Bay of Plenty Business News March/April 2018

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24 Bay of plenty THANK YOU TO THE SPONSORS, EXHIBITORS AND VISITORS OF THE INAUGURAL BAY OF PLENTY/WAIKATO BUSINESS EXPO First on the scene Pictures from the inaugural Bay of Plenty/Waikato Business Expo, which was successfully launched at ASB Arena in March. Congratulations for embracing and supporting this new and exciting event and a huge thank you for your contribution in helping to make the Business Expo a great success. 1 2 1 Tim van de Molen, MP Waikato, with Nigel Murphy and Cathy Hendry, Strategic Pay 2 Taite Smith and River Jermyn, NOW. The purpose of the Business Expo is to provide a platform for businesses to showcase their offering, to enhance and create business opportunities and connections, and to bring additional growth to the regions. The energy and enthusiasm at this year’s Expo and the positive feedback received indicates that the Business Expo is now a “Must Do” event in the region’s business calendar. We look forward to seeing you at the next Business Expo, Sharon Giblett and Barry Brown Jigsaw Solutions Group Limited 3 4 3 Pete Wales, David Porter and Vanessa Lee, Bay of Plenty Business News. 4 Nick Osborne and Michelle Beaumont, Nettl. 5 6 5 Angela Thomas, KPMG. 6 Jazz Kiihfuss and Mike Everard, Giggle TV, with Nic Tarrant, Katie Baker and Amanda Fraser-Jones, Corporate Traveller. For sponsorship and exhibitor enquiries for upcoming Business Expo’s, please contact Sharon Giblett on 021 566 869 or info@businessexpo.biz www.businessexpo.biz Sponsors Supporting Partners 7 8 7 Adam Hughes and Mike Bell, Think. 8 Sharon Giblett and Barry Brown, Business Expo and Jigsaw Solutions Group, with Tauranga Mayor Greg Brownless (centre).
BAY OF PLENTY BUSINESS NEWS March/April 2018 25 Wealth Taxes The Tax Working Group - established by the government to examine improvements to the fairness, structure and balance of the tax system - has released its background paper summarising the current system and calling for submissions. REGULATORY MATTERS > BY GRANT NEAGLE Grant Neagle, a director at Ingham Mora Chartered Accountants in Tauranga, is a business advisor and tax specialist. He can be contacted on 07- 927- 1225 or grant@inghammora.co.nz The group, chaired by former Minister of Finance and Deputy Prime Minister Sir Michael Cullen, has excluded from its terms of reference increasing the income tax and GST rate, inheritance taxes or taxing the family home or the land under it. But it has included consideration of whether a more comprehensive system of taxing capital gains on property (excluding the family home) would improve the tax system. And one tax not specifically referred to in the terms of reference, but one which Cullen has nonetheless signalled is on the table for consideration, is a “wealth tax.” Wealth taxes generally tax the net wealth - ie assets less liabilities - of a taxpayer on an annual basis. The attractiveness of such a tax for the government is that tax revenue from the tax could start from day-one as it taxes what a taxpayer already has. By comparison, comprehensive capital gains tax systems tend to only generate tax revenue when a taxpayer disposes of what they have for more than it cost them. So it seems that, while the government has ruled out a capital gains tax on a person’s home, it has not excluded the possibility of a wealth tax that could in fact, in principle, include taxing the wealth represented in a person’s home. Internationally, wealth taxes have lost favour over the last 20-30 years. In 1990, 12 countries had a wealth tax; today only five major countries have one. A number of those that still do, have signalled their intention to get rid of them or reduce their scope. Against this backdrop have come renewed calls from pundits for the adoption of wealth taxes to address increasing income and wealth inequality in developed countries. The French experience serves as a good case study. Introduced in 1981 by François Mitterrand’s Socialist Party, the French wealth tax known as ISF or the “solidarity tax on wealth” has been anything but an exercise in solidarity. The net asset threshold at which wealth taxes apply are typically high to catch the supposed “wealthy”. The French ISF as it currently stands is an annual levy of up to 1.5 percent on the wealth of French residents whose net worth exceeds 1.3million euros (approximately NZ$2.2 million). The French experience is that it is often the income and cash-poor middle-class – who find themselves in the “wealthy” category due to rising property values – who are affected. The imposition of the tax leads to tax planning, including making temporary gifts and donations, and in so doing taxpayers running the gauntlet between the wealth tax and