Photo: RNZ
The government may be considering changes to the corporate tax rate but significant numbers of companies aren't paying any tax at all, data released in an Official Information Act request shows.
Consultant John Cantin requested information from Inland Revenue showing the number of corporate taxpayers in various industries.
While it shows the biggest corporate taxpayers are in financial and insurance services - and potentially stand to benefit the most from a corporate tax rate cut - it also shows the number of corporate taxpayers filing a tax return each year, and the number reporting positive taxable income within that.
In some cases, there appeared to be large numbers not reporting a profit.
For example, in the arts and recreation service sector, there were 3480 filing an IRD in the 2023/24 tax year but only 1720 had positive taxable income - meaning they had a profit on which tax could be paid.
In education and training, there were 3650 that filed a return and only 1920 had taxable income.
In construction, 38,370 filed a return but only 25,560 had positive taxable income.
In retail, 18,810 filed a return but 10,120 had taxable income.
Progress data for the most recent year showed a similar trend.
Robyn Walker, a tax partner at Deloitte, said it was interesting how many companies were either making a loss or had zero taxable income.
She said some of it could be due to entities being holding companies or reporting zero income for other reasons, but the number still seemed high.
"In retail, 46 percent of the retail trade were in the not taxable income category, which is huge. The accommodation and food services sector worked out to be 49 percent not paying any tax...education was 47 percent."
She said it was maybe not surprising in some sectors and could be an indicator of the health of those industries. "Is there something more to see here, or is there more that needs to happen to support them based on these tax calculations?"
She said it was suggested that some could be operations such as residential landlords who might be recording losses, but only a third of their category were not reporting profits.
Some would have losses carried forward from the Covid period, she said, but many would have gone out of business by now if losses had persisted from that time.
Inland Revenue said there could be a number of reasons for a business having no taxable income including filing a nil return, not trading this year, being part of a group to which it returned profits, making losses or having brought forward losses.
Simplicity chief economist Shamubeel Eaqub said it could be a reflection of the point in the economic cycle. "Profits have been hit hard by the recession."
But Infometrics forecaster Gareth Kiernan said there could be a lot of legal or accounting reasons people would set up a company.
"On that basis, although I don't have any frame of reference, I'm not surprised that there's a sizeable number of companies in existence that are not making any money for various reasons, and are therefore not paying tax."
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