Financial Review Debate — Ministry of Economic Development

I rise to take a call on this particular report because I believe that the Government has been letting down the small-business community and has also been restricting this country’s ability even to reduce our current account deficit by using the abilities of the small-business sector. It is interesting to note that the 2004 Ministry of Economic Development report states that only 27.4 percent of small to medium sized enterprises make it to the seventh year of operation, while a little more than half move into the third year. I believe that this Government has basically run a policy of taking from the small-business community and loading it up with unrealistic rules and regulations that it cannot handle.

Let me put one thing forward in this debate, taking our forestry industry as an example. At the moment the forestry industry is exporting logs. What if the Government brought in a plan to give tax-free status to any business that, instead of exporting logs, exported them in a—

💬 Dr Muriel Newman: Tax-free?

Yes, tax-free; that is correct. Businesses would get tax-free company status if they were processing those logs into an item for export—if that company, instead of solely exporting logs, were making them within New Zealand into products for export. What would that do? That would provide a fantastic incentive to develop an export company in this country. Such a company would pay GST on everything it bought and sold, PAYE tax on its executives and other staff, wages and salaries, and everything else. But instead of having a “take” mentality we would be adopting a “give” mentality on something that would benefit the country as a whole.

United Future would like to see this country start to appreciate the abilities of small businesses in relation to economic growth, rather than being restrictive. Small and medium sized companies are made to battle with red tape, which is wasting time and energy, rather than encouraged and given focus by incentives to achieve what we want as a nation.

Eighty-five percent of our businesses employ five people or fewer, yet they are being slowly strangled by increasing red tape, new compliance costs, and a threat of more intervention by central government. I believe that this country and the Government have a fantastic opportunity to look at this area of economic development and begin to refocus. Instead of being takers from these businesses or loading them up with obligations, we should start to work out a plan whereby we can encourage them to move in a direction that will be good for them and good for the country.

The Government needs to look at risk management for many small to medium sized enterprises as they start up, because—as shown by the statistics I opened with, on the danger of them closing—they really need help in the risk management area. The Government needs to provide more advice to small to medium sized enterprises on risk management. Often without easy access to skilled lawyers and accountants, and lacking human resources departments, small businesses can find the cost of complying with Government rules and regulations significantly harder than their larger cousins.

New Zealand is a country that has many entrepreneurs and many people who have a tremendous ability to be risk takers and to design innovative products to export. But I believe that our current rules and regulations are stifling this, rather than being an incentive to achieve. If we were bold enough to do something radical—like saying that New Zealand companies that took a local component such as forestry and turned it into a product that we could export could have a tax-free status—I can guarantee that we would receive more tax and a greater reduction in overseas debt.

Report noted.

Ministry of Social Development