Businessman and founder of Animation Research Ltd Sir Ian Taylor.
OPINION
Dear Chlöe
Let me put this open letter in context for you.
An ex-colleague of mine recently accused me of being a “chardonnay socialist” because of the views I shared in an article I wrote around inequities in our tax system, my support of a capital gains tax, and my willingness to pay more tax - not less.
The article that had raised his ire was one I had titled “Let’s talk about tax”.
In it, I questioned the terms usually associated with the word tax here in Aotearoa New Zealand. Terms like “tax avoidance” and “tax burden”.
Why couldn’t we talk about being “proud to pay tax” as part of the social contract we had with each other to create a fair and equitable society? A society that placed a value on education, health and the wellbeing of everyone with whom we shared that society.
The “chardonnay socialist” comment highlighted the tribalism that has become an increasing part of our political discourse. A recent article featuring your suggested “wealth tax” accentuates that tribalism.
The introductory blurb on top of that article read “The golden age of stashing vast sums of money in trusts, or indeed, anywhere, may be over.” You yourself went on to add, “wealth in Aotearoa is concentrated in the back pockets of a wealthy few. It’s time we got on and fixed this.”
There goes the tribalism again. Bad people “stashing vast sums of money in trusts” or the “wealthy few” stashing it in their back pockets.
So, Chlöe, in the interest of complete transparency, something politicians appear to be struggling with these days, I need to declare that I have one of those family trusts. I am assuming that you don’t, so let me share with you why I do.
More than 30 years ago I set up a business in Dunedin, not because I wanted to be rich, but because I had found the place I wanted to live and had decided I wanted to create a company that built high-value jobs for others who wanted to live here.
To do that I had to borrow $500,000 to get started and, as part of that, I had to guarantee that loan using our family home, on which my wife and I were paying a mortgage with interest rates of over 20 per cent.
Within two years, working with some incredibly talented people who would have normally moved north, we built a technology company employing more than 30 people. All of them paying PAYE tax from the jobs we had created. All of them paying GST on the goods they bought, with the salaries they got, from the jobs we had created.
I am not sure how many of your colleagues fully appreciate the risks involved in starting a business that creates real jobs. As I look around the debating chamber, I am not sure how many have ever created a business themselves. Perhaps, more tellingly, the question might be, how many have spent most, if not all, of their working lives based on income that comes directly from taxes we pay.
Tax that is generated by people who have taken the risks that are inherent in starting a business.
In 2008, I faced that risk head-on when I had to explain to my wife that the business we had built was on the verge of going under because of conditions beyond our control. This meant that the family home, where we lived with our two young sons, would have to be sold.
People who have never created a business probably won’t ever appreciate the sense of failure that comes as they face the prospect of sharing this message with their staff, and the family who have built the business with them.
As you may have gathered, we did find a way around this, but that’s another story.
However, what I vowed from that experience was that as soon as I could, I would find a way to pay off that loan and get my family home in a trust to protect it, and them.
It took more than 20 years to get to the position where I could remove the need to continually put our house up as security against the bank loans that were needed to keep the business running and people gainfully employed.
Today, the trust holds more than our family home and it pays tax on income generated. That tax is set by the government of the day and I am more than happy that it is paid.
I don’t share this story because I think I am special. I share it because I know there are countless people out there who will have been through the same things. This is the reality of building a business that creates jobs - that pay taxes.
So, Chlöe, instead of joining in on the tribalism, why not lead from the front, do things differently, and avoid getting caught up in the nonsense that politics has become?
We could start by agreeing this is a discussion we need to have, but let’s have it in the context of a celebration of the success of people who have placed so much at risk to create the jobs that pay taxes in the first place.
People like a friend of mine who runs a hugely successful business that generates $80 million in annual revenue. I imagine that many reading the story on your wealth tax would place him in the “wealthy” category - stashing money in a trust, or his back pocket, so he doesn’t have to pay tax.
So, let’s look at the tax he does pay, or collect for the IRD, based on that $80m revenue:
That is $40m in tax, annually, generated by one person who had the courage to build a business and create those jobs. Yes, he is wealthy (I prefer “successful”) but how many people can you identify in that debating chamber who generate that much revenue for you to spend, every year?
This leads me to my final point.
The annual tax take is $113 billion a year. Of that, $19b is spent on health, $17b is spent on education. Both are on the verge of collapse.
So, Chlöe, my question of you is: When will you start to give those who take the risks to create jobs that pay tax the confidence that, were we to pay more, you will spend it well and not pour it down a seemingly endless drain with little or no accountability?
Sir Ian Taylor is the founder and managing director of Animation Research.
Taxman hauls in millions after international journalists' tax and trust exposés.