Speech at Textile Care Federation of NZ Conference, Resolution Room, James Cook Grand Chancellor Hotel, Wellington.

Thank you for the invitation to speak to you today.

I would like to take this opportunity to talk about some of the things we've been doing over the past couple of years to help small businesses such as those operated by those of you here.

We believe that the importance of small businesses to the New Zealand economy has not been properly recognised by governments past.

Small and medium businesses are the engine room of the New Zealand economy. Ninety eight percent of New Zealand businesses employ fewer than 50 people. 84% of businesses employ five or less full time staff

This government believes in taking a smart, active role – and I'd like to outline to you some of the work we have been doing.

A healthy economy
Obviously, as a trading nation, we cannot immunise ourselves against the effects of a global slowdown in light of recent international events.

But the competitive dollar, robust export commodity prices and the recent reductions in interest rates mean that the New Zealand economy is weathering the turbulence pretty well.

However, what this does highlight is the importance of our economic transformation programme. We must move away from an economy overly dependent on commodities, to one where knowledge and information both add and generate value for traditional and new products and services.

That means no more of the old last century thinking of a hands off government – it means government working in partnership with business and the community to achieve success.

In order to focus on helping small businesses to succeed the government established Industry New Zealand. Industry New Zealand is a board of private sector people concentrating on industry needs. We have not had anything like that for decades and it is the focus of our business development programme.

Recent practical examples of its work are the help and assistance provided to Sovereign Yachts in Auckland and Cloud 9 here in Wellington.

Business Development
The Government has committed almost $332 million over four years, for a more active business development programme.

Industry New Zealand has developed a menu of programmes around three themes: regional development, assistance to business, and general economic enhancement. These include:

·The Regional Partnership Programme which helps revitalise provincial economies by boosting employment and helping to promote sustainable growth. Regions can apply for funding for strategy development, building capacity and regional initiatives.

·The Industry New Zealand Enterprise Awards Scheme which has funding to help good business ideas become reality.

·The Industry New Zealand Up and Ready Scheme is designed to improve innovative small businesses and entrepreneurs’ chances of raising finance in the early stages of development.

·The angel network matches up small to medium businesses with investors seeking to make an investment of $50,000 to $500,000.

·Industry Specialist Support helps firms with high growth possibilities to realise their potential either by providing access to specialists contracted by Industry New Zealand or through grants to help firms employ their own advisers. The difference from what we've got now is that existing advisory services typically target small struggling firms rather than those with high growth potential.

The New Zealand Venture Investment Fund
The Government is backing New Zealand's innovators with a $100 million seed capital investment fund set up in the last budget.

The New Zealand Venture Investment Fund will finance business start-ups, focussing particularly on technology and high value-added products and services, in partnership with private sector venture capital.

The aim is to accelerate the development of New Zealand's venture capital sector, which is vital to the formation of innovative new businesses. New businesses often need seed and start-up capital, but that end of the venture capital market is presently under-developed.

There is also work being done on developing an incubator programme.

This year's budget boosted the Government's support programme for business incubators by more than $1 million a year.

Incubators typically provide workspace and support services for entrepreneurs and new businesses at the start-up and early stages of development.

Modern apprenticeship programme
Boosting participation in skills training and opening up opportunities for young people is a high priority for the Government.

We aim to make it as easy and straightforward as possible for employers to take on apprentices.

Well over 500 Modern Apprentices have been established. The aim is to have up to 3000 apprenticeships in place under the scheme by early 2002.

The Modern Apprenticeship Programme provides a new way into high quality, work based training. It is aimed mainly at 16 – 21 year olds.

Modern Apprenticeships Coordinators screen potential apprentices and arrange work placements with employers. Co-ordinators work with the employer and the apprentice to produce an individual training plan, and, where necessary, manage the training arrangements and ensure that the training leads to assessment for credits towards a complete national qualification.

Budget 2001 provided $56 million over the next four years to buy another 17,000 industry training places.

Two of the specific issues I know you are interested in and which the government is working on are those of business compliance costs and tax simplification.

Compliance costs
Past governments have talked about reducing business compliance costs for years, but little has been achieved. This government is serious about tackling compliance costs for business.

