The Costs of Compliance and Associated Benefits for Small and Medium Enterprises in New Zealand: Some Recent Findings

Abstract

This study reports the results of an investigation of the tax compliance cost burden for New Zealand small and medium enterprises (SMEs). It is one part of a larger international project (across five countries), which is evaluating and comparing tax compliance costs affecting SMEs. This study differentiates tax compliance activities from core accounting activities in order to identify the managerial benefits of tax compliance. It also investigates whether various New Zealand SME tax concessions are perceived to be achieving their objective of relieving the tax compliance burden for SMEs.

To determine New Zealand SMEs’ tax compliance cost burden, an online survey was conducted during the period of late 2012 to early 2013. The New Zealand results reinforce prior studies that tax compliance costs, as well as core accounting costs, are regressive with respect to business size, with the compliance burden being proportionately greater for smaller businesses. It was also found that a majority of the respondents perceived significant managerial benefits in tax compliance for their business. The findings reveal that the respondents seemed to be unaware of the eligibility rules for the various small business tax concessions. Overall, the survey results concerning the SME tax concessions cast some doubt as to whether they fulfil their objective of simplification of the tax system for SMEs.