Not a lot to be frank. While many businesses weren’t surprised by what was proposed, there was a distinct lack of specific policies addressing this sector – a stark contrast from what our neighbours across the ditch were offered in their recent Budget.
One of the most talked about announcements was the decision to inject $80-million into Callaghan Innovation with the three biggest sectors to benefit being ICT, high-tech manufacturing, and the health technology industries.
Science and Innovation Minister Steven Joyce says the new funds will give the organisation more clout to support innovative Kiwi businesses by contributing to around 20% of their programme costs.
But while the R&D tax credit scheme for example will be welcomed in the SME-tech sector, Icehouse Chief Executive, Andy Hamilton, says it’s not just our tech SMEs that need a boost.
"What new initiatives are under way to encourage, support and incentivise our heartland SMEs that with encouragement could become that much more productive? They need help to start."
However, MYOB New Zealand executive director Scott Gardiner says the injection is a positive one for SMEs, as the Government appears to be targeting areas that will underpin increased productivity.
“The SME community wants to see the Government devote more funding to innovation and the development of the workforce – both of which have the potential to transform the economy,” he says.
But at the same time, there was a lack of other incentives and boosts compared to the Australian Budget earlier this month, Gardiner says.
“Their budget had a raft of stimulus packages that were wholly focused on SMEs – from tax reduction to credits on small capital investments."
“While New Zealand SMEs can be satisfied they are currently in a better place than their Australian counterparts, they could be forgiven for looking across the ditch and wondering whether more of that approach could be provided here.”
Nothing new on tax
There were refreshingly few changes to tax settings announced.
Deloitte CEO, Thomas Pippos, welcomed that there were no precipitous actions taken on the tax front noting that there is potential for more wholesale changes on the horizon.
“Both Inland Revenue’s work around Base Erosion and Profit Shifting (BEPS) and their business transformation (BT) project have the potential to reshape New Zealand’s tax settings in terms of what is collected and how it is collected,” says Mr Pippos.
However, as the OECD concludes its recommendations on BEPS later this year, we can expect to see the New Zealand response start to emerge. Deloitte Private partner Ian Fay offered a word of caution to business owners that think BEPS will only impact high profile global businesses.
“GST changes proposed by Australia for services provided by non-residents to Australian consumers will apply to some New Zealand businesses not just the likes of Netflix. One of the surprises in the budget was the lack of comment on a similar change in New Zealand, but this is likely only a matter of time.”
Mr Pippos added, “It will be important to ensure that the changes arising from BT result in a reduction of compliance costs to taxpayers. To be transformational, BT cannot be about the transfer of compliance costs from Government to the private sector. BT must reduce compliance costs for all.”
“Tax plays a fundamental role in attracting and retaining business activity in our economy. Most important is how the tax burden falls, which is not just a question of each tax in isolation but rather the combination of rate, base, restrictions and incentives – within our broad base low rate framework.
“New Zealand has challenges with size and distance from market. Accordingly, we need to ensure that our tax settings are competitive and not a barrier to attracting and retaining business and capital,” he concludes.
Mr Fay also commented that from an SME perspective, the smart use of technology should reduce the business impact of BT.
“However changes always have some cost whether through lost productivity while understanding the changes or increased charges for software that needs to be updated to implement the changes. Businesses that have already moved to Cloud based technologies are likely to experience significantly less impact.”
So where does that leave us? From a SME perspective we’d say evolutionary rather than revolutionary. But relative to Australia, it’s all good here.
Read Deloitte's comprehensive Budget analysis here