Latest / Best of Business / Katherine Rich: BusinessNZ CEO on the impact NZ First's proposed tax cut for small and medium businesses could have

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Katherine Rich: BusinessNZ CEO on the impact NZ First's proposed tax cut for small and medium businesses could have · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from Newstalk ZB. Follow this
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• 0:16
  Speaker 2: As we've been discussing, New Zealand First is promising to
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  Speaker 2: slash the company tax rate for small businesses from 28%
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  Speaker 2: to 20%. The policy would apply to firms with turnover
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  Speaker 2: under $ 30 million and cost about $ 1 billion a year.
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  Speaker 2: Winston Peters says it would boost investment, jobs and economic growth.
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  Speaker 2: Business NZ Chief Executive Catherine Rich joins me now. Very
• 0:39
  Speaker 2: good morning to you.
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  Speaker 3: Good morning, Kerry.
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  Speaker 2: Would it though? Would it boost investment, jobs and economic growth?
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  Speaker 3: Potentially, yes. Yes, it could. Business New Zealand for a
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  Speaker 3: long time has advocated for lowering the corporate tax rate
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  Speaker 3: because we're not competitive with the rest of the world. So...
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  Speaker 3: the New Zealand First idea is certainly worth considering. It's bold,
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  Speaker 3: it's new. Obviously, it needs to be researched for implementation,
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  Speaker 3: but why not discuss it?
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  Speaker 2: Absolutely. Why not discuss it? Although, and this is only anecdotal,
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  Speaker 2: I'm only speaking anecdotally here. So many small to medium
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  Speaker 2: business owners that I've spoken to say they have reached
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  Speaker 2: a level of turnover they're comfortable with. They don't want
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  Speaker 2: to grow anymore. They could. They could easily take on
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  Speaker 2: more staff. They could hustle for more contracts. They could
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  Speaker 2: put more capital into their business. They don't want to.
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  Speaker 2: They want to coach the kids sport, have a few holidays,
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  Speaker 2: live a life.
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  Speaker 3: And that makes good sense, Kerry, because people want a
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  Speaker 3: lot more than just running their businesses. They want to
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  Speaker 3: balance things. But I'm sure they'd also want to keep
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  Speaker 3: more of their own profit so that they can make
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  Speaker 3: a decision about whether they invest in their business or
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  Speaker 3: actually take more out and enjoy it. Because When I
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  Speaker 3: look at the New Zealand First idea, 99% of New
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  Speaker 3: Zealand businesses earn less than $ 30 million, so their policy
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  Speaker 3: would potentially cover a lot of New Zealand businesses. Certainly,
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  Speaker 3: it would bring us well below the OECD tax average,
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  Speaker 3: which is about 24%.
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  Speaker 2: 24.5%, yeah. Yeah, it could make a tangible difference. Clearly....
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  Speaker 3: Needs to be worked through, get the Ministry of Business
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  Speaker 3: and IRD and all the tax experts to take a look.
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  Speaker 3: But it could transform New Zealand business. I think it's
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  Speaker 3: really worth considering.
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  Speaker 2: There would be businesses that would grow, I can see that,
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  Speaker 2: but then a lot of them might just take the money,
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  Speaker 2: then they'd be taxed at the higher tax rate anyway,
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  Speaker 2: so the government gets it anyway.
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  Speaker 3: Yes, they could, but equally a firm could say, I'm
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  Speaker 3: going to It's going to improve my cash flow. So
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  Speaker 3: I am going to employ another fellow New Zealander or
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  Speaker 3: I am going to invest in that new piece of machinery.
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  Speaker 3: It just gives business people a few more choices and
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  Speaker 3: the ability to enjoy, have more of a say about
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  Speaker 3: how they spend that profit. Now, a lot of small
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  Speaker 3: business people, they might make ends meet. They might derive
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  Speaker 3: a salary. But being in a business is tough. It's challenging.
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  Speaker 3: This is something that I think could make a difference
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  Speaker 3: to a lot of small businesses. So I think we've
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  Speaker 3: welcomed a lower tax rate across the board. We'd like
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  Speaker 3: it brought down for everybody. But certainly the New Zealand
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  Speaker 3: First policy is worth debating during the election. I'd be
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  Speaker 3: really interested to know what your listeners say.
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  Speaker 2: Yeah, absolutely. So far, they seem to be relatively for it.
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  Speaker 2: Would you go as far as the Irish who aggressively
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  Speaker 2: hunted international businesses to come and settle in Ireland after
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  Speaker 2: the crash, after the Celtic tiger was skinned and laid
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  Speaker 2: on the floor? 12.5% they had.
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  Speaker 3: I've often thought New Zealand could be the Ireland of
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  Speaker 3: the South Pacific. We don't have the proximity of Europe
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  Speaker 3: and that massive market which can be so helpful to business.
