New Zealand has an overwhelmingly onerous, highly regressive, taxation compliance regime to which we must conform under the Sauron-like gaze of the IRD, or get flogged with fees and penalties.
We pay more tax than anyone else, and unlike other nations every dollar of our earnings is taxed. Even our children are taxed.
Now, our government intends to slap a Capital Gains Tax on us. Cullen, head of the Tax Working Group, said “it’s to bring us in line with the other nations.”
“It’s all about fairness” the proponents of this tax proclaim as they seek to apply it not just to speculators flipping Auckland houses, but to farmers and small business owners! I know its not going to be fair, its already corrupt and unjust.
Here is my experience of the NZ Government as a small business owner. We set up in 2007, in our early forties. It was quite the mid-life crisis. We didn’t get any help from the government. In fact, they were a stumbling block. Our capital was a measly $48 but we secured a private loan of $10,000 which we paid back in three years.
The first year, we couldn’t take drawings so worked at night. I worked three part time jobs, my husband two. We cleaned workplaces, did night-fill at a Supermarket, and I looked after a group of handicapped people on the weekend. Our tax was 28% because of the “secondary” jobs. If we’d been in Australia we would have paid no tax.
We went along fine for two years, and made a small profit of $34,000 before drawings, which triggered Provisional Tax. This tax is brutal for small business and the reason most of them fail in the first five years. It’s like a bar to entering business.
Under Provisional Tax, NZ Businesses have to pay two years worth of tax, being tax for the previous year and tax on money for the current year that hasn’t been earned yet. We didn’t have enough put away, not knowing how much we were going to be charged.
We had to pay nearly 25% of that profit in tax. IRD said we could pay the first year’s tax off in installments, with penalties, but had to pay the entire amount on the second year. It was a serious setback, and we would have been out of business if we hadn’t had access to revolving credit.
For the next three years, we were unable to replace the twenty year old car or grow our business, because of the amount taken off our profit.
The business is now twelve years old. It hasn’t made us rich but it does provide a living and we’re our own boss. We haven’t been able to participate in the Auckland housing market but hoped the business would be a nest egg for our retirement. If the CGT goes through the leech-like NZ government will seek to take 33% of the money from our small business.
My husband and business partner considers the NZ government and its enforcer IRD to be like Queensland cattle ticks.
My tale will be typical of small business and the middle class in New Zealand.
We are a nation of entrepreneurs. Small businesses generate 28% of New Zealand’s GDP and employ over 600,000 people. You’d think we’d be encouraged and helped every step of the way but we’re not.
Given the risks we take and the hurdles we have to overcome to get our business running, its demoralising to think that at the end of it the government will take a third of our nest egg, on top of all the other tax we pay in the business; Provisional Tax, PAYE, 15% GST, the ever-widening FBT, ACC, Fuel Tax, and GST on Fuel Tax.
Cullen and the Tax Working Group appear to be completely out of touch with NZ Small Business. If Jacinda follows the Tax Committee’s advice she will only be in for one term. In the meantime, how much damage will they do?
There are two tax regimes, one is hidden. It turns out NZ is a well-known tax haven.
Just like Vancouver and other places where foreigners have speculated, we’ve now got an unaffordable property market. Guess what the overseas tax lawyers invested their client’s un-taxed money in? I found out how it happened and will deal with that in a separate post.
Finally, Jacinda is a socialist. Here she is in action ten years ago as Comrade Jacinda Ardern. Should we trust her given what we’re seeing here?