If National wins ...

[fungus pudding]

No it's not. For one, we're generally talking about a small amount of tax refund, in the next (Labour) term it will be 12.5% of applicable R&D spend refunded. There's still a fair bit of paperwork involved, and it can be audited. Compare that to outfits like AgResearch, NIWA, HortResearch, IRL, many universities, who have a big chunk of their R&D work fully funded by the Taxpayer. They are not audited, but they do have to publish their findings eventually. With their internal costs and PR, legal teams, about 20%-30% of the funding actually gets spent on research.

I agree that dairies and other small businesses might find it hard to tap into R&D tax credits. But when you look at these smaller firms, they are often run by people who are learning the ropes of running a standalone enterprise, and sometimes they are there because they can't get a consistent job with good pay elsewhere. They need well-off customers, plenty of them. A strong, profitable manufacturing industry will provide that traffic, and a lot more jobs.

It's unfair that some get better tax treatment than others? How many times have you stood in front of a till in a dairy and heard the familiar ping of the "No Sale" button? Particularly if cash is offered. Manufacturers don't have a till, everything is recorded, and tax paid on it.
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I don't know where to srtart with all that, so I won't bother; except to say if you really really really believe a dairy relies on its till tape for its p+l accounting or bookkeping, then you should get out and about more in the world of commerce. Certainly there are lots of undeclared trades jobs, and undeclared retail sales made, it's not illegal to not ring a sale up. It's not compulsory to have a till. But there are also heaps of manufacturers who buy in 'extra' bits and pieces for a personal job - or fiddle use of company vehicles and heaps of other things, flog stuff off and pocket the dough. In spite of your claim that everything is recorded, it just isn't the case. (want to buy a $30,000 boat that comes off the manufacturer's floor, but never quite appeared in the books? - see me later) Manufacturers are no different from all other tax-payers. To offer such nonsense up to justify taxing some businesses to prop-up others is nonsense.

[elZorro]

I don't know where to srtart with all that, so I won't bother; except to say if you really really really believe a dairy relies on its till tape for its p+l accounting or bookkeping, then you should get out and about more in the world of commerce. Certainly there are lots of undeclared trades jobs, and undeclared retail sales made, it's not illegal to not ring a sale up. It's not compulsory to have a till. But there are also heaps of manufacturers who buy in 'extra' bits and pieces for a personal job - or fiddle use of company vehicles and heaps of other things, flog stuff off and pocket the dough. In spite of your claim that everything is recorded, it just isn't the case. (want to buy a $30,000 boat that comes off the manufacturer's floor, but never quite appeared in the books? - see me later) Manufacturers are no different from all other tax-payers. To offer such nonsense up to justify taxing some businesses to prop-up others is nonsense.

Any business can run the risk of being audited, and in a dairy the till tape is often the audit record. Managed firms will require a written excuse for every press of the no-sale button or till drawer access. I've worked behind a till for several years part-time. The family companies I've worked in were straight-up, if there were any 'cashies' they were minor in value. How can a business owner check on the annual progress of a business if too many transactions are off-line? It would defeat a proper valuation when it was time to sell it.

And of course, a manufacturer pays PAYE for every employee as well. No shirking taxes there.

Good manufacturing businesses don't need propping up with tax advantages. But they do need to be given some direction. We're all quite lazy, let's face it.

Comment on the Len Brown article:

Brent #2 01:14 pm Sep 14 2012

Brown said the city needed to focus less on property speculation and more on the base of productive trade sectors, which would earn overseas exchange and provide skilled jobs.
That applies for the whole of NZ, not just Auckland. Our property speculation here is ridiculous, everyone sees property as a safe bet, which mainly it is, but we don't see the opportunity cost of putting our money into productive businesses. Buying property doesn't generate wealth for everyone, potentially only for an individual. Investing in businesses makes the country as a whole wealthier and makes us much better off long term. If only the people with the big bucks realised this we would have a much better venture capitalist culture than the non existent one we have now.

[Major von Tempsky]

Ha!ha! ha! That's very amusing. I do a voluntary stint at a charity shop one afternoon a week.
Every time I wish to go to the loo down the alley I open the till and stuff all the notes in my pocket while I make a quick trip. It's also not unknown to change notes for customers and to take large notes out to hide them overnight.

The IRD will have a totally unmanageable headache if they are going to question every time a till is opened.
Is an IRD staff member going to escort me to the loo?
And yes the IRD has looked at us as a result of which we got a huge refund as our chartered accountancy firm advice was totally wrong on one point.

[craic]

Years ago a friend of mine had a dairy across the street form a small butcher. My friend ate meat and the butcher ate other groceries and greens off their respective shelves and both lived happily ever afterwards - they are both long dead. It was a double dip in more ways than one. The dairy goods were "lost" when they went to the butcher and the meat was lost when it went to my friend so not only did they gain the goods but their profits were reduced by the amount they ate, resulting in tax credits. I use a whle range of cash services because I get better service and better value. GST creams off the tax in the finish anyway. A till can be opened for a $1 transaction but that has no bearing on the amount in or out of the till.

[elZorro]

Years ago a friend of mine had a dairy across the street form a small butcher. My friend ate meat and the butcher ate other groceries and greens off their respective shelves and both lived happily ever afterwards - they are both long dead. It was a double dip in more ways than one. The dairy goods were "lost" when they went to the butcher and the meat was lost when it went to my friend so not only did they gain the goods but their profits were reduced by the amount they ate, resulting in tax credits. I use a whle range of cash services because I get better service and better value. GST creams off the tax in the finish anyway. A till can be opened for a $1 transaction but that has no bearing on the amount in or out of the till.

