21st May, 2021
The ‘Wellbeing Budget’ announced yesterday may have arrived in a pretty fancy looking folder, but the shine could be wearing off for small business owners.
On Thursday, Finance Minister Grant Robertson alighted on the steps of Parliament brandishing a glossy looking folder embossed with a map of New Zealand.
For small and medium businesses still struggling with border restrictions and high levels of uncertainty, what Robertson has dubbed the ‘Wellbeing Budget’ appears to overlook this economic powerhouse in favour of welfare benefits.
Let’s take a look at some of the notable key measures and see how they stack up.
All beneficiaries are going to get a big boost, said Robertson: “this is the biggest lift to benefits in more than a generation”.
While this doesn’t immediately sound like good news but, in theory, if it helps bolster consumer spending then benefits could be a powerful contributor to small business revenues.
Other than Robertson’s slick folder, this is perhaps my favourite bit of Budget 2021. New, mostly unpleasant tax changes have been coming thick and fast since the government were re-elected in late 2020, so it’s a real relief not to see any more changes to tax.
Having said that, one could argue all the dirty work has been done already, so there’s not much scope for anything new. The Budget documents note: ‘Tax settings will continue to be broadly stable and predictable. …The Generic Tax Policy Process shall be used to develop and consult on tax policy where practicable.’
Whether you see this as positive or pathetic will depend on your standpoint when it comes to taxing high net-worth individuals.
Only $5 million has been allocated to the Inland Revenue Department (IRD) to ‘collect information on the level of tax paid by high wealth individuals and their related entities’.
$5 million in the overall scheme of the IRD’s budget is not much at all, potentially indicating just how interested in scrutinising high wealth individuals the government really is.
More good news, as the forecasts for the economy are good, with lower-than-expected unemployment and impressive (for New Zealand standards) increases in growth.
The government is forecast to return to a budget surplus in 2027, but forgive my nagging doubt that this is optimistic, especially with many political activists now turning to Modern Monetary Theory (MMT) to build an argument against fiscal restraint at the national government level.
According to the online news, businesses were not thrown a bone, with no friendly or alleviating tax or regulation-lifting measures and no other business friendly initiatives.
It’s sink or swim time for businesses — but perhaps the government feels businesses are replete following last year’s COVID-19 subsidies free-for-all.
It’s also worth noting there has been an increase to the Digital Boost programme, which helps small and medium businesses tool up with new tech in order to increase efficiencies and prepare them for the future.
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There’s no free lunch, as the saying goes. Unless you are of that MMT view that you can spend like it’s going out of fashion, without fear of consequences of runaway inflation and eventually going bust, all additional government spending has to be paid by someone.
And that someone is probably, to a significant degree, business owners, who by necessity have to pay a confusing array of complex and varied taxes, all without thanks or any fanfare, especially if you include PAYE deducted from their employees.
The end of runaway price increases for houses is forecasted for the near future. This may or may not be the case, but that is not all good.
Increasing house prices creates a real feel-good factor, which is good for the economy. For those of us in business, it also means we can access finance more cheaply and more readily.
It’s also good for business because, unlike imported consumer goods, spending money on local property means the money stays in New Zealand.
According to the Taxpayers Union, this Budget ‘represents a represents a major shift of the economic dial to the left by rejigging the tax and transfer system strongly towards those not in employment’.
So, for employers, business owners, or farmers, there are no tax cuts and no relief from increasing red tape and bureaucracy, which is making it tougher than ever to be a business owner.
It’s bad enough finding and keeping employees now, so reducing their incentives to work more can surely only make the situation worse in the short term.
Whether the real pain for NZ businesses is only yet to come, or whether we’re actually on an upwards trajectory is yet to be seen, but what’s clear is that Budget 2021 has provided little direct support of any kind.