By Ian Kuperus
Here are a few insights from my personal journey of setting up the first-ever tax pooling intermediary, Tax Management NZ.
I was recently asked by a friend to share some ‘secrets to success’ about starting a business.
There are two underlying aspects to a question like this:
- People are interested in hearing the journey, the key issues and turning points that made it possible.
- They want to know what lessons might be useful for others.
How it started
My journey started when the New Zealand Government introduced interest on underpaid and overpaid tax in the late 1980s.
I was working for National Bank and saw an opportunity for ‘intrepreneurship’ (people within a company instigating a new idea). I suggested that I set up a service to help the bank’s customers offset their provisional tax imbalances and even out the interest they would receive or pay. National Bank was open to the idea and we presented it to the then Minister of Revenue, Trevor de Cleene. The proposal did not find favour.
Over the next decade, I kept pushing the concept whenever ideas where sought to improve the tax system.
Finally in May 2001, when I was at the Dairy Board, the government published a discussion document, More Time for Business, promoting the idea of tax pooling as a way to soften the interest burden for business which faced with uncertain income tax payments.
This opened the door to pursue the idea. Over the next two years I worked with Phillip Porter and Mara Fisher, exploring through lots of trial and error to find a way to provide a secure tax payment mechanism that would:
- Meet the requirements of Inland Revenue.
- Allow the offsetting and management of provisional tax balances in order to significantly improve the flexibility of tax payments and reduce interest costs.
- Alleviate concerns over the security of funds deposited into a tax pool account.
Eventually, we decided a registry system using an independent trustee, New Zealand Guardian Trust, was the best way forward.
On 1 April 2003, legislation to allow tax pooling became effective. Six days later we were fortunate enough to arrange the first tax pooling deposit of $7 million. Since then, tax pool deposits for all tax pool operators have grown to total more than $6 billion.
Tax Management NZ has had the privilege of creating a better tax environment for all Kiwi businesses by significantly reducing the interest cost, as well as the time and stress of provisional tax calculations and payments.
Some insights from my journey
In response to my friend’s question, I shared the following.
There are no secrets to success
In hindsight, there are snapshots that create a sense of coherence. But don’t look for a magic formula – it is hard work and lots of trial and error. At the end of the day, it’s often good timing, good luck or God’s grace that contributes to our success.
Make early, frequent contact with the people you aspire to help
Keep listening. Put forward the idea of the service or product and seek reaction from as many people as possible.
Talk with lots of people about your new idea – even if they are not potential clients
Seek feedback. Often people are reluctant to discuss new concepts for fear that their idea may be copied. This is a valid concern, but in my view people tend to be overcautious.
Separate family or personal things from business as much as possible
Ensure there are separate budgets, that the boundaries are clear and the bailout, exit or closedown criteria are agreed (or at least known) to all those who are financially impacted by your activity.
He tangata, he tangata, he tangata
At the outset of a new business, the ‘new idea’, drive, innovation and hard work of the entrepreneur(s) play a huge part in making it happen. However, as the business develops, its success will increasingly depend on how well you deal with people when it comes to:
- An attitude of service towards your customers.
- A servant leadership approach to leading staff.
- Meaningful engagement and contribution to the community of which the business is a part.
NEXT BLOG POSTS: I will make some observations on entrepreneurship in New Zealand by looking at how our shared values, educational environment and the mentor and funding environment can contribute to increasing the number of successful Kiwi entrepreneurs.
Ian Kuperus is the founder director of Tax Management NZ and the winner of the Services Category at the 2013 EY Entrepreneur of the Year Awards.