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12. What does this mean for businesses?

12. What does this mean for businesses?

Answer

Any business that is not declaring a minimum return on its assets will need to pay more tax. This forces a greater efficiency of capital (productivity) and disincentivises low-earning businesses. Those businesses facing a temporary or cyclical earnings downturn could defer their minimum income tax for a period of up to 3 years (use of money interest to be charged).

Showing 4 reactions

  • James Turnbull
    commented 2016-12-07 22:38:28 +1300
    What the answer tells me is this ….

    If your a small business owner and youR business hits a hard time due to a change in economic circumstances beyond your control, if you’re struggling along perhaps in a traditional way of doing things with old plant and machinery to keep a few jobs in your local economy, or if you became unwell ( as a sole trader ) and were over a perios of 3 years unable to make the ToP Prescribed Rate of Return on their assessed value of Your Investment … then they’re essentially creating a mechanism by which they will impose tax (on money you did not earn) and apply interest for use of tax money that you did not pay them (out of the income you did not earn) then they will kill your business and destroy the jobs of your employees.

    Though, if the plan for dealing with retirees was transferred across to business … they might allow you to mortgage your business assets (if you own the freehold ) to IRD so that you can struggle on a little longer and slowly bleed to financial death!

    So far … it seems ToP has the over-riding philosophy of

    YOU HAVE MONEY
    ALL MONEY IS GOVT PROPERTY
    THE MONEY YOU HAVE AND THOUGHT WAS YOUR MONEY IS ALSO OURS
    WE WANT IT – WITH INTEREST FOR YOU HAVING USED IT
    WE WILL DEVISE NEW AND COMPLEX WAYS OF TAKING IT FROM YOU

    But the real beauty … if your business plan ( as many do ) has a longer investment period before it makes the ToP prescribed RORI then you have to pay tax and interest for use of money / How long has (say) Xero been going ?

    How much investment has been poured into that ?

    What has the RORI been to date ?

    How would IT survive if it has to pay tax … I doubt investors would be keen to pour in funds to meet a Fictional Tax bill … I think most would simply invest overseas.

    See Grant’s Q below also?

    BUT it would certainly make money for FINANCE COMPANIES because leased equipment appears off balance sheet and couldn’t be subjected to this BSI !
  • James Brunskill
    commented 2016-12-07 10:22:26 +1300
    How will private businesses assets be valued? Is there a plan for how to capture this value?
  • Grant Ryan
    commented 2016-12-07 10:21:14 +1300
    How is this going to be applied to start-ups that are often cash flow negative for many years as they invest significant capital in their technology and market development? Will they accumulate a large tax bill that has to be paid in 3 years? Surely this will push people away form just the sort of high risk tech invesments that are key to a modern economy? Do you want to encourage people to invest in only businesses that can pay there tax in the short term?

    Overall I support the gist of your policy but think anything that actively discourages the sorts of invesments key to a mordern economy needs to be addressed.
  • Oliver Krollmann
    followed this page 2016-12-07 09:51:28 +1300