barry coates sustainable business

A Green deal for small business

Behind the rhetoric of being ‘business-friendly’, the National government has prioritised the interests of big business and foreign corporations over small business. The Green Party considers that small and medium enterprises (SMEs) are the backbone of our economy, opportunities, and jobs. We are calling for a fair deal for small business, and we will support SMEs.

SMEs are crucial to our economy. Around the world, governments have programmes to help small business to start up and get a foothold. For good reasons – they provide the backbone of most economies, generating most of the jobs and most of the local economic benefits that are the lifeblood of towns and cities. However, the government’s policies are more attuned to the lobbying of big business and foreign corporations than SMEs. The result is that SMEs are trying to compete on a playing field that is tilted to the advantage of these big companies and multinationals.

The GST problem

An example from the retail sector. Shops and small manufacturers across New Zealand face a new threat from Amazon opening a huge new distribution centre in Sydney. They not only have the advantages of huge scale in marketing and leverage with suppliers, they can supply most products into New Zealand without GST. This gives them an automatic 15% advantage. The government’s policy is that any imported product, purchased online and costing less than $400, does not pay GST. This not only means that New Zealand business is disadvantaged, but the government misses out on around $200 million in lost tax. The Greens would level the playing field by charging GST on all imported products.

Other tax issues

There are other problems with tax policy. It has been well-documented for decades that multinational corporates, like Apple, do not pay their fair share of taxes in New Zealand. They use tax loopholes to avoid paying taxes, usually by shifting their profits around the world to end up in a tax haven, where they benefit from secrecy and low or zero taxes. Australia and the UK have clamped down, through a Diverted Profits Tax that charges a penalty if multinationals are artificially structuring their businesses to avoid tax. The National government have repeatedly delayed the introduction of legislation. Again, New Zealand businesses are put at a disadvantage against their competitors who don’t have to pay tax, and the government misses out on tax revenue of at least $300 million per year. The Greens will clamp down on multinational tax avoidance, through a Diverted Profits Tax and other measures.

Dumping unfair competition

Small businesses are also not protected from unfair competition. The government passed legislation this year, against strong opposition from the Greens and other Parties, to impose a test that limits action against foreign companies that dump imports at below market prices in New Zealand. The government will not impose any surcharge (“countervailing duty”) if there is a net benefit to consumers from allowing unfair dumping. Even worse, the model they use to determine this benefit is heavily weighted in favour of doing nothing.

This provides an in-built incentive to foreign competitors. They can sell imported products at cheap prices until the local business is driven into bankruptcy and then put the prices up. The anti-dumping system is already hugely difficult for small business to access and this new law will only make it worse. Even if the small business shows unfair dumping, the government may do nothing about it. The Greens would repeal this law and defend New Zealand companies suffering from unfair competition. The Greens will also strengthen competition policy to prevent market dominance by a few large companies.

Compliance

Government regulation also creates disadvantages to small business. Typically the compliance costs are far heavier on small business. Sound regulation is needed to avoid costs from poor or non-existent regulation such as leaky buildings, the Pike River disaster or the collapse of finance companies. However, regulation should be proportionate to the scale of the risk and the size of the company. In sector after sector, high compliance costs have led to the exit of small business and the market dominance of a few large companies, facilitated by the absence of sound competition policies. This is enabled by powerful lobbying of big business and foreign corporations and weak representation by small companies. The Greens will review compliance requirements for SMEs to identify ways to reduce the burden and will simplify implementation and reporting requirements.

Procurement

Many SMEs get a foothold in the market through procurement contracts from government or local Councils, but procurement rules have been skewed to providing access for multinationals and favouring large integrated contracts that advantage large companies. The Greens will require government and councils to implement sustainable procurement practices, including fair access for SMEs, on the basis of best value to the economy. The Greens will also educate the public about the benefits of supporting local business and require Country of Origin labelling for imported single ingredient products.

Trade agreements

Other disadvantages to SMEs are hidden in trade agreements. Free Trade Agreements like the Trans-Pacific Partnership Agreement contain preferential rights for foreign corporations and allow them to challenge New Zealand laws and regulations if they restrict their profits. These rights are not available to domestic business. The Greens will push for trade agreements that are in the interests of all New Zealanders, without the extreme rules that allow multinationals preferential rights, disadvantage SMEs and prevent fair rules on the economy.

The Green Party is independent of big business. We have consistently championed the cause of SMEs and recognise their contributions to the economy, local community and the fabric of New Zealand society. In government, we will remove the above disadvantages of small business and provide a clearinghouse to help small business deal with regulatory issues and reduce compliance costs.