'Enormous' bill for GST software changes
- 14 February, 2010 22:00
Big businesses are confident altering their systems to comply with GST changes will be a simple job, but some firms are in for a nasty surprise, experts say.
Prime Minister John Key signalled last week that GST would likely rise to 15 percent as part of a reform of the tax system.
Any change to GST would be confirmed in May's budget and is likely to take effect from October 1.
Computer Society president Paul Matthews says updating systems will be a costly exercise, as many software programs have not been designed to allow for changes to GST.
Each situation is different, but the costs for businesses could be anywhere between $100 to hire a software developer for an hour and the cost of purchasing a new accounting system.
Expecting all businesses to update their systems by October is a "tall order", he says. "Announcing it in May and having it apply from April the following year would be a lot more plausible. But if you've got five months between announcing it to full implementation throughout the country, then you would have to look at subsidising the cost of doing these changes."
Any system that creates an invoice or manages accounting functions is going to need to be modified, he says. Most small businesses would be using systems designed for them and would have the GST rate hard-coded into the software.
"That's very difficult to change. You'd have to go back to the developer."
Firms using software developed for New Zealand and Australia, which have different GST rates, cannot just enter in a new rate, as this will upset invoicing data generated before the change.
Only a small number of systems would allow the rates to be changed without affecting previous invoicing.
He estimates as many as one-fifth of businesses will have to shell out for new systems.
Businesses with "off-the-shelf" and online software packages, such as MYOB and Xero, will escape any upgrade costs, as these will be borne by the suppliers, he says.
Deloitte tax partner Allan Bullot says the magnitude of the systems changes will depend on what software businesses are using and to what extent it has been customised.
Large enterprise systems may simply require one data field to be changed. "But any subsidiary systems for budgeting or spreadsheets built up over the years may have 12.5 per cent hard-coded into them in many different places, and I see that as being a major issue. People could potentially get caught out."
He says that the cost of tweaking systems could be enormous. "It can be pretty significant if you're having to bring in coders from overseas, but then again, it might be that the administrator of the system can go in and just change 12.5 to 15."
Businesses' systems will need to be relatively flexible to cope over the transition period, when firms will be dealing with invoices with different GST rates, he says.
More than 600,000 businesses are registered for GST.
"If you're sending out invoices with GST at 12.5 percent after October 1, you're going to look dumb and it will slow down your payment collection. People are not going to pay until they have a proper tax invoice. That's how a systems issue becomes a business issue."
The Warehouse chief information officer Owen McCall says any GST rise will require little systems work. "It's just going to be some parameter changes."
LV Martin chief executive Trevor Douthett says it will simply need to change a data field in its systems, but things could get tricky for businesses if products such as food have different GST rates, as suggested by the Maori Party.
SAP New Zealand professional services director Glenn Bittle says SAP systems can be easily configured if GST changes, but customers will need to ensure they have not hard-coded rates into reports and system interfaces.