Friendly policy hedges rainy day risk

When our businesses thrive, the communities around them thrive as well.For Web Edition-Budget Special- Small businesses must top- David Shearer

That is why I make it a priority to visit dozens of local workplaces every year, listening to business owners about how we can make New Zealand a better place to trade.

In Sandringham, which is a part of my constituency, there are many businesses in which owners and their families work long hours to be successful.

The most common complaint I hear from business owners is that dealing with the Inland Revenue Department (IRD) is an enormous hassle.

When a company’s cash flow does not match up with the IRD tax calendar, these hassles can really dominate a business.

All my Labour colleagues report the same thing – businesspeople see our Provisional Tax System as old-fashioned and frustrating.

Beachside motels

Take beachside motels for example. Most of them get almost all their revenue during the summer holidays. But IRD demands Provisional Tax from them in the winter too, when there is no revenue coming in to cover it. This does not make sense.\

New Proposal

Last month, Labour announced a new proposal to make it easier for small businesses to pay tax. We want to replace IRD’s rigid timetable with a new flexibility for business owners. We want to let Kiwi businesses pay their tax when they earn their income.

That way, a motel owner can choose to pay more in the summer but less in the winter, while a business that earns the same amount every month can choose to pay more consistently through the year. Businesses in different situations can choose to pay tax at different times, decided by them. A simple idea, really. And long overdue.

Like PAYE

It is like the Pay-As-You-Earn arrangement most of us have through our jobs.

I am really pleased to offer the same advantage to business owners as well as to people earning wages and salaries. The best part is that the person who gets to decide when to pay the tax is not IRD, but the business owner. They can use their new flexibility to help them get ahead, while still paying their tax.

Additionally if a business owner is happy with the current provisional tax model, they can stay with that. It is their choice.

Why not give that power to the businessperson, rather than the government? It gives business owners freedom, and they know their industry and its cash flow better than IRD.

Expected downturn

The coming economic downturn – with dairy prices falling and our regions struggling will make it harder for small businesses. Labour is determined to find ways to make some things easier, to help our firms cope, and help them get ahead.

There is more to come for small businesses, and this Flexible Tax for Business idea is just the beginning.

If we want everyone in our community to do well, they need good jobs. When we make life easier for businesses, we help create more of those jobs. And that’s good for everyone.

David Shearer is Member of Parliament elected from Mt Albert Constituency in Auckland and is Labour Party’s Spokesperson for Foreign Affairs and Consumer Affairs.

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