6 November 2019

Wed, 06 Nov, 2019

BUSINESS HURTING

If you didn’t already see this opinion piece by Brent Norling, director of Norling Law, then I recommend reading it. Small business is feeling the pinch from every direction, a lot of it created by onerous red tape that requires they spend more time form-filling for the government, battling employment laws, calculating taxes and employing accountants and solicitors, than on being productive. At every turn the IRD, or immigration policy, or a variety of compliance rules created by the Resource Management Act, present a road block to business growth.

For example, you are making it difficult for New Zealand SMEs to employ foreigners for roles Kiwis don't want anyway. You are increasing employee costs for business owners who aren't even paying themselves a living wage.

You are making it harder for employment relationships with changes to the trial period provisions. You are increasing costs to business by tampering with fuel costs. There is uncertainty over the tax position of SMEs and how that could play out. 

And this current government’s solution? To regulate the insolvency industry! In last week’s Politics in Full Sentences podcast, I asked Damien Grant, director of insolvency firm Waterstone, what it would take for him to run out of work. He replied that a) the government could regulate him out of business, or b) we could have some kind of totalitarian state in which the government controlled all business and none failed. Sounds like communism to me. The point of my question was to draw out the idea that businesses must be free to fail, but if the government got out of the way, fewer of them would.

I read some similar requests of government by Business New Zealand, in a news piece leading up to the 2017 election, from a survey of 575 businesses:

Three quarters of businesses argued against a higher tax rate, saying it would divert funds that could be used to invest and expand their businesses.

This week’s Politics in Full Sentences podcast will have Brent as guest so will be well worth watching.

SELF EMPLOYED TOO

Business isn’t just corporates or limited liability companies. It’s self-employed, spousal partnerships, and sole traders. They typically pay themselves last after the wages and monthly bills, often drawing less than the minimum hourly wage when hours of work are calculated.

I sympathise when it comes to Kiwisaver. I took years to finally open a Kiwisaver account because as a self-employed person, no-one was going to be matching my contributions. But there’s an easier way – government could just reduce the tax liability of businesses and individuals and let them put more of their money either back into their business to grow it and secure their future, or towards their retirement savings.

RED TAPE STORIES

A local resident group near me wants to install a very simple dinghy rack on the beach reserve, to tidy up a number of dinghies and kayaks left long term on the grass and to make it easier for the council contractor to mow around them. The design of the rack is identical to one they had installed at a neighbouring bay just a couple of years ago, and which does the job nicely. It comprises just ten pieces of timber, centred around four main posts cemented into the ground. The resident group is funding the rack and will install it themselves.

Tightening of council policy requires them to not only get Land Owner Approval, but to pay for the privilege! The cost of the LOA application is nearly the same as the cost of the materials to do the job. After over six months of to-ing and fro-ing with my help to try to get the fee waived (unsuccessfully), they have finally capitulated as they would like to get this rack in before the summer. Imagine their frustration after agreeing to pay the fee and submitting the application, to receive the reply “we have begun assessing the application and gathering feedback from our specialists.” Spare me, council have had the application for months, that’s how they assessed the fee in the first place!

ROAD NAMING RULES

This is one of which I have first-hand experience. The red tape developers and private landowners are put through to have a name approved, or even that they are required to assign a name at all in the case of something not much more than a right-of-way, seems completely unnecessary. One time, in my absence, my local board declined the name of ‘Cash Cow Road’ to a landowner. I’d have let him have it. However silly or frivolous we might think it is, perhaps appropriate in this case given the amount of money the applicant had already dished out to council for various aspects of the development, he has to sell those sections and if the name is going to put off a buyer and reduce the value of the sections, then surely that is his problem. Eric Crampton of the New Zealand Initiative agrees:

You might have thought that while there should be some process around naming motorways, private developers putting in roads on their own smaller developments should be able to just pick road names – so long as those names did not duplicate ones already in existence elsewhere in town. The developer has every incentive to avoid horrible names because the developer wishes to maximise the selling price of houses in the development. No sane system would load a pile of compliance costs onto the naming of minor roads – and certainly not in a city with a massive housing shortage. 

And this is just one of the reasons why the cost of housing is as high as it is.

There’s a bit of a theme here and you guessed it – it’s business, tax and red tape. Just happens David is embarking on a Freedom to Earn tour so check him out at one of these locations near you soon. On Wednesday 27 November he’s visiting my home town, generously hosted by One Warkworth Business Association, and I’ll be there speaking as well.