Friday, 11 April 2008

T = Tax

It’s tax time again.

When I was employed by someone other than me, I never worried about tax. My take home salary, after tax, was sufficient for my needs. It enabled me to live a good life. Tax was something that I never thought of – my tax was paid by my employer, before I ever had the opportunity to become attached.

But I’m self-employed now. Tax is something intensely personal to a self-employed person. As a consultant, my income goes up and down, depending on the needs and holidays and distractions of my clients. I can go some months without significant income, then get huge (well … it’s all relative isn’t it?) welcome and relaxing lump sums in my bank account. I feel safe again for the next few months, and breathe easier.

But then along comes tax time. Self-employed people have to pay income tax three times a year, and our goods and services tax twice a year. So we have to be cautious, even when feeling flush. Because the tax we pay comes directly from our bank account – the same one we use to pay for our food and electricity. Sometimes we have to pay tax on income we don’t yet have. That really hurts.

So I take tax very personally.

I am very happy to pay tax to go towards our health and education and social welfare systems. That’s what taxes are for. I am the beneficiary of a free education, which gave me opportunities I would otherwise never have imagined. I have had the misfortune to appreciate the benefits of a free health system, and more importantly, I have seen my parents cope with old age through the universal government pension payments.

I am less happy though for my taxes to go to the expanding government we have here. The opposition party states that the fastest growing sector in the economy since 2000 has been government administration. I am unhappy about this. Unhappy about my taxes going to unnecessarily high government salaries, and padded departmental budgets. I have worked in government, and in private sector. The people in government think that they would get much higher salaries out in the private sector, and think the private sector has money slushing around, waiting to be used frivolously. But they have no direct experience of this.

But when I moved from the public to the private sector, I was struck with the difference in the attitude to money within organisations. I have seen government officials figuring out how much extra money they can make by manipulating the system regarding travel allowances. Government servants who on principle object to being paid on the basis of performance. Allowances, expenditure, salary increases – everything is theirs “as of right.”

In the private sector, by comparison, profit and performance was the motive. If the company didn’t perform as well as expected, no-one got a salary increase or bonus, whether or not there was inflation, or that they had personally performed well.

Now, as a company director (another role I hold), I see my company suffer because competition is removed and responsibilities are put in the solely in the hands of the overpaid bureaucracy. (I feel qualified to comment – I know many of the individuals involved. I have personally done some of the jobs that now require 8 or 18 people to do, when one or two of us used to be sufficient). This bureaucracy is not as skilled, and definitely not as prudent with my money, my taxes, as the private sector. In Wellington, the centre of government, I see our office rentals skyrocket as the government expands, greedily gobbling up premium office space. I see our small company struggle to recruit or retain qualified individuals at a reasonable market rate, because government departments pay 30-50% more.

And I object.

So Helen. This is my money. And if this is how you are going to spend it, I’d like some of it back please.


  1. I thought for a minute you were sending some of your earnings my way. Dang.

    It's interesting reading this, because I'm one of those people who doesn't know much about the private sector but has that view that the money is much better over there. It's hard not to believe that when you hear what some executives in the private sector make, especially when you compare it to the person who heads the clinical trials group of the National Cancer Institute, has a Ph.D. and M.D., teaches at the university, and makes $125,000/year.

  2. I had to pay what I owed on my 2007 taxes (a shock, I'm afraid) and my first 2008 quarterlies last week before I left for Portland. Which leaves very little coin left for wine, screwtop or not.

  3. This would be the first year of the accountant. We are finally complicated enough to pay someone money to help us pay the government money.

    I have friends (who run Sophia's school, actually) who are tax dodgers for peace. I think they have a better name than that.

    I'm way too chicken for that.

    (And I thought you were sending Helen money, too).

  4. Helen: Sorry 'bout raising expectations - I suspected that might happen, hence the link to the NZ Helen (who is not nearly as much fun as the Canadian one).

    I agree there are some ridiculous salaries in big corporations. (Less so in little NZ of course) But I'd rather my taxes went to pay teachers more, rather than create huge bureaucracies at the Ministry of Education. Likewise for drs nurses researchers etc in the health sector.

    IB: I sympathise. Cashflow after tax is going to be tight for me too. Fortunately we have a stock of wine - corked and screwtop!

    Bridgett: ouch! Paying accountants always hurts. NZ system is ridiculously simple. No rebates on just about anything in my case, so easy to complete a tax return. Sigh.

  5. See, these women Prime Ministers......I thought you were saying our Helen was a public service bludger, which I thought was gutsy of you.

  6. on a more serious note: Rudd's much trumpeted razor gang has just shut down the educational publishing unit that Kate's sister worked in: even though it made a profit! It looks good on the books.....


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