France’s Gift tax. Moreover, the tax is estimated to have promoted the flight of some 60,000 millionaires from France since the year 2000. However, reform of the French ISF is on the cards So it seems that, while the government has ruled out a capital gain tax on a person’s home, it has not excluded the possibility of a wealth tax that could in fact, in principle, include taxing the wealth represented in a person’s home. with the current government looking to reduce the ambit of the tax and have it apply only to tax real estate assets. Given the Tax Working Group’s intention to garner submissions from a broadcross section of New Zealand society, Cullen’s reference to a wealth tax may just be a ploy to stoke the fervour of the New Zealand public and so encourage submissions. Cullen has mooted that a capital gains tax and wealth tax could be the alternatives. The cynic in me would say that mention of a wealth tax could just be a softener that would make the bitter pill of the alternative comprehensive capital gain tax easier to swallow. Time will tell. The comments in this article are of a general nature and should not be relied on for specific cases, where readers should seek professional advice. Staying the course I recently came across an article written by one of my colleagues for a local newspaper in January 2008 that still has lessons for us today. It read: “The recent share market sell-off will have a number of investors questioning their investment strategy and whether they should be investing in the share market at all. Now is not the time to be selling good quality compa- WHAT TO DO WITH YOUR MONEY > BY BRETT BELL-BOOTH Investment Advisor with Forsyth Barr Limited in Tauranga. Phone: (07) 577 5725 or email brett.bell-booth@forsythbarr.co.nz nies. In fact this may be a great buying opportunity. “While lecturing as a 21-year-old at Columbia University the world’s greatest investor, Warren Buffett, quipped: “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful” “The simple concept that Buffett was alluding to was that when the majority of investors are driven by fear and selling their holdings, this is the best time to buy. Often in fear driven markets, most businesses are being sold at cheap prices, even great companies. “It was then that the true investor was able to get a bargain price and therefore increase the potential for capital gain. The lower share price also results in a higher dividend yield for those investors seeking income. “So, while the perceived risk for investors often feels greater because of the doom and gloom being felt and falling share prices, the risk is in fact lower as the return to the investor will be higher once the market recovers… Good companies will continue to produce goods and services, generate earnings, pay dividends and prosper.” Although the comments were penned 10 years ago, they are still relevant. In February this year, when a market sell-off occurred, markets were driven by sentiment. Conditions conducive to share price growth (i.e. positive economic growth, increasing corporate profitability, low inflation, low interest rates, low unemployment), were present, yet newspaper headlines were full of doomsayers predicting a sharemarket crash. The doomsayers were basing their predictions on how high share prices were relative to historical valuations, and the length of time the current bull market has run relative to historical bull markets. The markets were almost looking for a reason to take a breather, and the catalyst appeared to be the fear of rising interest rates in the United States. The US market fell almost 10 percent in a very short time. While it is true that many market valuations are higher than historical averages, and the bull market is much longer than in past cycles, conditions conducive to market growth are still intact. Many investors realised this, with the markets subsequently recovering from the February sell-off. Markets do move in cycles, and history can offer a guide to future events, but the fundamentals of investing remain the same. Be wary of comments of “this time it’s different.” As my colleague wrote a decade ago, regardless of market conditions, companies will continue to produce goods and services and generate earnings, with the goal of creating future growth for shareholders. This column is general in nature and is not personalised investment advice. Disclosure Statements for Forsyth Barr Authorised Financial Advisers are available on request and free of charge. Vote Anne Pankhurst Who stands for: • Better transport solutions • Investment into the city • Unlocking the huge investment potential • Experience in governance and leadership Authorised by Anne Pankhurst, 37 Monmouth Street, Tauranga
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