Taxpayers Union co-founder Jordan Williams speaks to Hawke's Bay Today reporter Andrew Ashton on what should be done to ensure businesses and taxpayers are getting full value. Mr Williams is a constitutional lawyer who grew up in the Hawke's Bay and in 2013 with David Farrar co-founded the New Zealand Taxpayers' Union.
What changes would you personally like to see take place regards the way business tax rates are worked out and divvied up?
New Zealand businesses are overtaxed. Our current rate of 28 per cent sees us with the second highest level of tax on capital in the OECD. Meanwhile, countries like Australia, the US, and the UK are cutting their company tax rates. The UK is heading for a rate of 17 per cent. Ireland has seen strong economic growth off the back of a 12.5 per cent rate. New Zealand's rate is simply not competitive, and the only thing that has protected us in recent years has been the fact that Australia's rate is also unusually high (albeit on the way down).
We know that low taxes allow businesses to thrive – just look at Māori Authorities, who pay a tax rate of 17.5 per cent – their assets grew by 30 per cent just last year. As it stands, only iwi-owned businesses like Go Bus and Shotover Jet benefit from this tax loophole. New Zealand's tax system is generally simple, but our special treatment for Māori Authorities is an exception.
We should turn this loophole into an across-the-board low tax rate for every New Zealand business. And we can afford this tax cut by slashing taxpayer-funded handouts currently given to specific businesses and politically favoured industries.
Do you feel individual businesses are helped/hindered by too much Government involvement in business?
The Government shouldn't be in the business of "picking winners". We too often see politicians funnelling taxpayer money towards selected businesses and private developments for obvious political reasons, under the guises of "sustainability", "innovation", or "regional development".
The downside of this corporate welfare is a distorted economy, where unproductive enterprises are rewarded while productive (but less trendy) businesses are taxed to the hilt, and therefore denied the opportunity to reinvest profits in growth and new jobs.
While my role at the Taxpayers' Union leads me to focus on tax, it would be wrong to ignore the enormous harm done to businesses by red tape – the financial effect of which could be called a "regulatory tax". Some of the worst offenders are the Resource Management Act, the Securities Act, and even some of the more silly provisions in the Health and Safety at Work Act. Small businesses in particular lack the funds to comply with complex rules, so the ultimate effect of the regulation is to lock out new businesses and protect larger ones from competition.
In short, governments should seek to help businesses by getting out of their way, rather than throwing taxpayer money at them.
What is your view on the role of start-up incubators aimed at helping new companies?
The concept of a private sector incubator is a great one – across the world incubators take risks in helping start-ups and have created some enormous successes.
The problem we see in New Zealand is that business incubation seems irresistible to politicians and bureaucrats who want to appear entrepreneurial. Business incubation is a risky field and we should be wary when taxpayers are forced to shoulder these risks.
A good recent example is BizDojo, a long-time darling of the business press, which received support from Auckland Council before its Auckland branch went into liquidation, owing ratepayers $341,000 in unpaid rent.
Auckland's The Icehouse and Wellington's Creative HQ also receive government money, as does Soda Inc which operates here in Hawke's Bay. Ultimately, if these incubators or the businesses they support go belly-up, then it's a failed investment of taxpayer money. But perhaps more importantly, if they succeed, taxpayers will not see a dividend.
Investors manage risk best when it's their own money on the line. This is why governments make terrible investors – they're spending other people's money. If things go wrong they know they can always just tax us more.
What do feel is the single biggest financial waste New Zealand businesses tend to be guilty of?
This isn't really in our wheelhouse or my field of expertise. The key point is, if you want to "waste" your money go for it. Views differ in what "waste" is.
That's the big distinction between your own money (or that of a company reporting to shareholders) and taxpayer money. The higher threshold must apply to the latter as you are forcing third parties (ie, taxpayers) to pay.
Are provincial ratepayers paying too much to fund government Research and Development initiatives, such as those run by Callaghan Innovation?
A recent trend has been for politicians on both sides of the aisle to complain that New Zealand under invests in R&D. Unsurprisingly, businesses agree, because these complaints lead politicians to pour taxpayer money into business via grants or tax credits.
The economic case for R&D investment in New Zealand needs to be better examined. There is a strong argument to be made that New Zealand, as a small trading nation, is not well-placed to fund its own R&D, but instead can (and does) import innovation. New Zealand consumers have reaped enormous benefits from businesses like Uber, Amazon, and Facebook, without the need for taxpayer investment.
Despite this, the political winds suggest government support for R&D won't be going away anytime soon. The Taxpayers' Union suggests R&D grants should come with a requirement that resulting intellectual property remains in New Zealand, avoiding situations like the sale of Callaghan Innovation-supported Gameloft, whose intellectual property ended up under French ownership.
Alternatively, we could just scrap grants and support R&D with an across-the-board tax credit, rather than having government agencies "pick winners".
