Small-business owners get a raw deal: lawyer
A capital gains tax on businesses is unfair and sends the wrong message to entrepreneurial New Zealanders, solicitor John Shingleton says.
He represents several smallbusiness owners through his law firm, First Law, and was commenting on the options looked at by the Tax Working Group.
‘‘We need to understand why some people have achieved what they have. Business owners generally make a lot of sacrifices,’’ he said.
‘‘They don’t have paid holidays or statutory holidays or sick leave, and they often pay themselves low wages when you consider the hours they work.’’
Shingleton said the main reward most owners got was when they sold the business after spending years building it up.
‘‘If you consider a dairy owner, you’ll find they are working from seven o’clock in the morning until seven at night. If you broke it down they’re probably getting far less than the minimum wage.’’
Nor did business owners receive contributions for KiwiSaver, he said. ‘‘People in these situations are not the rich p .... s some people like to claim they are.
‘‘What about the electrician who spends several years starting with one vehicle and building up to 10, plus building goodwill?
‘‘His wife probably helps with the books, unpaid. If he died and the business was worth about
$200,000, his widow would lose
$60,000 if capital gains applied. It doesn’t seem fair.’’
It also meant the value of the business would be discounted by a new buyer because they would be looking at the future income.
Shingleton said he understood the reform was not about raising the total tax take but making it fairer. ‘‘I agree with the prime minister that we need to look at different areas of the economy.’’
Shingleton said land bankers were an obvious example. But people who intentionally sold for a profit after owning a home for a brief period were caught by existing tax laws anyway, he said.
‘‘One area we should put more effort into reviewing is the digital economy. There are an increasing number of businesses offering online services and they are often attracted to set themselves up in tax-friendly countries,’’ he said.
‘‘We need to look more at some of those businesses and ensure they are paying their fair share.’’