Minister targets business burden

By COLIN JAMES

Commerce Minister Paul Swain wants provisional tax simplified for small business in legislation this year as he seeks to prove the Government is serious about reducing business compliance costs.

Mr Swain, who is also Associate Revenue Minister, made a point of tax simplification already in legislation when he responded last month to his business compliance cost panel's report. Tax was not on the panel's original agenda but Mr Swain agreed to its inclusion after the panel found it high on the complaints list of businesses.

One option Mr Swain is examining for legislation timed for May is to allow payment of provisional tax on cash flow instead of being calculated from the previous year's income or an estimate of the current year's.

Many small businesses have uneven cash flows, which makes payment of three equal instalments based on the previous year difficult. The nature of many businesses also makes estimating the current year's figures difficult.

Payment on cash flow could be made every two months at the same time as - and even linked to - GST, Mr Swain says.

Another option is to "pool" overpayments and underpayments and bring the interest paid closer to commercial rates.

Mr Swain is sensitive to accusations that the Government has piled more costs on to business since 1999. He hopes this is the year when the balance will be reversed.

He says there will be no more regulatory surprises.

Business will hope so. Reregulation of the labour market and a bill to tighten workplace safety regulation, renationalisation of ACC, new and tighter competition law, major reregulation of the electricity and telecommunications industries, new sharemarket regulation, tighter insolvency law, higher income and fringe benefit tax on executives and many other minor changes have all added costs.

In an open economy under heavy pressure from international competition, all additions to business costs reduce profitability.

But there have been moves on the other side of the ledger. Mr Swain's Motor Vehicle Sales Bill now in Parliament brings more dealers into the regulatory net but simplifies the regulatory framework. It is also a model of the new practice he has persuaded the cabinet to establish for all legislation of quantifying in an
accompanying note the expected compliance costs.

Mr Swain insists his Telecommunications Bill, forcing open access for new market entrants to established telecommunications services, will reduce costs to telecommunications users, including business.

And Pete Hodgson, though he gave himself draconian backstop powers in his Electricity Industry Act, prefers to talk the industry (backed up, recently, by some stiff private letters) into better behaviour than displayed during the wholesale price fiasco last year.

But, for all Mr Swain's earnest endeavours, there is more red ink to come this year.

Mr Hodgson, as climate change tsar, is high on many businesses' most-feared list. Implementing the Kyoto protocol will add costs to most businesses - and so far details are skimpy. If he is to meet the deadline of September for signing the protocol, he is going to have to produce that detail quickly.

Mr Hodgson insists there are offsetting gains to be made. Some businesses are starting to grasp those opportunities - for example, Waste Management's plans for electricity generation from waste.

However, the costs and the gains will fall unevenly. Forest industry companies are particularly worried about losing international competitiveness.

Allied to climate change are energy and transport. The long-delayed transport strategy to be released next month will hold prospects of costs (higher fuel excise) and gains (better roads) for business.

And, across in Marian Hobbs' territory, there are also costs to come. A waste minimisation strategy will come with costs. Her Resource Management Act changes hold out some promise of improved practice - and so lower costs of consents in time - but the immediate impact will be higher costs because objections are being made easier.

Then there is Sandra Lee's rewrite of the Local Government Act, giving councils wider powers - which may prompt some to lift rates. The rating bill now passing through the House disenfranchises business ratepayers, caps direct charges and rates utilities, which would add to business's energy costs.

Mr Hodgson also has a gas industry review in train. Submissions on his review team's report, are being sought. There are complex issues, not just in wholesaling and retailing, but also what to do when the Maui field runs out.

Labour Minister Margaret Wilson's Health and Safety in Employment Bill tabled in October excited the same initial reactions as the original draft of the Employment Relations Bill.

But on December 21 the Council of Trade Unions and Business New Zealand issued a joint statement saying the reactions were overhyped. Mr Swain told the media on December 18 that reasonable suggestions for changes would be reasonably responded to. Ministers point to the relatively small impact on business costs of the Employment Relations Act.

Next on Ms Wilson's list is revision of the Holidays Act. The Government-union-employer advisory group's final report in November agreed on many points, though there were some differences.

Potentially more problematic is "transfer of undertakings" - protection of employees when a business or part of a business is sold or contracted out. The advisory group's report showed unions and employers wide apart. Unions want rules akin to those in Europe, which essentially require the new employer to retain the same staff on the same conditions. Employers want as little change as possible.

Mr Swain has one more chunk of regulation in the pipeline: whether to make insider trading illegal. A discussion paper will be issued soon. His first tranche of sharemarket legislation, which stiffens insider trading law, is working its way through Parliament.

On the positive side for business, as Associate Minister of Energy with responsibility for mining Mr Swain has work going on to improve access for miners to the crown estate and to modify landowners' right to bar licence-holders' access to land over the deposits to be prospected, explored or mined.

Mr Swain's associate minister in the commerce portfolio, Laila Harre, has two more measures to come on intellectual property to go with the Trade Marks Bill.

These are revisions of the Copyright and Patents Act which, among other things, wrestle with the impact of the internet on copyright and complex matters of culturally sensitive insignia, which by definition have no owner in the traditional legal sense.

Decisions are likely in the first half of this year but legislation is not likely until next year. When it does come, it will be, officials say, a "new type of law".

Ms Harre will also decide early this year a second tranche of insolvency issues: business rehabilitation, the state's role, the statutory management procedure, "phoenix" companies and a possible single statute for corporate and personal bankruptcy.

That's enough to be going on with. One thing is for sure. It is probably not a complete list.

So business might hope in election year for relief from the right. After Bill English became leader there was a flurry of anticipation that a pro-business agenda could be got up through the National Party's election platform.

That is likely. But it will have real point only if National looks like winning. And businesses at the moment don't expect that.

* ColinJames@synapsis.co.nz