It is overwhelming to many of the small businesses to have to know the

It is overwhelming to many of the small businesses to

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“It is overwhelming to many of the small businesses to have to know the different types of taxes such as GST, ACC, PAYE, FBT and Income taxes. It is a bit of both in terms of the administration and the actual payment of taxes that is overwhelming most of these taxpayers.” (BE3) These perceptions showed that ethnic SME operators lacked certain skills, capabilities and tax knowledge to comply. Some of these perceptions were attributable to cultural values of power distance, long term orientation and masculinity traits. The high power distance cultures tend to revere tax authorities with an element of fear towards them. However the effect of power distance can be moderated if the ethnic operator possesses tax knowledge and is long term oriented. This is because the perceived benefits of
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122 having a non-adversarial role with the IRD may bring rewards, with future benefits such as less scrutiny from the IRD. The negative views of the IRD by SMEs suggest that the IRD had not fulfilled its customer oriented services as proposed by the 2001 New Zealand Taxpayer Charter (Inland Revenue, 2008). In order for SMEs to have favourable tax perceptions towards the IRD, there ought to be some improvement in the IRD services for SMEs. To summarise, this section discussed the perceptions of SMEs towards the IRD. This study found that high power distance Maori non-contact with the IRD was due to historical reasons and their perceptions of government authorities in general. On the other hand, Asians’ infrequent contact with IRD was because they had other sources of tax help resulting from their collectivistic traits. Their long term orientation also deterred them from using the inefficient IRD’s telephone services. The Europeans did not trust the IRD which resulted in almost no contact with the IRD for this sample group. Finally, the high power distance characteristic of the Pacific group caused them to revere the IRD without question. This information contributes to the existing tax literature as most existing tax research suggests that taxpayers’ infrequent contact with tax authorities was due to lack of trust in them (Feld & Frey, 2002), and prior unfair treatment taxpayers had received from tax authorities (see Chapter 2, section 2.7.). The findings in this study showed that the inefficiency of IRD services, other sources of tax help available, and the perception of the tax authority as an “authoritative” figure due to cultural and historical reasons, were other considerations for SME operators’ infrequent contact with the tax authorities. Another reason for their lack of contact with the IRD was partly due to their tax audit experiences, which are discussed in the next section. 7.4 Tax audits and SMEs Given the low tax audit probability in the OECD countries (Andreoni et al., 1998), not all SME operators in this research were tax audited. Only a quarter of the 36 ethnic operators had been tax audited: two Asians (A2 and A5), five Europeans (E4, EA5, E7, E8 and E9), one Maori (M6) and one Pacific (P1) operator. Overall, these operators found tax auditors varied from being helpful to being judgemental and ruthless. For the Asians, the audits confirmed their good record keeping system, but not so audits for the
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  • Fall '16
  • tax compliance, SME Operators

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