John Tamihere: The Government's Approach to Maori small-medium businesses

Address to Maori Tourism and SME operators hui, Wairakei Terraces Complex, Taupo, May 29

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The good news for the tourism industry and for small businesses is that the old spirit of Kiwi ingenuity and the number eight fencing wire approach is still well and alive and inspiring a proliferation of small to medium sized businesses in New Zealand.

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Our economic landscape is dominated by small but dynamic businesses, and most tourism operators do fit into the category of small-to-medium enterprises or SMEs. SME's are defined as businesses employing fewer than 20 employees. Some 267,000 businesses (97 per cent of all New Zealand enterprises) are SMEs, and they employ 43 per cent of all employees and contribute 39 per cent of this nation's GDP. Nearly all Maori tourism operators would fall into the category of small-to-medium enterprises - only the really big guns like Kaikoura Whale Watch and Tamaki Brothers, who are the exception, rather than the rule, would employ more than 20 staff.

So the economy, and we as the Government, depend on innovative and successful businesses for successful economic and social development, and will increasingly focus on the needs of these groups. That's why healthy SMEs are at the heart of the Government's Growth and Innovation Framework

SMEs are particularly important for economic and social participation of Maori through employment, which is something I particularly want to see growing.

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The New Zealand Tourism Strategy recognises the importance of Maori in tourism. Maori tourism businesses are of particular importance because of their uniqueness, and the growing awareness globally of their uniqueness. As the graph shows, the most popular tourist attractions are those involving Maori cultural experiences.

Tourists can visit skifields or geothermal areas or forests in a large number of different countries around the world. The same goes for adventure tourism, farmstays, fishing, and other tourism opportunities that exist in New Zealand. While New Zealand does those things very well, and New Zealand is a great destination for tourists to enjoy those things, New Zealand is not the only place in the world where they can do them. But New Zealand is the only place in the world where international visitors can experience Maori culture, arts and a wealth of other things that are uniquely Maori. Increasingly tourists are seeking out experiences that are special and unique, and increasingly people like yourselves are delivering those experiences.

So what is the Government doing to help SMEs, and SMEs in the tourism field?

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For I start, I personally hope to be doing a lot of work in this area. While previously I was Associate Minister for Small Business, working in conjunction with the very capable Minister, the Hon Paul Swain, I now have sole responsibility for the small business portfolio, and am very pleased to be taking on a more active role in this very exciting sector.

A 2001 survey of businesses showed that although New Zealand had the world's highest rate of opportunity entrepeneurship, and a high rate of business start-up, the survival rate of businesses was not so great. After four years, just 40 per cent of new small businesses were still afloat.

It seems the toughest challenges for small-medium businesses occur at the start, and in the first few years - and that is where Government assistance may be of the most help. We want to help small and medium businesses overcome those early hurdles and set them on the path to becoming successful, self-supporting businesses.

The Government's strategy for small-medium business comes under three basic areas: addressing business compliance costs, supporting business growth, and making Government more accessible.

To help achieve that, Budget 2003 has allocated an extra $1.84 million in new funding for the 2003/04 year, and $960,000 a year in subsequent years to the SME sector. That money will fund an SME summit in February to help define what the Government can do to progress the interests of small business, and will establish a Small Business Advisory Group comprising 6-8 members drawn from the SME sector. Academics? Banned. Big business? Banned. We want bonafide, on the ground, genuine, hardworking small businesspeople on that advisory group - people who know about the reality and the needs of small business. We've got 640 applications for those positions, and out of that pool we're going to get some really switched-on people.

The Government has also boosted its support for business incubators by $1.6 million a year. Budget 2003 contains an additional $6.4 million over four years to lift the proficiency and scale of New Zealand incubators, of which there are now 15. The Incubator Support Programme provides a management support service and annual cash awards for incubators, helping businesses find their feet in that crucial start-up period.

And a two-year pilot programme, starting later this year, and costing $200,000, will establish an advisory service for SMEs, which will help them with employment relations and occupational safety and health issues.

To help in the area of accessibility to Government, we are launching a one-stop shop for business, containing all relevant Government information and services. And as Minister of Statistics, I aim to see that SME have all the statistical information they need to succeed at their fingertips. And as the relationship works both ways - the Government also demands information from businesses - we will make that easier, too, with a one-portal approach to the Government collecting information from small businesses.