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  Speaker 3: But often when you hear politicians talk about how well
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  Speaker 3: Ireland and Singapore and a few other key countries have done,
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  Speaker 3: tax is a big part of that. Tax is a
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  Speaker 3: big part of their story. And one of the things
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  Speaker 3: that could possibly happen is you could get some small
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  Speaker 3: businesses owners, and actually not that small if you're under
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  Speaker 3: 30 million, saying, well, I'm going to come to New
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  Speaker 3: Zealand from Australia. I remember I ran the Food and
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  Speaker 3: Grocery Council, when I ran the Food and Grocery Council
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  Speaker 3: a number of years ago, the reverse had happened. One
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  Speaker 3: of our members had said, I'm thinking about where I'm
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  Speaker 3: going to open my new office and my new factory.
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  Speaker 3: And they thought about going to Australia because of the 25%
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  Speaker 3: small business tax rate. I'm not sure exactly what they did,
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  Speaker 3: but it gets people thinking.
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  Speaker 2: It does get people thinking. I just wonder whether we...
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  Speaker 2: And that's something that numerous economists and business leaders have
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  Speaker 2: pointed out, is that we were kind of like the
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  Speaker 2: millennials before the millennials, that we wanted a work-life balance
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  Speaker 2: before it was a thing.
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  Speaker 3: We did. We want different things now than our parents
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  Speaker 3: and grandparents. But equally, we want to earn enough to
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  Speaker 3: be able to pay our bills more have a holiday,
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  Speaker 3: employ people, and not stay up with sleepless nights thinking,
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  Speaker 3: how am I going to pay IRD tomorrow? And I
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  Speaker 3: think some small business policies can make a big difference
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  Speaker 3: to make it easier to do business. And what I
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  Speaker 3: like about the New Zealand First policy is at least
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  Speaker 3: it's putting it on the table for discussion to say,
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  Speaker 3: we can bring it down. Clearly, it's complex. IRD and
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  Speaker 3: tax specialists will have a say, but I haven't heard
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  Speaker 3: any arguments yet as to why it's so complex.
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  Speaker 2: No, that's true. I think every time I speak to
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  Speaker 2: successful business owners, I'm just in awe of the time
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  Speaker 2: they've put in, the risks they've taken, the stress they've
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  Speaker 2: put themselves under. One guy, the guy I spoke to
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  Speaker 2: most recently, said that he was sitting up at three
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  Speaker 2: or four in the morning smoking. His wife had had
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  Speaker 2: the babies, so he didn't want to disturb her. He
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  Speaker 2: had no money to pay everybody he owed money to.
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  Speaker 2: He needed to keep his good name. And now he's
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  Speaker 2: sitting pretty. And people say, oh, well, didn't you do
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  Speaker 2: well in his life? She was touch and go for
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  Speaker 2: a while.
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  Speaker 3: Yeah, that's the stress that only a small business owner knows.
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  Speaker 3: And you think about it, we've got so many stressed
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  Speaker 3: businesses right now. If you're in hospo, retail, cafes, restaurants,
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  Speaker 3: there are so many businesses which have just done it tough,
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  Speaker 3: particularly over the last six years. So what I like
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  Speaker 3: about this idea for discussion is that it's saying if
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  Speaker 3: you do make a profit and you've got something left over,
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  Speaker 3: this will allow that small business owner to make a
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  Speaker 3: choice as to whether they want to invest it, hire
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  Speaker 3: someone else, or in fact just have a little bit
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  Speaker 3: more in their own bank account because a lot of
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  Speaker 3: small business people are part of the working poor. Many
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  Speaker 3: small business people I've spoken to, in some cases particularly,
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  Speaker 3: not just in the start-up phase, but even when they're cranking,
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  Speaker 3: can still be earning less than many of.
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  Speaker 1: Their own staff.
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  Speaker 3: It's tough.
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  Speaker 2: It is tough. Thank you, Catherine. Lovely to talk with you.
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  Speaker 2: Catherine Rich, Business NZ Chief Executive. Love to get your
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  Speaker 2: views on this, as indeed would Catherine. Would the tax
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  Speaker 2: rate make a difference? A texter says the tax rates
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  Speaker 2: are irrelevant right now for most small businesses. Many of
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  Speaker 2: us are losing money and not paying tax anyway, says one.
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  Speaker 2: And remember we had, what was his name? He writes
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  Speaker 2: guest editorials for stuff, I think. He was saying that
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  Speaker 2: a lot of small business owners are addicted to that adrenaline,
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  Speaker 2: like keeping all those balls in the air and thinking,
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  Speaker 2: holy heck, am I going to make it this week,
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  Speaker 2: next week, the week after? And it becomes a kind
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  Speaker 2: of cycle, perhaps not a healthy one, but one where
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  Speaker 2: you are skating close to the edge and that becomes
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  Speaker 2: quite addictive. That made it. Don't know how I did it,
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  Speaker 2: but I did.
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