Last year we appointed a Panel of business people to tell us how business felt these costs could be reduced. The Panel reported back earlier this year. Their report was a clear and practical response to their brief and canvassed issues ranging from the Resource Management Act to ACC and work place safety.

We are committed to making changes. We will be consulting business early in the drafting of legislation, monitoring compliance costs through industry test panels and following-up to ensure that we have reduced the costs of doing business.

Many of the suggestions from the Business Compliance Cost Panel are not big changes but small changes that when added together make a big difference for business.

A portion of the recommendations have already been done, including establishing a test panel to look at proposals arising from the review of the Health and Safety in Employment Act.

And most of the panel’s recommendations can be done quite quickly – for instance on the Building Act - including the issue of clarifying the distinction between 'building consent' and 'resource consents' - were incorporated into a recently released discussion document on the Building Act.

A third of the recommendations in the panel’s report dealt with environmental issues and the Resource Management Act. Responses to those recommendations will be included in a comprehensive package designed to improve the RMA’s workability. This is planned for release by Environment Minister Marian Hobbs very soon.

The government is considering the panel’s report now and will be making a final response in December. Our initial response showed that most of the recommendations could be progressed and we have asked departments to look at the suggestions made by the panel and tell us how they could be implemented.

I expect departments to give genuine consideration to each and every recommendation and to tell us what changes we have to make to our work programme.

Along with suggestions about particular legislation, the panel also wanted improvements in the way the law is made. It wanted the bureaucracy to think about the impact of new laws on business before they are made. Particularly for the small and medium enterprises that are the backbone of our economy.

We are also working on other ideas from the panel. They will take a bit longer to set up, but they will make us politicians also focus on compliance costs.

Tax simplificatation
Our tax system must be capable not only of raising the necessary revenue, but also of minimising compliance costs for New Zealand businesses that operate here and overseas.

Earlier this year we released the first in a series of discussion documents devoted to different aspects of tax simplification. "More Time for Business" looked at possibilities for simplifying the tax system from the perspective of small businesses, which make up the majority of New Zealand businesses.

"More Time for Business" presented new ideas to help businesses meet tax obligations as part of their normal business activity. In particular:
qProvisional tax: Small businesses would be able to pay provisional tax in smaller and more regular payments that match cash flow, rather than in three large equal payments throughout the year.
qUse of money interest: Interest costs could be reduced by allowing taxpayers to pool provisional tax payments and thereby set off underpayments of one taxpayer against the overpayments of another and pay each other better interest rates than Inland Revenue can pay.
qEmployers and PAYE: Employers could reduce exposure to penalties and interest by using intermediaries such as payroll firms when collecting and paying PAYE.
qEnd-of-year tax adjustments: Requirements associated with end-of-year income tax calculations for small businesses, such as trading stock valuations, could be reduced.
qBenefiting from information technology: Recent advances in information technology can help to reduce tax compliance costs by reducing the need for businesses to communicate with Inland Revenue, simplifying the calculation and payment of tax, simplifying the filing of returns, and improving the administration of the tax system.

We received generally supportive submissions from a wide variety of individuals and groups on this document - and there were many new suggestions on ways to simplify the tax system. We will be working through those new ideas to see what benefits they would create and see whether they are feasible.

As outlined in another discussion document released in August6 on compliance and penalty legislation, the Government is also keen to replace the rules that provide relief to taxpayers in debt who face hardship. The current rules were developed in the 1930s and are deficient from both the perspective of taxpayers and that of an efficient tax administration. Proposed new rules are intended to be fairer and clearer and to encourage taxpayers to deal with their debt problems early rather than letting them become insurmountable.

Measures from More Time for Business and changes to the rules that provide relief from penalties will be implemented through Bills coming in December this year and May next year.

Conclusion
These are just some of a broad range of things the government is doing to promote the succes of small business.

As I said to begin with – this government believes in taking a smart, active role - that means building partnerships with the private sector. It means being a facilitator, a broker, and occasionally a funder.

We have recognised the role of the small business in the New Zealand economy and we are working to make it easier for you to fulfil your goals of getting on with doing business. A lot has been achieved, there is much more to do.

Together we can make it happen.