Another one of the really good things that Budget 2003 has done to make life easier for small-medium businesses is propose a range of measures that will take a whole lot of the hassle about paying taxes.

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I'm sure that those among you who are involved in running small to medium sized businesses will know what a headache and huge cost and obstacle to business tax compliance can be. You're not the only ones feeling this way - the Ministerial Panel on Business Compliance Costs recognised that the burden of compliance fell disproportionately on SMEs. And Inland Revenue's own surveying of small businesses, tax agents and industry groups has found that the IRD had the highest impact on businesses through compliance costs.

As the chart shows, on international comparisons, New Zealand doesn't do too badly on the amount of red tape SMEs have to deal with (and I pity small businesses who happen to be based in Portugal) but we can always do better.

So we propose to do something about that, and the ideas we plan to put forward for public discussion include:

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- Aligning provisional tax and GST payment dates and more frequent payment of provisional tax. Both provisional tax and GST would be paid on the 28th of the month. Provisional tax would be aligned with GST due dates - every two months for monthly and two-monthly GST payers, and every six month for six-monthly GST filers. - A 6.7 per cent tax credit incentive to make voluntary payments of provisional tax in the first year of business. This reduces the financial pressure of multiple years' tax becoming due at the same time in a business's second year of trading. - Basing provisional tax liability on a percentage of GST sales. This option would give better match tax payments to businesses' cash flows. - Subsidising the cost of employersusing a payroll firm for their first five employee. - Simplifying the FBT multi-rate calculation, reducing high compliance costs. - Providing greater certainty around employment and residency status - and therefore certainty of tax treatment in respect of such issues.

These measures are all straightforward, commonsense things we can do which will make the day to day compliance issues much easier, and much less expensive, for small and medium businesses. The cost to the government is expected to be about $30 million a year, but the savings to businesses in having fewer, and less time-consuming, dealings with the IRD, having a less complex and more flexible tax system will repay that investment. Instead of spending an inordinate amount of time filling out forms, or on the phone to the IRD, innovative and busy businesspeople like yourselves can get on with doing business. Not only that, the tax regime won't be as punitive as has sometimes has been the case in the past. We're not there to be a hunt and kill machine; we're there to support small business.

More specifically in the area of SMEs involved in tourism and Maori businesses, the government has a number of schemes in place which can help you.

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- The Maori Business Facilitation Service is a business-mentoring Agency in Te Puni Kokiri which gives free advice and help to those starting new businesses or running existing ones. - In July this year NZ Trade and Enterprise will bring together Trade NZ and Industry NZ to provide businesses with a one-stop shop for information on developing new products, creating business plans and entering new markets. - NZTE will also use the Biz Info and Biz Training services, which provide free information on government and non-government help and funding for SMEs, and provide free training on running businesses. - Maori Regional Tourism Groups have been set up and given $1 million over three years to help the government establish relations with tourism organisations.

Through these initiatives we aim to provide SMEs involved in Maori tourism the best help we can. But if you think we can do better, please tell us. We will be reporting back from these regional hui to the decision-makers in Cabinet. So don't hold back when it comes to telling us what you really think, because we really want to hear it.

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Already Budget 2003 has delivered an extra $15 million over three years to increase New Zealand's market share among United States visitors. That money will fund a US-market specific version of Tourism New Zealand's 100 per cent Pure campaign. Every year 34 million people leave the US on holiday, and the high media profile achieved through the campaign will ensure that New Zealand gets its share of that very lucrative market. United States tourists fit the profile of the sort of tourists we want to bring to New Zealand. They are active seekers of authentic experiences, and are large consumers of Maori cultural products.

Events such as the pre-release screening of the New Zealand film Whale Rider in New York this month will build on that interest in the United States with authentic, Maori-focused, New Zealand tourism experiences. Tourism operators are certainly facing some big challenges in today's global situation, with external forces such as terrorism and the spread of the SARS virus taking their toll on tourism numbers worldwide. So it was great to see that international visitor numbers for April 2003 were up five percent on numbers for April 2002, despite these new challenges facing the industry,

If we can focus on the strengths of the New Zealand tourism industry, and the things that make it unique, we can still look forward to a strong and growing sector. And you, as Maori tourism operators, will increasingly be at the heart of that success.

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