What is Progressives Business Tax (PBT)
First of all the Progressives Business Tax (PBT) is not a new tax and I am not looking at the subject of GST. PBT would only replace the current business flat tax of 28%.
I ask you does it seem fair that your local coffee shop has the same tax rate as Starbucks and given the Starbuck will have some really good Accountants it is likely Starbuck will effectively be paying a lot less.
If you add up all of the small coffee shops in New Zealand and then look again at Starbucks who employs more people in New Zealand the small guys come on top. The facts are that small to medium business employ around 70% of New Zealanders.
but small to medium business have to pay the same flat tax as large companies, this system is not only unfair to some business but it could be counterproductive to our local economic growth. So let’s look at the numbers first the top business tax rate under PBT should not be higher than the current tax rate of 28%. So what does the PBT model looks like? Small businesses (SB) would pay around 24% medium businesses (MB) would pay 26% and large companies (LC) would pay an unchanged tax rate of 28%.We could even have a sole trader tax say tax-free for the first $10,000 then around 15% until the sole trader hits let’s 80 of the minimum wage. but that is something to talk about some other day.
Most of the people I have talked to about the PBT model. Say how you define a small business and medium business form big business and is PBT and the government picking winners and losers in the free-market. well, this is a work in progress, and we have to start somewhere so first of all, let’s work out what’s the difference between SB, MB and LC and how do we make sure all businesses are paying their tax obligations in full
We could even have a sole trader tax say tax-free for the first $10,000 then around 15% until the sole trader hits let’s 80 of the minimum wage. but that is something to talk about some other day.
The tax rate is 24% but what is an SB under PBT system. SB would be classified as a business that makes less than one million in turnover in a financial year and has less than twenty counted full time or part time employees once an SB exceeds the turnover or counted employees. The SB will have one financial year to prepare for the new tax rate and their new business classification as an MB
The tax rate is 26% but what is a MB under PBT. MB is classified as a business that makes less than Seven million in turnover in a financial year and a business that has more than twenty counted employees but no more the one hounded full time or part time counted employees. Once an MB has more than Seven million in turnover in a financial year or exceeds one-hundred counted employees. The MB will have one financial year to prepare the new for the new tax rate and their new business classification.
The tax rate is 28% but what is a LC under PBT. An LC is a business that makes more than Seven million in turnover in a financial year or has more than one-hounded counted employees. Also, all overseas companies operating in New Zealand will be classified as LC no matter how much they make in the turnover or the amount of counted employees in employment with the LC’s. The LC will have no limits on counted employees or how much profit can make LC’s will pay no more business tax under PBT. Another question is what happens if an LC or MB makes less than the minimum stated turnover above under the listed in its classification what would happen. The business will be moved to meet its new classification also if a.
What is a counted employee?
I would look at a point system let’s say a full-time employee is worth 100 and a part-time employee would be 50 and this could be changed depending on the hours worked. Employees that are not counted by PBT are an independent contractor, temp casual staff, and internships/apprenticeships, work training work experience, business owners, and board of directors or people.Something to note is we need to encourage business to invest and employ people so the issue of counted employees and overall how to classified our business will need to be looked into and decisions will need to be made based on evidence and positive effect on business and our social community
Now for the big question is PBT picking winners and loser in the free-market, do we have the right to change the rules of the free-market. Do we have the right to give SB’s and MB’s an effective tax cut and help them grow their market share? That could be the experience and point of view of LC’s. I think the question needs to be asked How do we want our economy to look what type of New Zealand do we want to live in.
if a Progressives Income tax is good enough for you and me at home why don’t we have the same for our business.