The mining tax passed through Federal Parliament last night, after a lengthy debate that for SMEs at least became as much about tax cuts as it did about digging stuff out of the ground.
The revenue raised by the mining tax will now in part be used to pay for a reduction in company tax, from 30% to 29%, for companies with turnover of $2 million or less.
Every little bit helps and you’re not going to find many entrepreneurs who are going to say no.
Except, maybe, an old-school businessman by the name of Gerry Harvey.
In a classic interview on Lateline last night – Gerry was at his blunt, honest and knockabout best – Harvey put himself in the shoes of the small business person and said the tax cut doesn’t really make much of a difference to the average business.
“I know people working 80 and 100 hours a week. They’ve got all the forms to fill in, they’ve got all the government regulations. It’s never-ending. You just work, work, work. And you think to yourself, ‘Am I ever going to get out of this?’”
“And then your business drops 10%. ‘What the hell am I going to do now?’ And the Government comes up and says, ‘I’m going to cut your tax 1%.’ ‘Hell, I’ve bigger problems than that! I’ll pay 35% tax. Let me make a profit’.”
Now, I’m pretty sure Gerry doesn’t really want to pay 35% tax, but his point is that cutting red tape would be a much bigger help to business owners.
“It’s more important to make a profit. And to make a profit you need next to very little government intervention if possible.”
“You hear about the politicians, ‘Oh, we’re going to cut the red tape to business.’ They never cut it! Go back five years: there was a lot less. Five years before that, it was a lot less. Guess what? Another five years, there’ll be a lot more than there is now!”
As Harvey himself admitted earlier in the interview, there’s a large portion of the business community that sees him as yesterday’s man, someone who has allowed the biggest business trend of the last 50 years – the internet – seemingly pass him by.
(Harvey made an impassioned defence of his position last night, claiming internet sales are nowhere near as big as many claim, particularly in the categories Harvey Norman plays in.)
But what makes Harvey so engaging as an entrepreneur is that he remains so close to the coalface of business. Not only does he have his finger on the pulse of the consumer, but his store network contains thousands of franchisees – small business people currently struggling to grow their businesses.
Gerry’s right. Company tax cuts mean stuff all unless you’re making a profit and right now, that broad church of red tape – which in the mind of the SME can include everything from labour laws and awards which dictate pay rates through to changing OHS laws, changing tax laws and shifting superannuation requirements – feels like a huge impost on your business.
Yes, that’s got a lot to do with general business conditions – we tend not to notice these things as much when the economy is chugging along nicely.
But Harvey’s central point is a good one. Small business people just want to run their businesses. If the Government can support them, that’s all well and good. But the rising tide of red tape is weighing entrepreneurs down.
Towards the end of last night’s interview, Harvey asked some great questions of how governments see small business.
“I’m worried, when I talk to Government ministers and bureaucrats, do they get it? Right? Do they really understand business? How many people work in government in the bureaucracy and as politicians – they’re lawyers and they’re lawyers and they’re lawyers and they’re union leaders and union leaders and union leaders.
“How many business people do you get? How many people do you get that have actually been out there, worked and run a business? They are very rare.”
As the new federal small business minister Brendan O’Connor said yesterday, running a small business doesn’t have to be a prerequisite for being small business minister. As he asked, how many health ministers have been doctors?
But as Harvey says, what the small business community wants to see is governments doing a better job of understanding what they actually need. Is a tax cut really the best way to help? Is there a more innovative solution?
Gerry Harvey’s point is worth listening to. I’m still not sure whether he gets online, but I do think he knows what drives entrepreneurs.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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