ISSUES WITH BALLS
BEST GUESSING THE FUTURE IS POINTLESS WHEN YOU’RE IN CHARGE OF A BUSINESS, WRITES ASHLEY BALLS – BUT BEING FULLY INFORMED IS NOT.
THERE’S NO point in looking back at 2018, other than to see what could or should be done differently next time. However, we can look to the future to see what it holds for business.
Of note this past year has been New Zealand’s change of government, though by the look of the Tax Working Group and The Business Committee members there will be little change, as the power of the status quo is being perpetuated.
Of more interest, or should I say amusement, have been the reports of self-destruction of one political party. Whilst it hasn’t made the news here in Spain it was media fodder for the best part of a week in the UK. The Brits were somewhat incredulous to see that ‘little old New Zealand’ has corruption too, as well as politicians who insist on behaving stupidly.
On taxation it was noteworthy that a great many New Zealanders managed to get themselves into a frenzy over the prospect of having a capital gains tax when every other OECD country has one. Taxation is always a difficult issue as when holding a conversation with almost anyone, particularly business owners, they generally feel they are overtaxed. The only way to look at taxation is to make comparisons with other countries and even then, people claim special circumstances make their country ‘different’. 1
Let’s start with some hard facts. According to the OECD, taxation in New Zealand can be measured as 34.32 percent of GDP – a figure that most Europeans can only dream of. In France it is 47.4 percent, Denmark 47.2 percent and Belgium 46 percent.
Surely the debate on taxation should not be about what individuals consider fair and reasonable but what sort of society we want. If people want a high quality, free at the point of delivery, health service with minimal queues, no homelessness, quality infrastructure, public safety, good education, and more, then what are they are prepared to pay for it?
Given the EU has an average tax rate (tax to GDP) of 40 percent New Zealand can expect poorer government services by a significant factor.
Some will argue that the state is not an efficient provider of services but this is not correct, as whenever the private sector provides public services it always costs more and is frequently mired in corruption. From my reading of New Zealand business affairs no one has ever asked what public services are most important to you and what you would be prepared to pay for them. The debate in New Zealand, as in many countries, is always about lowering taxes, not about the quality/quantity of services; an argument that perpetuates poor public services.
The core problems in the New Zealand economy are very similar to those in the UK and centre on a number of issues including prolonged low productivity, underinvestment in infrastructure, an addiction to debt and an overvalued currency. Perversely, making interest rates, and hence currency value, the prerogative of the Reserve Bank hasn’t stopped this in either country. Economists generally agree that optimising all these issues is the key to national prosperity yet few governments anywhere are prepared to take the necessary actions to remedy the problems, as none can be fixed in the terms of one, or even two, parliaments.
What does 2019 hold for the business community? From my reading of the tea leaves significant change is not on the agenda. Changes will be largely cosmetic and the usual complaints will be heard about rising employment costs – for parental leave and more. But again, non-wage employment costs are low in New Zealand compared with elsewhere. (See below for comparable nonwage costs3). Several countries have non-wage employer paid costs of over €10 per hour. (At the day of writing this €1 bought NZ$1.75).
Whatever the perspective of the reader the grass will always seem greener on the other side of the fence – but the business and general economic outlook is far from bad. The keys to success are virtually all managementrelated and based on the individual business taking time to know and understand where their business stands in terms of product/ service lifecycle and making sure the key decisions on investment, productivity, marketing, HR and maximising opportunity are made not with intuition but with knowledge. Thankfully in this age of instant information there are no longer excuses for not knowing what is going on in our own business sector. We might chide our children for the time they spend on the web but many of us in business spend too little. Access to the web has moved from a luxury to an essential service in a few short years and is cheap.
Have a great Christmas break and a prosperous and happy New Year!