33 per cent were not adversely affected by the earthquakes.

About 6 per cent were "currently not trading" and were no longer in a position to pay tax.

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The reason for the survey was to take stock of a city that was "constantly evolving. We just want to ensure we're working with businesses across Christchurch and Canterbury to help with that evolution to make sure our response is right for where we are," Ferguson said. IRD would use its powers of discretion to decide who needed help.

Ferguson said the survey, which also took in 100 tax agents, would be repeated once a year over a five-year period.

IRD had about 650 staff in Christchurch, compared to more than 2000 in Wellington and 1000 in Auckland.

Most staff were split between a base in Russley Rd and one in Moorhouse Ave, having left the main Cashel St property due to the quakes. The department was also in discussions with the owner of an existing property in the central business district, hoping to secure space for a further 100-200 staff.

"We have continued to recruit in Christchurch and have had some great people join the organisation," Ferguson said.

- The Press

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