The economic benefits of taxi

Taxi is an innovation in business financing that creates a new source of capital at lower costs than bank lending, using the provisional tax framework.

Taxi uses New Zealand’s provisional tax framework to allow businesses to use their provisional tax payments as a source of capital to meet investment and short-term cash flow constraints. In doing this, Taxi creates a new source of capital at lower costs than bank lending. A few large businesses have been accessing capital using the provisional tax framework in this way for many years. Due to the complex nature of the legal framework, this benefit has been unavailable to most New Zealand businesses. Taxi is an innovation that uses technology to democratise access to capital for business growth and make this benefit of the tax system available to all New Zealand businesses that pay provisional tax.

Taxi commissioned NZIER to assess the economic benefits of using Taxi among small and medium-sized enterprises (SMEs). The key findings were:

• Cash flow constraints and barriers to capital for investment stymie growth potential and entrepreneurialism.
• By utilising provisional tax payments, Taxi will provide greater access to working capital for business investment, improving productivity, lowering production costs, supporting increased innovation and product development, and expanding productive capacity.
• Business in New Zealand has typically favoured investment in labour rather than capital, which has resulted in lower productivity in other countries that use more capital.
• By providing better access to capital for business investment, Taxi presents an opportunity for diversification and improvement in investment quality.

The capital per worker in New Zealand is about half the level in other OECD economies we like to compare to

•  Workers in New Zealand tend to work longer than the OECD and produce less per hour worked.
  
  Greater access to business investment funding via Taxi presents an opportunity for capital investment that could contribute to closing the output and productivity gaps while reducing the pressure for longer workdays.