Daughters step into breach for family firms
Inland Revenue has released its interpretation statement outlining its views on what distinguishes legitimate tax planning from tax avoidance.
The statement has been almost nine years in the making.
It last published its guidelines on tax avoidance in 1990.
Back then the emphasis was on meeting the precise letter of the law to be legitimate.
The latest statement expands the boundaries of tax avoidance by requiring an examination of parliament’s intention when the law was introduced.
If a transaction falls outside this intention, it will constitute tax avoidance and the commissioner is empowered to undo any tax benefit obtained.
There is limited guidance on how parliament’s intention is to be ascertained. Inland Revenue has revealed only that parliament’s purpose is determined in light of the commercial and economic reality of each case.
Inland Revenue was initially reluctant to publish examples of what constitutes tax avoidance as it claimed it was not possible to give such certainty and nor was it desirable to do so.
After receiving submissions it has included three examples in the 135 page document. However, these examples do not provide much insight as they deal with facts at the extremes which have clear conclusions. It would have been better to give examples at or around the boundaries.
While clarification on the boundaries is always welcome, there is a lack of direction in the statement in relation to complex tax issues.
Achieving certainty in complex tax matters is rare and the latest statement leaves taxpayers and their advisers with the onerous task of ascertaining what parliament intended to determine whether the transaction will be caught by the ‘catchall’ tax avoidance provision.
One way taxpayers can gain certainty is to obtain a binding ruling from Inland Revenue.
Taxpayers can also ask for an indicative view which, although not binding, will give a steer as to how Inland Revenue may treat a transaction.
Greg Harris is a specialist tax partner in the Hamilton office of Deloitte. Sons following their fathers into the family business is a familiar tradition, but is this convention changing as more women make their mark in business? Laura Walters chats to daughters who have chosen to take up office in the family empire. Twenty years ago Sir George Fistonich, founder and chief executive of Villa Maria Estate, was preparing to board a plane for a six-week business trip when he had a thought: What if the plane went down?
He turned to his daughter, who had come to see him off, and gave her a fiveminute rundown on the business, handed over the key to the filing cabinet, and waved his family goodbye.
Needless to say, Karen Fistonich was relieved when her father returned six weeks later.
When the same scenario played out the following year George decided it wasn’t the best way to prepare his daughter to run the family business in his absence, so he approached the board about appointing Karen to the team.
Nearly 20 years later Karen is chairing the board of Villa Maria Estate, the most awarded wine producer in New Zealand.
The former international banker is part of a growing number of daughters who are choosing to move into the family business, especially in New Zealand.
Fistonich did not plan to join Villa Maria when she left high school, because she did not see a logical place for herself in the business, and she wanted to make it on her own without her father’s patronage.
After completing a psychology degree and working her way up through the banking sector, she came home to find her niche at Villa Maria.
The mother-of-two says New Zealand women are becoming more involved in all aspects of business, especially leadership roles.
Although it is not common for daughters to follow their fathers into the family firm, it is not uncommon, she says.
Fistonich had her first taste of the wine business as a teenager.
One Saturday she was called in to cover for an employee who did not show up to work in the winery shop, and she came back to work there every Saturday for the next few years.
Like the rest of the family, including cousins and grandchildren, Fistonich worked on the bottling line part-time, ‘‘doing whatever needed to be done’’.
Despite not always officially working at Villa Maria, she was constantly involved.
Whether listening to her father chat to a restaurateur, or checking the wine list when out at dinner, she was always absorbing bits of information through ‘‘osmosis’’.
‘‘It’s very much happening around you.’’
Fistonich’s brother, Michael, and sister, Megan, worked part-time at the vineyard growing up, but other than that have found their places outside the family business as a computer analyst, and a mother, respectively.
Fistonich says working with family makes decision-making easier, because you share common values and often come at problems the same way.
But Fistonich will challenge her father if she thinks it’s necessary.
She was once quoted as saying she butted heads with her father ‘‘every now and again’’, but Fistonich says this is the mark of any productive relationship between board members and senior management.
She believes being forthright is a prerequisite for her position.
Women need to be more confident in their own abilities to succeed, something that comes with maturity, Fistonich says.
‘‘Kiwis are very humble, and women even more so.’’
Fistonich says her biggest challenge has been juggling work and family commitments.
Like most mums, she accepts there are requirements of a woman to run things around the house.
However, Villa Maria, the first New Zealand company in the liquor industry to employ a female sales representative, has a strong family culture, which staff appreciate, she says.
As well as her governance role at Villa Maria, Fistonich is on the boards of the Auckland Theatre Company, and New Zealand Trade and Enterprise, while trying to fit in her daughter’s netball practices.
Fistonich has given her son, Matthew, the same advice she imparts to everyone starting out on their career path: focus on what you’re good at.
Although the 18-year-old may find his place in the family business at some point, Fistonich says she doesn’t want to see him back for a couple of years yet.
Another strong woman used to juggling business and family is Emma Hill, the daughter of Michael Hill, owner and founder of Michael Hill International.
Emma Hill followed her father into the business, and is now deputy chairwoman of the jewellery company.
In Hill’s case, diamonds really are a girl’s best friend.
Photo: Fairfax NZ
Her first involvement in the company was cleaning the glass counters, something the 7-year-old took great pride in.
She eventually graduated from polishing cabinets and started learning the art of selling, retail management, and the science behind what makes the business model tick.
At 30 she was given the opportunity to establish the business in Canada, which Hill recalls to be ‘‘incredibly exciting, daunting, humbling and ultimately rewarding’’.
The NZX-listed company, which was established in 1979 and listed in 1987, has 252 stores in New Zealand, Australia, Canada, and the United States.
Hill says she loves a challenge and is working on cracking the US market.
‘‘How could you not want to be involved?’’
Hill also manages The Hills golf course in Arrowtown and oversees tournaments.
The mother-of-two says she loves the diversity of her job.
‘‘There is no longer the automatic assumption the son will come into the family business,’’ she says.
Hill’s parents, Michael and Christine, have always encouraged their daughter and son, who is a sculptor, to do whatever they love.
‘‘Work should be about following your passions whatever they are,’’ she says.
As a woman she has faced the same challenges any businessman would face.
‘‘Ultimately everyone is judged on their results. If you demonstrate capability you earn respect.’’
If anything, Hill sees being a woman as an advantage in the business world.
‘‘I believe we can open doors more readily than many men can.’’
When it comes to working with family, you are more emotionally entwined in the business than a non-family member would be, she says. And family do not hold back.
‘‘They are your most honest critic and your most avid supporter.’’
Hill says there aren’t any ‘‘big egos’’ in her family, so they can robustly debate things and still emerge as friends.
When it comes to giving advice to businesswomen who are starting out, Hill says to set goals, and don’t let anyone or anything, including yourself, hold you back.
‘‘As women we tend to be incredibly hard on ourselves and are often our own worst enemies.’’
Company of Women co-founder and chief executive Tara Lorigan says from what she has seen it is becoming more common for daughters to join the family business.
Sometimes it is just a really good fit for particular families, she says.
Lorigan agrees with Fistonich and Hill: women often get in the way of their own success.
Businesswomen’s values need to align with that of the company, she says.
‘‘Women are great at networking, but they often connect with the wrong people.’’
Women need to become savvy, and learn they can succeed, Lorigan says.
Fistonich is now prepared to take over when her father jumps on a plane, leaving the business in her hands.
She has an appreciation and understanding for the different aspects of her family’s business, and she doesn’t plan to walk away from it any time soon.