Independent Business Foundation respomse to SME

Response on behalf of Independent Business Foundation to just announced SME relief measures.

The majority of measures announced this morning by the Prime Minster are appreciated, but in terms of a reality check of the overall health of small business in a recession some will be less effective and fall short of expectations. Several of the issues covered in the announcement are not indicative of an understanding of the size and scope of 90% of New Zealand businesses, which bear no resemblance in their financial make-up to the revenue and tax liability thresholds quoted in the IRD press release.

Giving temporary relief from the 5% incremental provisional tax provisions are meaningless for the majority of firms, which are experiencing substantial shortfalls in revenue. The introduction of this measure under a previous government was generally resented with an expectation that it would be set aside under the new administration as a matter of course.

The reduction in the rate of penalty tax is a realistic move. To make it more meaningful, the rate should be pegged to the OCR to allow further adjustments to take place automatically without the need for regulatory change.

Taking a more lenient attitude to FBT will be well received by many, particularly where motor vehicles are concerned, as is the case with the ability to change from accrual to a cash base of accounting for tax purposes in the current environment.

Beefed-up business assistance with information and advice without simultaneous facilitation may not suffice to achieve the desired outcome. Greater emphasis on qualified intervention with evidence of outcome is called for to achieve accountability, which is frequently lacking where external providers are concerned. The accreditation schemes of the New Zealand Institute of Management and the Institute of Accredited Business Advisors provide safeguards and can serve as examples that should apply to other sources, except formally qualified members of professional bodies.

Making the export guarantee scheme more meaningful is laudable, but again will effect very few SMEs, as is the case with Government contracted services.

There are many other substantial measures that found expression as recommendations emanating from the 2008 Small Business Summit, where emphasis was placed on increased productivity, education and training, simplified reporting requirements, whole-of-government approach in dealing with business, management capability building and research based targeted assistance.

These outstanding issues have been presented to the Government at the time and the key ministers holding portfolios at present. Enabling the SME sector to perform better and ride out the recession will require more than dealing with tax and compliance issues.

ENDS

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