Saturday, March 20, 2010

TIA Advocates More Tax For Home-based Businesses

We see that the Westland District Council are proposing to identify home-based businesses such as Bed and Breakfasts that are currently paying residential rates and charging commercial rates. 

Tim Cossar, head of Tourism Industry Association New Zealand (TIA) (pictured) has spoken out against the proposal on the basis that the identification of businesses operating from residential households will not capture all such enterprises. The TIA have suggested that the council seek further home-based businesses to broaden their commercial rate base.

The TIA believes that using the capital value of bed and breakfast establishments to calculate rates is unfair due to commercial activity often occurring in only part of a building and the seasonality nature of the business.

The TIA have also given qualified support to targeted rates on tourism businesses. 

If our industry trade associations are to be taken seriously as representatives for small business, what should they be saying? 

An underlying message that should be communicated to all councils is that a strong private business sector will underpin and sustain the general welfare of communities. In order to achieve this, councils should focus on minimising rates and regulatory burden as businesses are the wealth-creating institutions of society.

The "level playing field" argument that trade associations use in submissions to councils always seems to default to finger pointing at other sectors outside their sphere that are supposedly not pulling their weight. This seems to follow the woolly premise that it is acceptable for a business sector to pay an inequitable tax as long as other sectors share the burden as well.   As a logical alternative, Trade Associations should be calling for councils to make a concerted effort to reduce business/private household rate differentials. This would address the anomaly of accommodation businesses charged differing differentials and businesses subsidising private households. 

Rates should be based on actual use, not on the perceived ability to pay. 

The elimination of the inequity between commercial and residential rates, would remove the need to witch-hunt those that use their residential homes for business.

So, what else should hey be saying?

Councils should only fund genuine public goods and services and facilitate the efficient provision of necessary infrastructure. 

Councils should exit from all non-core activities. 

And just to prove that our industry leaders are not self-serving and wish to ease the burden of rates for their members, they also need to advocate:

The case for councils subsidising events, tourism promotion, attractions, conference and sports facilities must be supported by rigorous economic analysis that clearly demonstrates net benefits for all ratepayers. 

There should be a concerted effort by councils to move funding of ‘club’ goods, such as swimming pools, recreation centres, libraries, museums, zoos etc to user charges.

We're not holding our breath... 

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