No room for complacency but NZ doing well at making taxpaying easy – PwC

New Zealand clocks in at 22nd out of 189 economies in the ease of paying taxes, according to a new PwC Paying Taxes 2015.

The country rose one place from last year’s study (from 23rd place), but still ranks behind Singapore (5th) and the 16th-ranked UK. Yet New Zealand is ahead of most of its major trading partners including Australia (39th) and the US (47th).

PwC’s tax and private business leader Geof Nightingale says New Zealand’s placing shows there is a coherent tax policy setting in the country, with no immediate or radical shifts in policy required.

“However, there is little risk of New Zealand becoming complacent. Inland Revenue’s briefing to its returning minister, Todd McClay, last week made it clear IR’s Business Transformation Project is a key priority.

“As we look to our major trading partners, the easier and less costly for a company to pay tax here, the more this will encourage and help to attract both domestic and international investment to our economy,” says Mr Nightingale.

New Zealand’s largest trading partner, China, ranked 120th and is one of the economies in the Asia Pacific that has made the most progress in increasing the ease of paying taxes in recent years.

China is continuing to implement measures to improve taxpayer services, enabled by advances in technology, and these changes are expected to ease the compliance burden further in the future.

For instance, in the Shanghai Pilot Free Trade Zone, newly established enterprises will have their own tax registration number allocated automatically.

A cutting-edge computer system shares information between tax authorities and the government. If successful, the system could be implemented nationwide, which will reduce further the time spent on tax registration.

In comparison, the US’ tax system continues to drown in complexity. The US ranked 47th in overall ease of paying taxes or just two ahead of the Russian Federation, which isn’t exactly known for its smooth government.

Many in the US government and other stakeholders are calling for tax reform. However, while the Inland Revenue Service seeks creative ways to reduce compliance burdens, says the report, the underlying complexity of the US tax rules keeps growing.

The study was conducted by PwC and the World Bank Group as unique research measuring the ease of paying taxes by assessing the time required for companies to prepare, file and pay its taxes, the number of taxes that it has to pay, the method of that payment and the total tax liability as a percentage of its commercial profits.

nsmith@nbr.co.nz