But MVT and Craic, once a business gets above being 1-2 people, it might be managed from afar. Then the till tape becomes the audit trail, and the end of day cash receipts will have to match what the tape says. Otherwise staff can be asked to make up the balance. Banks do the same thing, but electronically. Sure, some stuff might get swapped off the shelves, pinched off the shelves, and other stuff never paid for by poor customers.

I simply made a comment that the obvious use of the no-sale button in front of customers is poor form, because it makes the firm look dodgy from the outset. They'll do it once too often, there are still a few IRD employees around.

Chartered accountants gave poor advice MVT, that's shocking. My non-chartered accountant has just been wound up by IRD for not paying their taxes...that's also very weird.

[elZorro]

Years ago a friend of mine had a dairy across the street form a small butcher. My friend ate meat and the butcher ate other groceries and greens off their respective shelves and both lived happily ever afterwards - they are both long dead. It was a double dip in more ways than one. The dairy goods were "lost" when they went to the butcher and the meat was lost when it went to my friend so not only did they gain the goods but their profits were reduced by the amount they ate, resulting in tax credits. I use a whle range of cash services because I get better service and better value. GST creams off the tax in the finish anyway. A till can be opened for a $1 transaction but that has no bearing on the amount in or out of the till.

Hang on a minute Craic, this deal is not as good as you think it is. This is an example of a right-thinking couple of traders who have accepted that they have a low markup on their goods.

X sells to Y as a swap, so if we look at each side: X gives away stock costing $100 say, but receives equivalent stock of $100 that is not entered as a purchase, and is consumed. Because his net income will be down by say $130 for the year, he saves about $40 in tax, and that's all. He has no cash for replacement stock. If he'd been able to sell those goods for $200, not $130, he'd have paid tax on an extra $100 of income, or $30 in tax, but he'd effectively have another $170 in his till in cash, with which to buy replacement stock, and repeat the process.

In other words, X and Y have screwed up their businesses, for the sake of paying less tax.

[fungus pudding]

Hang on a minute Craic, this deal is not as good as you think it is. This is an example of a right-thinking couple of traders who have accepted that they have a low markup on their goods.

X sells to Y as a swap, so if we look at each side: X gives away stock costing $100 say, but receives equivalent stock of $100 that is not entered as a purchase, and is consumed. Because his net income will be down by say $130 for the year, he saves about $40 in tax, and that's all. He has no cash for replacement stock. If he'd been able to sell those goods for $200, not $130, he'd have paid tax on an extra $100 of income, or $30 in tax, but he'd effectively have another $170 in his till in cash, with which to buy replacement stock, and repeat the process.

In other words, X and Y have screwed up their businesses, for the sake of paying less tax.

But have they paid less tax? Most small traders declare something for goods taken for personal consumption, or run the risk of getting caught in an audit. I know of a fish and chip shop owner who got hounded by the IRD because they were convinced he must have been taking spuds home from his shop.

[CJ]

Hang on a minute Craic, this deal is not as good as you think it is. This is an example of a right-thinking couple of traders who have accepted that they have a low markup on their goods.

X sells to Y as a swap, so if we look at each side: X gives away stock costing $100 say, but receives equivalent stock of $100 that is not entered as a purchase, and is consumed. Because his net income will be down by say $130 for the year, he saves about $40 in tax, and that's all. He has no cash for replacement stock. If he'd been able to sell those goods for $200, not $130, he'd have paid tax on an extra $100 of income, or $30 in tax, but he'd effectively have another $170 in his till in cash, with which to buy replacement stock, and repeat the process.

In other words, X and Y have screwed up their businesses, for the sake of paying less tax.

Hang on a minute. I thin you have left something out.

Say he gives $100 stock away that he could have sold for $200.

Instead he sells it to the butcher for $200, paying tax of $30 and a NPAT of $70. He draws that as salary and receives $50 in the hand. He goes across the road to the butcher and asks for $200 of meat but finds he only has $50 in his pocket. He would need to sell the butcher $800 of groceries (cost $400) to earn enough to buy $200 back. And I dont even think that factors in the tax refund he gets because of the 'lost invetory'.

[elZorro]

But have they paid less tax? Most small traders declare something for goods taken for personal consumption, or run the risk of getting caught in an audit. I know of a fish and chip shop owner who got hounded by the IRD because they were convinced he must have been taking spuds home from his shop.

When I was learning the ropes, the family business did just that, wrote down all goods taken for personal use, and it was part of the drawings calculation.

I would hope that IRD has more sense than to chase small issues like spuds going missing. It took them long enough to reel in the Aussie banks. Early on I was audited for my vehicle costs, and a general GST audit. I'd only been going for a small while from home, but was able to bring out two archive boxes full of invoices, and a manual cashbook. I said to the young auditor that he could look through the whole lot to check it. He promptly suggested we have a cup of tea, a general discussion, and forget about it. That was common sense.

[elZorro]

Hang on a minute. I think you have left something out.

Say he gives $100 stock away that he could have sold for $200.

Instead he sells it to the butcher for $200, paying tax of $30 and a NPAT of $70. He draws that as salary and receives $50 in the hand. He goes across the road to the butcher and asks for $200 of meat but finds he only has $50 in his pocket. He would need to sell the butcher $800 of groceries (cost $400) to earn enough to buy $200 back. And I dont even think that factors in the tax refund he gets because of the 'lost invetory'.

But the dairy owner will have $70 in the hand, not $50, he only pays tax once. He also has $100 left over in the till to replace the stock he just sold. Without stock, his shop would be screwed. What if the goods he got back in exchange were overpriced, not something he really needed, or faulty? How much stock does he have to sell at a profit, to replace the goods he swapped out, and retain stocking levels?