IS­SUES WITH BALLS

NZ Business - - CONTENTS - ASHLEY BALLS IS SE­NIOR PART­NER OF LEGALBESTPRACTICE. EMAIL [email protected] GMAIL.COM

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.

COS­METIC CHANGE

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!

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